Process
The investment objective of the Fund is to seek to achieve attractive long-term returns by investing in international shares. The strategy focuses on quality and value in absolute terms, which means that the Manager (Morgan Stanley Investment Management Limited) does not use a benchmark index for portfolio construction.
The Global Franchise investment process
The Global Franchise investment philosophy and process clearly differentiates the fund from other international share offerings. The fund invests in a concentrated portfolio of 20 - 40 companies that the manager considers demonstrate exceptional quality and value, and therefore warrant long term investment.
The overall portfolio has a strong value bias. Over the years, the Global Franchise team have observed what in their view constitutes a great company:
- Posession of dominant intangible assets
- Repeat business or recurring revenue
- Disciplined management
- Organic growth potential
- Sustainable high return on capital employed
The companies in which the fund invests are typically found in industries such as branded consumer goods, media and advertising. The fund does not invest in capital intensive industries such as telecommunications and utilities.
The team's experience has led them to believe that dominant intangible assetscreate a significant barrier to entry by competitors. In contrast, physical assets can be duplicated more readily and this eventually leads to price competition and erosion of returns on capital.
Morgan Stanley believes companies with strong franchises are superior creators of shareholder wealth. These companies generally have a low correlation with most equity investments, potentially enabling the fund to perform well in both strong and weak markets.
Benefits
The Fund provides the potential for the following key benefits:
- attractive long terms returns;
- higher returns and lower volatility than traditional benchmarks
- a low correlation with traditional benchmarks for international shares
- a bias towards capital preservation, as demonstrated historically by positive annual returns before fees in US dollars for each calendar year since the inception of the Manager's strategy*. Please note that past performance is not a reliable indicator of future performance.
- A concentrated portfolio of high quality companies
- A deliberate disregard for benchmark indices
*31 March 1996 is the inception date for the Manager's Global Franchise strategy.
