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Overview
Overview

The US Limited Duration Strategy seeks current income, preservation of principal and liquidity by investing in a diversified portfolio of securities issued by the U.S. Government and its agencies. To help achieve this objective, the team invests in U.S. Government, corporate bonds, asset-backed and mortgage-backed securities with maturities of less than five years.

Differentiators
1
Integrated Investment Approach

The team’s investment approach integrates strong qualitative analysis with robust quantitative valuation tools at every stage of the investment process, providing a robust credit management process.

2
Research with Portfolio Management

Strategic investment decisions are made by a team of experienced investors who continually conduct ongoing research to be at the forefront of fixed income research and are thought leaders in this field. Opinions from all members of the team are debated to ensure that portfolios reflect the team’s best ideas.

3
Global Research

An emphasis on a team-based approach to research and investment allows investors to benefit from the combined insight and expertise of MSIM’s global fixed income team. Approximately 80 percent of MSIM’s research is generated in-house, and this is supplemented by Morgan Stanley sell-side and third party research.

Investment Approach

The team employs a value-based investment philosophy. The team believes that significant inefficiencies can exist in the fixed income markets and, as value managers, they look for situations where the market’s implied forecasts are extreme and position client portfolios to capture the value inherent in these situations. The team seeks to add value and exploit inefficiencies across eligible sectors by combining traditional analysis with innovative technology.

Investment Process

1
Macro Analysis:

The investment team employs a top-down approach to asset class allocation. The allocation decision starts with macroeconomic analysis. They believe that market participants often misjudge the likely paths of monetary policy, inflation, and credit quality—key paths that, for the most part, are aligned with the business cycle or inflation cycle. The team employs fundamental and quantitative analyses to identify and exploit any mispricing in an effort to generate superior returns over the long term. Mispricing often occurs when market expectations are excessive and unlikely to be realized.

2
Yield-Curve Analysis:

The team utilizes a proprietary term structure model that imputes the market expectations of inflation and monetary policy from market prices. These forecasts are compared to the likely range of outcomes—taking into account fiscal policy, monetary policy, general business conditions and historical precedent—to determine yield-curve positioning.

3
Valuation Analysis:

The risk parameters established by the portfolio management team guide the portfolio managers in implementing security selection decisions. To help attain these targets, the portfolio managers refer to the value opportunities already identified by the various research teams in making their security selection decisions. Portfolio managers have the ultimate responsibility for fulfilling portfolio targets while simultaneously ensuring that all selected securities are compliant with the investment guidelines.

4
Portfolio Construction:

The team's research focuses on identifying value in as many opportunities as possible. Portfolios are built security by security with vigorous attention paid to assessing and comparing a wide variety of possible investments.

Portfolio Managers

Effective December 1, 2023, Joseph Mehlman and Stella Ma were added as Portfolio Managers on the Strategy, and Neil Stone and Matt Dunning are no longer serving as Portfolio Managers.

Team Insights

RISK CONSIDERATIONS  

Diversification does not protect you against a loss in a particular market; however it allows you to spread that risk across various asset classes.

There is no assurance that a mutual fund will achieve its investment objective. Funds are subject to market risk, which is the possibility that the market values of securities owned by the fund will decline and that the value of fund shares may therefore be less than what you paid for them. Market values can change daily due to economic and other events (e.g. natural disasters, health crises, terrorism, conflicts and social unrest) that affect markets, countries, companies or governments. It is difficult to predict the timing, duration, and potential adverse effects (e.g. portfolio liquidity) of events. Accordingly, you can lose money investing in this fund. Please be aware that this fund may be subject to certain additional risks. Fixed-income securities are subject to the ability of an issuer to make timely principal and interest payments (credit risk), changes in interest rates (interest-rate risk), the creditworthiness of the issuer and general market liquidity (market risk). In a rising interest-rate environment, bond prices may fall and may result in periods of volatility and increased portfolio redemptions. In a declining interest-rate environment, the portfolio may generate less income. Longer-term securities may be more sensitive to interest rate changes. Mortgage- and asset-backed securities are sensitive to early prepayment risk and a higher risk of default and may be hard to value and difficult to sell (liquidity risk). They are also subject to credit, market and interest rate risks. Some U.S. Government securities are not backed by the full faith and credit of the U.S., thus these issuers may not be able to meet their future payment obligations. Foreign securities are subject to currency, political, economic and market risks. The risks of investing in emerging marketcountries are greater than risks associated with investments in foreign developed markets. Derivative instruments can be illiquid, may disproportionately increase losses and may have a potentially large negative impact on the portfolio’s performance. Restricted and illiquid securities may be more difficult to sell and value than publicly traded securities (liquidity risk).

 

This communication is only intended for and will be only distributed to persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations.

There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. Past performance is no guarantee of future results.

A separately managed account may not be appropriate for all investors. Separate accounts managed according to the Strategy include a number of securities and will not necessarily track the performance of any index. Please consider the investment objectives, risks and fees of the Strategy carefully before investing. A minimum asset level is required. For important information about the investment manager, please refer to Form ADV Part 2.

Any views and opinions provided are those of the portfolio management team and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. Furthermore, the views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring. The views expressed do not reflect the opinions of all portfolio managers at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.

DEFINITIONS

Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates.

This material is a general communication, which is not impartial and all information provided has been prepared solely for informational and educational purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy. The information herein has not been based on a consideration of any individual investor circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. To that end, investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision.

OTHER CONSIDERATIONS

The indexes are unmanaged and do not include any expenses, fees or sales charges. It is not possible to invest directly in an index. Any index referred to herein is the intellectual property (including registered trademarks) of the applicable licensor. Any product based on an index is in no way sponsored, endorsed, sold or promoted by the applicable licensor and it shall not have any liability with respect thereto.

The Bloomberg 1-3 Year U.S. Government/Credit Index tracks the securities in the 1-3 year maturity range of the Bloomberg U.S. Government/Credit Index which tracks investment-grade (BBB-/Baa3) or higher publicly traded fixed rate U.S. government, U.S. agency, and corporate issues. 

“Bloomberg®” and the Bloomberg Index/Indices used are service marks of Bloomberg Finance L.P. and its affiliates, and have been licensed for use for certain purposes by Morgan Stanley Investment Management (MSIM). Bloomberg is not affiliated with MSIM, does not approve, endorse, review, or recommend any product, and. does not guarantee the timeliness, accurateness, or completeness of any data or information relating to any product.

The information presented represents how the portfolio management team generally implements its investment process under normal market conditions.

Morgan Stanley Investment Management is the asset management division of Morgan Stanley.