European Credit Strategy
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The investment team believes that market participants may often mis-value a company’s default risk, resulting in bond prices that fail to reflect the true credit profile of a company. However, the team believes that the market will re-value the bond prices of high-quality issuers based over time, thereby offering investors the opportunity to potentially exploit these pricing inefficiencies and earn superior returns over the long term.
The team believes that successful credit management depends on four factors:
• A value-driven process;
• Forward-looking credit analysis;
• Broad diversification to help reduce portfolio risk;
• A global approach.
Combined Quantitative and Qualitative Approach: |
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The team’s investment approach integrates strong qualitative analysis with robust quantitative valuation tools at every stage of the investment process, providing a robust credit management process. |
Extensive Experience: |
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The Global Fixed Income Team at Morgan Stanley Investment Management has invested in fixed income assets since 1975, and in European fixed income assets since 1990. |
Global Research: |
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An emphasis on a team-based approach to research and investment allows investors to benefit from the combined expertise of the Global Fixed Income Team at Morgan Stanley Investment Management. Approximately 80% of the team’s research is generated in-house, and this is supplemented by Morgan Stanley sell-side and 3rd party research. |
| 1 | Macro analysis: |
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The process begins with a top-down value assessment of the corporate bond universe, including a consideration of macroeconomic conditions, the corporate earnings environment and relative valuations. |
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| 2 | Screening: |
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The team applies what they believe to be a unique combination of quantitative and qualitative filters to identify approximately 250 to 300 bond issuers that meet its investment criteria in terms of competitive position, franchise value and management quality. |
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| 3 | Credit Analysis: |
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The team conducts rigorous focuses on financial risk, business risk and management ability/intentions. |
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| 4 | Valuation Analysis: |
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The team’s credit analysis narrows the universe to approximately 200 investment candidates on which a relative valuation assessment is conducted. |
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| 5 | Portfolio Construction: |
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A portfolio of 100 to 120 issuers is constructed, with sector allocation driven primarily from bottom-up security selection (subject to the risk management guidelines). |
Effective 30 August 2024, Richard Ford is no longer serving as Portfolio Manager, and Joe Mehlman was added as Portfolio Manager on the Portfolio.