2014 proved to be another strong year of growth for Morgan Stanley’s managed accounts platform, which saw assets increase from USD2.6bn to USD3.5bn.
From day one, Morgan Stanley’s managed account solution was clear: to deliver investor-centric bespoke solutions. As Stephane Berthet (pictured), Executive Director at Morgan Stanley and head of its FundLogic Alternatives platform says: “It goes beyond merely being a distribution platform,” which is the case with more of the long-standing public platforms that have traditionally been manager-centric.
There are between 30 and 35 managers on Morgan Stanley’s managed account open architecture platform. Where possible, these managers are used in more than one bespoke mandate. Last year, the platform onboarded two large equity market neutral mandates, as well as a global equity mandate and several blue chip CTA mandates, according to Berthet.
Morgan Stanley’s multi-asset platform is composed of three key pillars, with combined assets under management of approximately USD8bn. These three pillars are UCITS funds, managed accounts and systematics.
“Our UCITS funds and managed accounts give our investors access to third party managers whereas our systematic strategies give our investors access to a more bespoke strategy, tailored for their specific needs. Overall, this brings advantages such as providing regulated access to hedge funds, efficient access to hedge funds as well as bespoke solutions to investors,” explains Berthet.
Given that the platform is a solution-driven one, there aren’t any pre-requisites per se when it comes to onboarding managers, although care is taken to ensure that managers are of a certain quality/standard.
“Growth on our platform comes from addressing investors’ issues when trying to gain access to hedge fund strategies by providing exposure to these hedge fund strategies in an efficient format. The current regulatory environment and the need to restructure hedge fund exposures will further place us in a great position for the coming years ahead,” says Berthet in relation to anticipated future growth.
When constructing a segregated managed account (or portfolio of accounts) for an institutional investor, Morgan Stanley uses a total return swap to access hedge funds. The specific benefits that a TRS provides for investors will vary across different investor types.
“Recent regulations such as Solvency II and Basel III place heavy capital requirements on investments in hedge funds for insurance companies and banks respectively. However, when investing using a TRS, such capital requirements can be reduced. It also allows for the investor to gain access to a hedge fund strategy in an unfunded format,” explains Berthet.
“Part of Morgan Stanley’s offering is that we are able to customise baskets for investors. This includes grouping multi managers into one basket and delivering performance to the investor through a TRS in addition to a TRS on a single manager.”
On jointly winning this year’s award, Berthet comments: “We are pleased to win this award amongst such strong competition. We believe this award is reflective of the hard work and dedication the team has put in to making Morgan Stanley’s managed accounts platform a quality and trusted brand.”
