MS INVF US Property Z |
by David Kathman
MS INVF U.S. Property has changed significantly in its first three years under portfolio manager Laurel Durkay, but its performance hasn’t been anything to get too excited about yet. It maintains Average People and Process ratings. Since taking over at the beginning of 2021, the most obvious change Durkay has made to the fund is in its valuation methodology. Previous manager Ted Bigman took a fairly strict value approach to real estate investing, looking for REITs trading below the net asset value of their underlying assets. Durkay still considers NAV when valuing REITs, but she also looks at expected future cash flow growth, which has been an increasingly prominent part of many REITs’ market value. She combines both of these factors in a modified price/earnings to growth, or PEG, ratio that is a key element in her evaluation of REITs, and she also incorporates macroeconomic trends and forecasts into her analysis. All this is sensible, but it is broadly similar to what a lot of other REIT funds do. Durkay has also overhauled the analyst staff to make it more compatible with her REIT investing philosophy. In 2021 she hired three new U.S. REIT analysts, and in 2022 she replaced two of the three U.S. analysts she inherited from Bigman. She also hired a data scientist; as of November 2023, she is supported by seven people on this fund, four more than when she took over. In 2022 she completely replaced Morgan Stanley’s European REIT team, while keeping the Asia team intact. The people who now support here have plenty of experience, but it remains to be seen how effectively they can all work together. Durkay herself has more than 20 years of investment experience, including 14 years at top REIT investing shop Cohen & Steers, but she didn’t have much of a public track record managing REIT mutual funds before coming to Morgan Stanley. Her track record on this fund has been a mixed bag so far, with returns that trailed the property indirect North America Morningstar Category in 2021 and 2022 but beat it in the first 10 months of 2023. She still needs to demonstrate that she and her team can add value over time relative to other U.S. REIT funds. |
Morningstar Pillars | |
People | Average |
Parent | Average |
Process | Average |
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