The Parity Portfolio Strategy

The Parity Portfolio StrategyPortfolio Management Program

The Matterhorn Group at Morgan Stanley

Morgan Stanley | 2014 2

the parity portfolio strategy

Portfolio Management ProgramEstablished in 1979 to provide individual investors with a level of personalized portfolio management typically reserved for major institutional investors.

All portfolios are managed individually on a fully discretionary basis by Financial Advisors at Morgan Stanley who have been qualified by the firm to independently manage client assets based on training, experience and commitment to service.

As your Portfolio Manager, I and my team can offer you:

• Direct access to the investment professionals managing your portfolio.

• Personalized service.

• A disciplined, multipart investment process.

• Ongoing client communications and reporting.

• Access to the intellectual capital and global resources of Morgan Stanley.



The Parity Portfolio Portfolio Management StrategyThe Parity Portfolio is a discretionary Portfolio Management gender lens investment strategy developed by The Matterhorn Group at Morgan Stanley to help meet the needs of ultra high net worth individuals and institutional clients seeking financial returns and social impact.

The strategy seeks to achieve financial returns through capital appreciation and current income and have an impact on social returns through gender parity in corporate America.



We all know… Good guys finish first.



We all know… Good guys finish first.In this case, it’s true.



Extensive research reveals a strong correlation between significant representation of women on boards and a company’s financial strength.1 Companies that do the right things on their boards reward their investors.2

1 Catalyst. The Bottom Line, 2011.2 Credit Suisse. Gender Diversity and the Impact on Corporate Performance, 2009.



What research?• Catalyst

• Credit Suisse

• Deloitte

• Ernst & Young

• McKinsey

• The Committee for Economic Development

• Columbia University

• Pepperdine University

• Harvard University



What kinds of financial strength?According to Catalyst (2012):Return on Equity by Women’s Representation on the Board

9.1%13.9%+53%

Companies with more women board directors outperform those with the least by 53%.

bottom quarter wbd

top quarter wbd



And more specifically...Fortune 500 companies with 3 or more women on the board gain a significant performance advantage over those with the fewest:

+46% +60%better return on equity

better return on invested capital

+84%better return on sales *

* Catalyst. The Bottom Line, 2011.



Therefore...The Parity Portfolio invests in companies that meet our rigorous financial analysis and have a minimum of 3 women on their boards.

Objectives:

financial return

social impact


Equity Selection ProcessInvestable universe: US-headquartered companies, listed on regular US exchanges

Negative screens: Oil, Tobacco, Firearms

Gender-diversity criteria:

• Minimum of 3 women on board

• Trends over time – consider changes in the board composition in the last 3 years and 5 years



Equity Selection ProcessFundamentals:

• Industry, sector, competitive position

• Dividend policy – yield, payout ratio, trends over time

• Earnings estimates – return on equity, return on assets, profit margin

• Current research – Morgan Stanley and third-party research

• Valuation: P/E, P/BEST, P/B, Relative to peers/industry, historical trends



Equity Selection ProcessBuy/Sell Discipline:

• Daily monitoring of individual holdings – seek to stay within 5%-10% fluctuation corridors

• Review triggered by move outside of corridor by any individual security

• Decide by consensus to increase, hold, reduce or remove positions

• Change triggers:- Women representation changes- Reached full valuation- Deteriorating fundamentals- Insider sales or corporate governance issues- Sector positioning considerations




Social ImpactThe Matterhorn Group uses its voice through direct dialogue with both holding and non-holding companies and promotes public discussion to advocate for parity in corporate America.

Public discussions include:

• The New York Times (Dealbook)

• The Globe and Mail (Canada)

• Bloomberg Businessweek

• Huffington Post

• Bank Investment Consultant

• Zeit Online (Germany)

• Golden Girl Finance



Meet the Portfolio ManagersEvE E. ElliSFinancial Advisor, Portfolio ManagerEve is a CERTIFIED FINANCIAL PLANNER,tm Certified Investment Management Analyst,® and Chartered Advisor in Philanthropy.®

EDucatioNYale University, B.A., American StudiesFriends’ Central School, Philadelphia

Bio NotESFormer Professional Tennis Player

ExpEriENcEInvestment and philanthropic financial advisor to Entrepreneurs and Senior Executives, Philanthropic Families, and Entertainment Professionals as well as to Private Foundations and Nonprofit Organizations.

philaNthropic iNvolvEmENtSMs. Foundations for Women, Board Member, Officer, Co-Chair, Investment and Finance Committee100 Women in Hedge Funds, Former Chair, Philanthropy CommitteeJewish Women’s Archive, Chair, Investment CommitteeCongregation Rodeph Sholom, Member, Investment Committee Thirty Percent Coalition, Member 20/20 Women on Boards, Member, New York Steering CommitteeMaccabi USA/sports for Israel, Board Member (former coach, USA Men’s Tennis Team, winner of 6 medals, Maccabi Games 1985Susan G. Komen for the Cure NYC, former Board Member, former OfficerGrandfather was Philanthropist, Fredric Mann



Meet the Portfolio ManagersNikolay DjiBaNkovFinancial Advisor, Portfolio Manager Nikolay holds the Chartered Financial Analyst® designation, has an MBA and is a Certified Public Accountant.*

EDucatioNMBA in Accounting, Baruch College, Zicklin School of BusinessMaîtrise en Sciences Economiques, Saint Denis University, Paris, FranceEuropean Union ERASMUS Exchange Program, University of East London, London, UK

ExpEriENcEFormer Senior Financial Planner, International Team, Goldman Sachs Family OfficeTrusted advisor to active and retired Goldman Sachs partners in their quest to preserve and perpetuate their family wealth and valuesServed as family CFO to maximize after-tax income around the worldExecuted complex intergenerational wealth transfer strategies across multiple jurisdictionsFormer tax advisor at Reminick, Aarons & Company and KPMG LLP*Sophisticated planning for internationally mobile executives and Forbes 400 family clients

proFESSioNal orGaNizatioNSMember of the CFA instituteMember of the New York Society of Security AnalystsMember of the Estate Planning Council of New York CityMember of the American Institute of Certified Public Accountants Member of Thirty Percent Coalition Member of 20/20 Women on Boards

*Does not perform this function at Morgan Stanley.



Who should consider investing?• Investors who seek growth of capital

over the long term.• Investors who are willing to accept

moderate to significant fluctuations in value.• Investors who understand that the way

we invest is intended to have an impact on seeking gender equality on boards in corporate America.



“Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.”- Margaret Mead



The Matterhorn Group at Morgan StanleyContact Us.

EvE E. [email protected]

Nikolay [email protected]

thE mattErhorN Group at morGaN StaNlEy450 Lexington Avenue, 40th Floor New York, NY 10017



This material is intended only for clients and prospective clients of the Portfolio Management program. It has been prepared solely for informational purposes only and is not an offer to buy or sell or a so-licitation of any offer to buy or sell any security or other financial instrument, or to participate in any trading strategy. The individuals mentioned as the Portfolio Management Team are Financial Advisors with Morgan Stanley participating in the Morgan Stanley Portfolio Management program. The Portfolio Management program is an investment advisory program in which the client’s Financial Advisor invests the client’s assets on a discretionary basis in a range of securities. The Portfolio Management program is described in the applicable Morgan Stanley ADV Part 2, available at www.morganstanley.com/ADV or from your Financial Advisor.The Portfolio Management program account will be charged an asset-based wrap fee every quarter (“the Fee”). The Fee covers investment advisory services, the execution of transactions through Morgan Stanley or its affiliates, custody of the client’s assets with Morgan Stanley or its affiliates, and reporting, as desired by the client. In addition to the Fee, you will pay the fees and expense of any funds in which your account is invested. Fund fees and expenses are charged directly to the pool of assets the fund invests in and are reflected in each fund’s share price. You understand that these fees and expenses are an additional cost to you and will not be included in the Fee amount in your account statements.Past performance of any security is not a guarantee of future performance. There is no guarantee that these investment strategies will work under all market conditions, and each investor should evaluate his/her ability to invest for a long term, especially during periods of downturns in the market. Each investor should evaluate himself/herself the level of impact on parity in corporate America that the invest-ment may have.Holdings are subject to change daily, so any securities discussed in this profile may or may not be included in your account if you invest in this investment strategy. Do not assume that any holdings mentioned were, or will be, profitable. The performance, holdings, sector weightings, portfolio traits and other data for an actual account may differ from that in this material due to various factors including the size of an account, cash flows within an account, and restrictions on an account. This material does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this material may not be suitable for all investors. Morgan Stanley Wealth Management recommends that investors independently evaluate particular investments and strate-gies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. The risks related to investing in a gender lens investment such as The Parity Portfolio Strategy are commensurate with the risks of investing in a non-gender lens investment. The Parity Portfolio Strategy does not represent the views or opinions of Morgan Stanley.

© 2014 Morgan Stanley Smith Barney LLC. Member SIPC. CRC887104 CS 7872983 06/14

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The Parity Portfolio Strategy