HEAD-TO-HEAD: Morgan Stanley versus T Rowe Price

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Conclusion

Morningstar has awarded the Morgan Stanley product five stars based on historical returns, and a silver analyst rating. The firm gives the T Rowe Price fund four stars, and also a forward-looking analyst rating of silver.

FE Fundinfo, which bases its assessment on a fund’s three-year history of delivering alpha, minimising relative volatility and producing consistent returns, awards the Morgan Stanley product four crowns, and rates the T Rowe Price fund lower with only two crowns.

The Morgan Stanley US Growth Fund delivered a tremendous performance last year as a result of key stock selections during the pandemic lockdowns. However, its high conviction, concentrated and low turnover investment philosophy means the strategy is susceptible to periods of underperformance: high returns come with higher risks.

“The fund’s volatility and vulnerability to short-term phases of weakness means that it is challenging to include the fund as a core holding,” said Poole.

“It certainly has a role as a great long-term play, but its lack of stable, reliable returns makes it unsuitable to be the anchor of an investor’s US equity portfolio,” he said.

Poole has no similar reservations about the T Row Price strategy.

“Tamaddon delivers strong, consistent, stable returns derived from a rigorous investment process and an exceptional team of analysts,” he said.

Although the Morgan Stanley fund sometimes generates spectacular returns, the T Rowe Price strategy is “more attractive of risk-adjusted basis,” Poole concluded.

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