MS INVF US Advantage Z |
Morningstar's Take
|06/03/2024by Robby Greengold
| The caliber of Morgan Stanley Advantage’s investment team makes its perennially bold posture worthwhile. The strategy includes the Luxembourg-domiciled MS INVF US Advantage. The strategy epitomizes active management. Unlike US-focused large-growth indexes characterized by companies that are well-established and widely owned across funds, this strategy concentrates on early-stage companies with short publicly traded histories. As of year-end 2023, the bulk of the portfolio behaved much like the US technology or consumer cyclical sectors with little representation from other sectors such as industrials or energy. The portfolio’s holdings tend to offer rapid top-line growth but paltry current earnings and highly uncertain futures. These features make the strategy prone to extreme volatility, which works against it when the market loses its appetite for risk. Its steep losses during 2022’s global equity market selloff provided a stark reminder. But the strategy regained its footing in 2023 and climbed around 46% that year, comfortably beating the Russell 1000 Growth Index despite scarcely owning any of the index’s soaring mega-cap stocks. Underpinning the merits of the strategy’s unique approach is its best-in-class investment team. Portfolio manager Dennis Lynch has long led the US-focused group, which is deep, experienced, and has recently expanded to around two dozen members. Including Lynch, seven members have collaborated on the team for 20 years or longer. Ten members are relative newcomers, having joined the team in 2019 or more recently. Many brought with them ample and diverse industry experience gained elsewhere. Among the team’s advantages is its distinctive investment culture. The team resists adhering to a single framework for evaluating the investment landscape. The coordination of its research efforts is one example. It does not rigidly assign individuals coverage based on sector expertise. But not everyone is a generalist, either. Instead, certain members focus on specific fields and others look across them. Another three team members are charged with researching disruptive change; they explore broad themes or significant ideas that could influence multiple sectors, especially where rapid changes render traditional expertise less relevant. This collaborative effort blending big-picture thinking with in-the-weeds attention to detail sets the team apart. |
An audacious but adept investment team.To find out how Morningstar rates a fund click here.
| Morningstar Pillars | |
| People | High |
| Parent | Average |
| Process | Above Average |
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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