Morgan Stanley SICAV Global Brands Fund

The fund outperformed its peers by returning around 20 percent in USD terms in 2006 and registered a 5.1 percent return for the first quarter of 2007. ....

Jessy Yang 04.04.2007
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Its consistent investment strategy thrives when market goes up or down.

The fund outperformed its peers by returning around 20 percent in USD terms in 2006 and registered a 5.1 percent return for the first quarter of 2007. The size of the fund is relative big compared to other consumer sector funds. As at end of February, its total asset size was over $3 bns USD, around 57 percent increase than January 2006.

This fund follows a blend strategy of value and growth and favors larger-cap stocks and developed markets. At country level, the fund has large exposures to Europe and the U.S. markets with the total weightings of the U.S. and U.K. more than 60 percent of total asset. Although the fund size grows

fast, the portfolio keeps stable and concentrated. The total number of holdings remains around 30 and the weightings of top 10 holdings account for over 40 percent of total asset. On sector level, it invests in both consumer discretionary and consumer staples.

The managers look for stocks with good franchises, decisive intangible assets, healthy balance sheets, and strong management teams. Stock selection is one of major contributors to the fund's outperformance. Examples include Japan's personal care producer, Kao Corp. and a U.S. leading consumer product company, Fortune Brands. The stock price of Fortune Brands went up greatly on strong 2006 Q4 earning growth, boosted by the increase in golf equipment and wine and spirit sales.

The fund produced strong returns in 2002 when the market was very weak. It gained 6.85 percent return while the MSCI World Index slumped around 20 percent that year. Last year, when markets went up, the fund's performance was also satisfactory. Management's proven strategy works well under different market conditions. Although this fund is a sector fund by its nature, we still think it is a worthy play for global large-cap investors.

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Jessy Yang  Jessy Yang is a research director with Morningstar Asia.

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