Morgan Stanley operates as a global financial services company. The firm provides investment banking products and services to its clients and customers including corporations, governments, financial institutions, and individuals. It operates through the following segments: Institutional Securities, Wealth Management, and Investment Management. The Institutional Services segment provides financial advisory, capital-raising services, and related financing services on behalf of institutional investors. The Wealth Management segment offers brokerage and investment advisory services covering various types of investments, including equities, options, futures, foreign currencies, precious metals, fixed-income securities, mutual funds, structured products, alternative investments, unit investment trusts, managed futures, separately managed accounts, and mutual fund asset allocation programs. The Investment Management segment provides equity, fixed income, alternative investments, real estate, and merchant banking strategies. The company was founded by Harold Stanley and Henry S. Morgan in 1924 and is headquartered in New York, NY.
COMMENTARY
Global equities rose in October, although leadership was uneven as investors balanced softer labour-market signals against further moderation in inflation. The Fund’s fundamentals remained strong, with earnings revisions and growth momentum continuing to exceed the benchmark. The Fund’s currency hedge provided less benefit this month, given the stronger US dollar.
Inflation eased across major regions. In Europe, underlying inflation was steady, while pricing pressures in China remained subdued across both consumer and producer measures. In the US, data releases were more limited due to the temporary government shutdown, but the indicators available pointed to modest economic growth and further weakening in employment conditions. The Challenger report showed 153,000 layoffs, marking the highest October reading in two decades. The US Federal Reserve cut interest rates by 25 basis points and maintained an accommodative stance, with markets viewing another cut in December as a realistic possibility.
Economic conditions elsewhere were mixed. In Europe, manufacturing and service activity were broadly stable, with a slight improvement in industrial production and retail spending. China saw softer export activity and a divergence between weaker manufacturing and more resilient services. Commodity markets were largely unchanged as lower oil prices were balanced by more stable industrial and precious metals. Trade relations between the US and China also improved, with both sides moving to ease certain tariffs and export restrictions.
With global growth running at a low pace and policy settings remaining supportive, the environment continues to favour companies with strong earnings visibility and positive revision trends, consistent with the Fund’s dynamic growth approach.
Portfolio Commentary
The Fund modestly underperformed the benchmark in October. Industrials and real estate contributed positively at the sector level, while information technology and communication services detracted.
Fujikura, a Japanese manufacturer of optical fibre and connectors, was the strongest contributor. Shares continued to rise as peer results and accelerating generative AI investment suggested that medium-term demand remains underappreciated. Alphabet also performed well after reporting stronger third quarter results, with improving click growth and faster cloud infrastructure revenue. Amazon contributed as its cloud division saw the long-awaited improvement in revenue growth. Data centre supply remains tight relative to AI-driven demand, and early commentary from key customer Anthropic points to further upside. Its retail operations also remained steady, supported by ongoing efficiency gains.
Meta Platforms detracted as higher guidance for generative AI investment weighed on sentiment, although these commitments are expected to support stronger engagement and improved advertising effectiveness over the medium term. Netflix also lagged despite ongoing operational strength. Subscriber trends and pricing remain healthy, while more moderate content spending supports a solid earnings outlook. Oracle gave back some of September’s strong gains despite improved long-term profit guidance. Its growing role in cloud infrastructure for large language model training remains a key advantage.
Portfolio activity reflected selective additions and reductions. The Fund added to Amphenol, ASML and Sony. Amphenol was increased ahead of strong quarterly results that supported forecasts well ahead of consensus. ASML was added as semiconductor capital spending began to improve, particularly in memory, where demand for high bandwidth chips continues to rise. Sony was increased ahead of earnings, supported by improving trends across gaming, music and film.
Reductions were made to SAP, Boston Scientific and Live Nation. SAP was trimmed as cloud growth expectations showed less upside relative to Axiom’s forecasts. Boston Scientific was reduced after market expectations aligned with Axiom’s view, and valuation moved higher. Live Nation was cut as industry data softened, with later earnings confirming weaker conditions.
A new position was initiated in Insmed, a US biotechnology company with an attractive pipeline and a stronger-than-expected launch for its lead therapy for bronchiectasis. The Fund exited Ferrari following weaker medium-term growth expectations and sold Sony Financial after its spin-out into a standalone insurance business. Six holdings received MSCI upgrades during the month, reflecting continued progress in governance, data privacy and talent management.