HEAD-TO-HEAD: Morgan Stanley vs Threadneedle

123456

Investment approach

The two funds aim to identify high quality companies globally that can potentially achieve double-digit earnings growth. Their investment processes, which include suggestions and challenges from teams of analysts, are similar. They have a universe of about 700 large-cap stocks, which are whittled down to about 40, which comprise each portfolio.

“However, their ultimate approach is different,” said Meatyard.

“Morgan Stanley tends to make bigger sector bets, while Threadneedle focuses more on individual stock selection to build a more diversified portfolio.”

For instance, Morgan Stanley’s Kristian Heugh has taken substantial positions in technology (up to 40%) and consumer discretionary (30%), while eschewing healthcare, which he considers over-valued. Last year, a major position in Facebook dragged on his performance.

In contrast, Threadneedle’s David Dudding makes fewer big bets, although his stock selection has shown a lean towards financials and healthcare.

As a consequence of its more aggressive style, the Morgan Stanley fund has delivered more alpha (6.76% over three years) than the Threadneedle fund (2.93%).

“On the other hand, Morgan Stanley also has more tracking error, which can be a disadvantage during volatile markets,” said Meatyard.

Source: FE Analytics

*29 Jan 2016 – 31 Jan 2019

Market Exposure:

Sector Weightings (31 December 2018)

Source: FE Analytics

Top 5 holdings (31 December 2018)

Source: FE Analytics

Regions (31 December 2018)

Source: FE Analytics

123456