Morgan Stanley Global Brands
The investment team behind Morgan Stanley Global Brands have a mantra: ‘don’t lose money’, which will possibly be as comforting to investors as the familiar names that can be found in the portfolio. The team, which operates as a boutique within Morgan Stanley, looks for high-quality companies with defendable and visible future earnings, allowing them to give attractive returns to shareholders and reinvest in their business to stay ahead.
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William is a portfolio manager and leads the International Equity team at Morgan Stanley, where he has been since 1994. With 30 years of investment experience, he previously worked in Credit Suisse First Boston's Corporate Finance Group and as a management consultant at Arthur D. Little. William holds a B.A. in Modern History from Keble College, Oxford. He is also a dedicated supporter of the creative arts, notably Glyndebourne Opera.
Bruno is a portfolio manager on the International Equity team at Morgan Stanley, having joined in 2009. Before this, he spent eight years at Sanford Bernstein in London as a Senior Analyst in the financial sector and was a manager at the Boston Consulting Group, focusing on financial services. Bruno earned an MBA from INSEAD, where he received the Ford Prize for graduating top of his class, and was a Research Fellow in Political Economy at Nuffield College, Oxford. He holds a B.A. in Politics, Philosophy, and Economics with First Class Honors from Keble College, Oxford. Bruno is also a parent-founder of The Rise School and a governor at Kensington Aldridge Academy, where he chairs the Business Committee.
Marcus is a member of the London-based International Equity team at Morgan Stanley. He joined the firm in 2008 and has five years of investment experience. Marcus holds a B.Sc in Psychology from the University of Newcastle Upon Tyne.
Nic is a portfolio manager for the International Equity team at Morgan Stanley in London, where he has been since 2015. With 26 years of industry experience, Nic previously worked at Credit Suisse on a top-ranked consumer staples team, covering food manufacturing, home and personal care (HPC), beverages, and tobacco. He also led the consumer research team at Unicredit and was a senior analyst at Merrill Lynch and Lehman Brothers, focusing on pan-European food manufacturing and HPC. Nic holds a B.A. in Economics from Sheffield University.
William is a portfolio manager and leads the International Equity team at Morgan Stanley, where he has been since 1994. With 30 years of investment experience, he previously worked in Credit Suisse First Boston's Corporate Finance Group and as a management consultant at Arthur D. Little. William holds a B.A. in Modern History from Keble College, Oxford. He is also a dedicated supporter of the creative arts, notably Glyndebourne Opera.
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Company Description
Morgan Stanley Investment Management is treated as a boutique business unit within its parent company, meaning it can operate without restrictions, but still benefits from the long-term relationships and brand recognition that Morgan Stanley commands. A recipient of the Elite Provider for Equities rating from 2018-2021, the investment team runs over $457bn worth of assets for clients in 23 different countries.
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Quote from the Fund Manager
The secret to longevity in this business is continuing to ask the right questions. Encourage your team to question everything and everyone, including yourself!
William Lock
Co-Manager
Investment process
The fund is a very concentrated portfolio of high-quality global companies. The criteria the team looks for to define a quality company are features such as intangibles assets - like strong network benefits and brands, or licenses and permits that can provide an advantage over competitors. They will also look for companies benefiting from economies of scale and leading market distribution.
The strategy is focused on generating absolute returns and not losing money through the team's stock choices. The process will start with a screen to identify those companies achieving high returns: defined by strong returns on capital, low leverage and low capital intensity. Also, every stock will have to yield at least 1% in order to show commitment to minority shareholders.
From this list, the managers will analyse whether the returns generated historically are sustainable going forward. They will need to see that the quality characteristics of the firm can be defended, and that the firm is in control of its own destiny. They will therefore analyse the threat of new entrants, and environmental and social factors.
The third step will be to confirm the investment story with company management teams. This is essential before an investment, as the team believes that the first thing that damages a business is the people. The team will also have conversations with other stakeholders and will look at the businesses strategy, not just quarterly earnings.
Once they have found investable companies, they will then assign each a valuation.
The resulting portfolio holds between 20 and 40, but the sweet spot will be around 25-30. These will primarily be media, consumer discretionary and healthcare services companies. High-quality industrial companies will also feature, but need to demonstrate cyclical protection. The managers deliberately avoid banks, utility, telecommunications and energy companies, as they are not in control of their own destiny and rely on external factors.
Stocks are bought with a four-year outlook, meaning turnover is around 25%, though positions will be topped and tailed, depending on their performance and attractiveness. While the fund can invest globally, it typically has the vast majority of its assets in developed markets. That said, holdings may still have considerable emerging market exposure due to their global business lines.
Risk
The managers define risk as the permanent loss of capital, and therefore assess the potential drivers behind this in the stock selection process. They will consider factors in a variety of categories, including the sustainability of the company’s strong position, the effects of technological disruption and sensitivity to the macroeconomic environment. They will also assess the impact of regulations on sectors and the risk of management making mistakes - hence the heavy focus on meeting teams during the process.
Positions are sized depending on how much conviction there is in the company, with the portfolio split softly into three sectors. The top five holdings will need to have a lot of conviction and at good valuations, with position sizes over 5%. The next part of the portfolio will be sized around 3%, as the investment case is usually missing one key element - often an attractive valuation. The final sector will be the tail of positions around 1-2%. In total, the top ten names will make up over 50% of the portfolio.
ESG
ESG - Integrated
This fund has a focus on quality and will consider ESG factors as part of this: the quality approach should lead to firms offering long-term compound growth and this can be easily undermined by ignoring ESG issues. Rather than screening the universe, ESG factors are used in the stock research, valuation and portfolio construction parts of the process. This work is carried out through a proprietary Material Risk Indicator system. This looks at universal risks such as carbon or executive pay, then at industry- and company-specific risks for more granular issues. Scores for ESG-related opportunities are then added, with firms whose product or services could be solutions to ESG challenges, allowing them to gain market share. This analysis culminates in a rank of A-E. The managers can use this score how they wish. This could be by reducing the position size, adjusting a valuation target or by avoiding the company altogether. This means that the manager will have the final say on what is and isn’t considered acceptable.
The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund nor of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating. All performance data, as well as fund size, OCF, AMC, annual income (historic), share price discount or premium, is sourced directly from FE Analytics, and will change periodically.