We've covered Elmasry for many years and believe his loss will be a blow to the funds and the firm. Indeed, Morgan Stanley's broad asset management arm has had its struggles over the years: Acquisitions of MAS, Van Kampen and Dean Witter left the firm with what our analysts saw as an ill-defin
ed investment culture and an overwhelming emphasis on sales. However, the firm subsequently pursued a multi-boutique strategy, and a few real stars emerged along the way. Brightest among these were Elmasry's unit in London, and boutiques in the US headed by Jim Gilligan (who came over in the Van Kampen acquisition) and Dennis Lynch in New York.
Elmasry's funds' records speak for themselves. He took over as lead manager in the group when Andrew Brown departed in April 2002. Over the past five years, his funds have delivered more than triple the return of the MSCI World index. The funds have held up particularly well in the credit-crunch, posting small losses ranging from .38% to 4.7% in 2008 in GBP terms, compared to a loss of 17.9% for the MSCI World index. They benefitted from an emphasis on companies with strong franchises that offer long-term sustainable growth--this steered them mostly to consumer services and consumer goods issues, areas that have offered pockets of safety amid the market downturn. Conversely, the funds had almost nothing in energy, industrials, or financials, which insulated them from the wreckage in those areas.
Elmasry will be starting his own firm, which will be based in London, and says he will run money in the same style he uses at his Morgan Stanley offerings. Until then, he states that he will still be running the funds and making buy/sell decisions as usual.
The real question is whether his team will follow him out the door. Elmasry has three comanagers--Paras Dodhia started in 2002, Jayson Vowles in 2003, and Michael Allison in 2005. Our research analysts have discussed the situation with the team and although they are in talks with the firm over their future, nothing has been decided yet. At this point, we believe there is a real risk they could leave. For now, given that the team is still intact and the relatively stable nature of the portfolio (Elmasry runs a low turnover, long-term oriented style), there appears to be little need for investors in the fund to rush to a decision, but if they leave, the appeal of the fund would be considerably diminished.
