Strong stewardship delivers results - Multi Asset Category

By Jayson Forrest - Managing Editor  - IMAP Perspectives

IMAP Awards - Aust Equities-  Integrity and durability - FIrst Sentier

A focus on performance consistency and client satisfaction has seen Morgan Stanley Wealth Management Australia take out the 2021 IMAP Managed Accounts Award category for Multi Asset. 

When Nathan Lim and Alex Ventelon first joined Morgan Stanley Wealth Management Australia, their objective was to institutionalise the way in which Morgan Stanley’s portfolios were managed, with the aim of elevating these portfolios to an institutional-grade offering.

The objective they set for themselves was to develop and enhance portfolios that could be put in front of any investor - large or small. It was no small task, but an undertaking they believe they have been successful in achieving.

You only need to look at the 2021 IMAP Managed Accounts Awards for validation of this success, with Morgan Stanley Wealth Management Australia not only taking out the category of Multi Asset but also winning the coveted award of Licensee Managed Account.

In deciding the winner of the Multi Asset category, IMAP Awards judge, Dragana Timotijevic CFA says the key focus for judges with this category was asset allocation, “specifically the manager’s approach to Strategic Asset Allocation and active asset allocation”. Other factors the judges considered were: the overall quality of the manager, processes, resourcing, research, and risk management.

“After careful deliberation, including reviewing and assessing the various capabilities of the managers in relevant areas, like track record, we chose Morgan Stanley Wealth Management Australia as the winner,” says Dragana.

Nathan Lim - Head of Wealth Management Research at Morgan Stanley Wealth Management Australia
Nathan Lim - Morgan Stanley Wealth Management Australia
Alex Ventelon - the Lead Asset Allocation Strategist at Morgan Stanley Wealth Management Australia
Alex Ventelon - Morgan Stanley Wealth Management Australia

Everything we do is always backed by research. Our investment process is very robust, which shows in the consistency of our performance.

Alex Ventelon

Our Tactical Asset Allocation is driven by research. Our global research team comprises of 750 analysts, strategists and economists, operating out of 21 countries. So, we are driven by a bottom-up view, with people on the ground providing local insights, which helps drive our thinking.

Nathan Lim

Approach to Investing

As Head of Wealth Management Research at Morgan Stanley Wealth Management Australia, Nathan credits much of the business’s success to its approach to investing. He ascribes this approach as “flexible but decisive”, which is driven by research, data and deep analysis.

Alex - the Lead Asset Allocation Strategist at Morgan Stanley Wealth Management Australia agrees, adding that the key to the investment process at Morgan Stanley is definitely the quality of its research.

“Everything we do is always backed by research. Our investment process is very robust, which shows in the consistency of our performance,” he says.

The investment process at Morgan Stanley is built on four pillars:

  1. Asset allocation - Strategic Asset Allocation underpins Morgan Stanley’s multi asset model framework, while Tactical Asset Allocation is used to anticipate and respond to changes in the macro environment.

  2. Active/passive framework - This type of framework is seldom used in Australia. It is a quantitative model built in Australia with the support of Morgan Stanley Wealth Management research in the United States, that is aimed at forecasting whether the next 12 months is going to be more conducive for active or passive management in each asset class.

  3. Manager selection - Internal analysts use research and investment tools to narrow down the best managers in each asset class.

  4. Portfolio construction and risk management - Morgan Stanley uses a granular approach to portfolio construction, including portfolio optimisation, to stress-test portfolios. This helps ensure that the end portfolio reflects Morgan Stanley’s investment approach, in the best possible risk-adjusted manner.

“Our Tactical Asset Allocation is driven by research. Our global research team comprises of 750 analysts, strategists and economists, operating out of 21 countries. So, we are driven by a bottom-up view, with people on the ground providing local insights, which helps drive our thinking,” says Nathan.

“In terms of our active/passive framework, we are agnostic between active and passive. We don’t think one management style is better than the other. Instead, it depends on market conditions.   And with manager selection, we leverage a lot of the portfolio management best practices we get out of Morgan Stanley Wealth Management in the United States.”

Nathan cites three quantitative tools - adverse active alpha, value score, and risk score - as examples of resources that were borrowed from the U.S. and brought across to the Australian business.

“We took these tools and adapted them to the Australian market. These forward-looking quant tools actually try to predict whether or not a fund manager will beat its peers, is value for money, and will do all this in a risk-controlled manner with a three-year outlook.”

The growth in funds under management in our managed accounts program has been stellar, particularly over the last 12 months. By delivering good risk-adjusted returns and very strong performance, we have been able to put together an offering that not only makes sense to clients, but it’s an offering they are satisfied with.

Alex Ventelon

Top quartile success

It’s not just performance that the Morgan Stanley multi asset team uses to measure the success of its strategy. Client satisfaction and adviser feedback also figure prominently as part of its criteria when measuring success.

“The growth in funds under management in our managed accounts program has been stellar, particularly over the last 12 months. By delivering good risk-adjusted returns and very strong performance, we have been able to put together an offering that not only makes sense to clients, but it’s an offering they are satisfied with,” says Alex.

Nathan agrees, adding that while client satisfaction is important, Morgan Stanley is always striving to be top quartile with its offerings.

“Not only do we want to be amongst the best in the country in terms of absolute and relative performance, but we want to do that in a risk efficient manner,” he says. “This includes ensuring our Sharpe ratio is superior to our peers, to ensure we are delivering outperformance through efficient use of risk.”

Not only do we want to be amongst the best in the country in terms of absolute and relative performance, but we want to do that in a risk efficient manner. This includes ensuring our Sharpe ratio is superior to our peers, to ensure we are delivering out-performance through efficient use of risk.

Nathan Lim

A validation of consistency

Perhaps what Nathan and Alex are most proud about as custodians of the Morgan Stanley multi asset strategy is not having to make any changes to the model since it was first launched in 2012.

“I am the third steward of this model, and even though Alex and I have been running this strategy for almost six years, the performance outcomes for clients have been very consistent. The risk-adjusted returns have been strong, the absolute returns have been strong, and the relative performance has been strong,” says Nathan. “So, while we’re not changing our fundamental strategy, we are constantly fine-tuning and enhancing it.”

The fact that this strategy continues to deliver consistent performance, makes winning the IMAP Managed Accounts Award for Multi Asset all the sweeter for the Morgan Stanley multi asset team.

It’s wonderful recognition and validation from our peers that we are heading in the right direction with our offering,” says Alex. “This award acknowledges the enormous effort and dedication that the team at Morgan Stanley puts into its investment models.

“The award also recognises our focus on client outcomes, by delivering the highest quality service offering to our clients in Australia.”

Finalists

IMAP 2021 Awards Finalist AUS Equities

IMAP congratulates all the finalists in the Multi Asset category for 2021

    • Infinity Asset Management
    • Innova Asset Management
    • MLC Asset Management
    • Morgan Stanley Wealth Management Australia
    • Russell Investments

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