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Morgan Stanley Company Investment Objectives Report

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Updated: Jun 27th, 2020

Introduction

Morgan Stanley is an American financial holding and global asset management company that deals with providing financial advice on issues such as mergers and acquisition to institutional clients. Founded in 1935, the company has been advising its clients on strategic transactions and issues concerning capital markets. The three fundamental investment vehicles that constitute Morgan Stanley include institutional securities, asset management and the management of global wealth. Its fierce rivals include Merrill Lynch & Co., JPMorgan Chase and Goldman Sachs. With more than 1200 corporate offices in 37 nations, Morgan Stanley enjoys a clientele base across the globe. These range from institutions, governments, individuals as well as corporations.

The changing climate in the securities industry

According to global securities industry outlook report released by Deloitte, even though risk management and regulatory compliance remain a great challenge to industry players, there are numerous growth opportunities in such areas as globalization, expansion and innovation through technologies (Deloitte, 2010. p.3). The current securities industry climate is characterized by intense competition from new players, tough regulations and risks.

Morgan Stanley has adapted to the changing climate in the securities industry opting to enter into joint ventures with other players. For instance, in March 2010 Morgan Stanley entered into a joint venture arrangement with Mitsubishi UFJ Financial Group (MUFG) inc., a Japanese financial giant. The intention of this joint venture was to fully exploit business opportunities by taking advantage of having a huge global reach and a large domestic retail brokerage networks. The other intention was to meet and exceed the diverse needs of the company’s clients.

Morgan Stanley survived major financial meltdown of 2008 that saw leading competitors such as the Lehman Brothers and Bear Stearns collapse and consequently, subduing other competitors. After surviving the scare, the firm sought to realign itself from an investment bank to a financial bank holding company. Luckily, the approval was granted. However, this process had to be closely scrutinized by the Federal deposit Insurance and the federal government as well.

This bold step gave the firm a major advantage of accessing Primary Dealer Credit Facility established by the federal government. The firm ignored pressure from the US government to merge with other financial institution for a very low price. The company announced the disposal of its investment firm Van Kampen to INVESCO (INVESCO, 2010) to enable it (Morgan Stanley) concentrate on institutional asset management. Another bold step that Morgan Stanley took was to hire senior talented personnel and professionals who would deal with the clients in order that sales and trading business could be rejuvenated.

The changes in the security industry regulations have affected the competitive environment. Players in the financial industry are required to comply with the laid down regulations in order to cut down costs of non compliance. These companies have been forced to have strict and tough procedures and processes to monitor the risks and implementing controls across the organization. That is the reason why Bear Sterns has hired former regulators to manage its legal departments.

Investment objectives

It is important that the clients of Morgan Stanley understand their personal investment objectives before committing to any investment scheme. The main objectives of an investment are safety, growth and also income. It is mandatory for any of Morgan Stanley investors to get these objectives right in order to reduce chances of getting no returns. An investor who is keen on having a risk free investment will not go for common stocks since they are characterized by a high risk. A risk- averse investor would therefore choose corporate bonds instead of common shares because they can maintain the principal and receive specified rate of return.

For an investor who is more concerned with getting high returns, he/she has to invest in preferred shares that are considered riskier. However, for those concerned with future growth, they would purchase common stock which usually generates low yields but has considerable opportunity for appreciating their value. The returns of such stock depend on nth events in the unpredicted future and are therefore common with speculative investors. For corporate clients, these normally invest in common stocks since they generate high rate of return for its owners and also due to their liquidity. It is evident that investors cannot achieve multiple objectives of investments since an advantage of one objective comes with expense of the benefit of others.

Investment choices

Morgan Stanley offers a variety of investment choices such as stocks, bonds, mutual funds, closed end funds, annuities, global Currency, insurance, UITs, structured investments, alternative investments, managed futures, credit and lending services. Mutual funds have been known to getting outstanding performance (Malkiel, 1997. Pp.549) and promises better returns for its investment. The company’s mutual fund is worth considering for an investor keen on getting a high return for his/her investment. In the case of Morgan Stanley, the company provides more that 2500 investment alternatives to clients in over 150 organizations who are intent on investing in mutual funds.

This is because with mutual funds, there is instant diversification without having large amounts of cash required to establish individual portfolios. Another reason is because Morgan Stanley mutual funds are managed by experts in portfolio management who can use a person’s money invested in buying well researched stocks. Mutual funds have high liquidity such that one can get in and out at any given time. One can dispose of the mutual funds within a short time frame. Lastly, I would choose mutual funds because it is convenient.

Reference List

Deloitte. (2010). Global securities industry outlook. Web.

INVESCO. (2010). Transition center. Web.

Malkiel, B. (1995). Returns from investing in equity mutual funds 1971 to 1991. The journal of finance. Vol 1, No.2.

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