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Does Morgan Stanley add value for investors?
By Advisor Perspectives
In an April 21, 2015 column, New York Times reporter Nathaniel Popper observed that, over the last few years, a growing line of mutual funds created by the likes of Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo have attracted billions of dollars from investors looking to earn a good return.
Popper noted that in the latest 10-year period, Morningstar data showed that only 38% of Morgan Stanley’s mutual funds outperformed their analyst-assigned benchmarks. Thus, while the fees these funds have generated are among the few consistent bright spots of growth on Wall Street, there is still a question for investors: Have these banks’ actively managed mutual funds actually been good investment choices?
Today, I’ll provide further insights into that question as I continue my series evaluating the performance of the market’s foremost actively managed fund families with an in-depth look at Morgan Stanley Investment Management.
According to Morningstar, as of April 30, 2015, Morgan Stanley had over $34 billion in assets under management in mutual funds. The firm’s website states: “Morgan Stanley Investment Management strives to provide outstanding long-term investment performance and best-in-class service to a diverse client base, which includes governments, institutions, corporations and individuals worldwide. Our global structure leverages the breadth, depth and access of the Morgan Stanley franchise to provide our clients a comprehensive suite of investment management solutions.”
Does Morgan Stanley deliver on what they strive for? Have its funds been adding value for investors, or was the firm the real beneficiary?
Active versus passive
As is my practice, I’ll compare the performance of Morgan Stanley’s actively managed equity funds to similar fund offerings from two prominent providers of passively managed funds, Dimensional Fund Advisors (DFA) and Vanguard. (Full disclosure: My firm, Buckingham, recommends DFA funds in constructing client portfolios.)
To keep the list to a manageable number of funds, and to make sure I examine long-term results through full economic cycles, the period covered will be the 15 years from April 2000 through March 2015. I’ll use the lowest-cost shares when more than one class of fund is available for the full period. In cases where Morgan Stanley has more than one fund in an asset class, I’ll use the average return of its funds in the comparison. The table below shows the performance of 13 of Morgan Stanley’s mutual funds covering seven asset classes – five domestic funds and eight international funds.
April 2000 - March 2015
Annualized Return (%)
Expense Ratio (%)
U.S. Large Growth
Morgan Stanley Multi-Cap Growth
Morgan Stanley Institutional Opportunity
Morgan Stanley Institutional Growth
Consulting Group Large Cap Growth
Morgan Stanley Average
Vanguard Growth Index