Morgan Stanley Investment Management has made its Applied Equity Advisor (AEA) team’s strategies available in mutual fund format for the first time with the launch of launch of three new funds – US Core Portfolio, Global Core Portfolio, and Global Concentrated Portfolio.
Led by Andrew Slimmon and Phillip Kim, who will act as portfolio managers for the Portfolios, the AEA team has been managing capital for over 15 years, focusing on high net worth and institutional investors in a separate account structure. They are core equity managers who believe in a flexible approach to investing that provides an option for investors seeking a benchmark aware strategy that incorporates both quantitative and fundamental approaches to investing.
“We believe it’s important to be able to capture outperformance relative to the benchmark regardless of which style is in favour, value or growth,” says Slimmon. “By combining a factor-based approach with a dynamic fundamental overlay to drive stock selection in a high active-share portfolio, we’re able to pivot from growth to value and back in real time.”
The team’s framework seeks to capture 70 per cent of the market’s returns using factor-based investing, with a dynamic fundamental overlay to drive high active share investing for the other 30 per cent. AEA’s approach has created significant demand for the team’s products across vehicle structures, and the launch of these three new funds will support that demand.
Clients can expect the team to invest in a highly active portfolio of stocks with attractive valuations, above-average appreciation potential and competitive dividend yields. The team uses a combination of quantitative models and fundamental research.
Through a network of financial advisors and retail clients, as well as institutional accounts, the AEA team already managed combined AUM of USD5.1 billion across its strategies as of 31 March, 2016. The three new portfolios bring these opportunities to retail and institutional investors seeking a comprehensive and flexible way to capture returns in a mutual fund vehicle.
The portfolios vary by concentration and region: the US Core Portfolio will generally consist of 30 to 60 stocks with the flexibility to invest up to 20 per cent in non-US equities; the Global Core Portfolio will generally consist of 30 to 60 stocks and typically invest at least 40 per cent in non-US equities under normal market conditions; and the Global Concentrated Portfolio will generally consist of approximately 15 to 20 high-conviction stocks and typically invest at least 40 per cent in non-US equities under normal conditions, but have greater flexibility with respect to regional and sector allocations than the Global Core Portfolio.
The AEA team is part of the Multi-Asset & Solutions business at Morgan Stanley Investment Management, and the firm is committed to building out the team’s platform. “Morgan Stanley Investment Management is a client-oriented organisation that develops products to deliver solutions and performance to our clients, and we believe that the AEA team has the expertise to truly understand what investment products address our clients’ needs,” says Jacques Chappuis, Co-Head of the Solutions & Multi-Asset Group. “These newest strategies broaden our offering to provide concentrated and core products that are in high demand.”
