February 2014
Asset Allocation Model Portfolios
Christopher Eckert
Portfolio Management Director
Senior Vice President/Financial Advisor
320 Post Road West
Westport, CT 06880
PHONE: 203-222-4057
TOLL-FREE: 866-740-7841
FAX: 203-222-4042
christopher.eckert@morganstanley.com
www.morganstanleyfa.com/christopher.eckert
Inside
Introduction to the Asset Allocation Model Portfolios ...................... Page 2
Five Models Based on Risk Tolerance and Investment Objective ... Page 4
ETF Strategy .................................................................................. Page 5
Mutual Fund Strategy ..................................................................... Page 6
ETF/Mutual Fund Strategy.............................................................. Page 7
Investments and services offered through Morgan Stanley Smith Barney LLC, member SIPC.
Asset Allocation Model Portfolios
What are the Asset Allocation Model Portfolios?
They are strategic and tactical asset allocation portfolios that
are diversified across asset classes and investment styles, can
incorporate both passive and actively managed investments and
are managed on a discretionary basis.
What is Strategic Asset Allocation?
It is the long-term investment weightings for the major
investment classes that both seek to fit an investor’s risk profile
and also take into account possible asset returns and volatility
under varying economic and financial conditions.
The Importance of Asset Allocation
Modern theory on portfolio diversification states that
appropriate asset allocation—the process of distributing assets
across different investment instruments and asset classes—can
create portfolios that produce the highest potential returns for a
given level of expected risk, as measured by the volatility, or
fluctuation, of portfolio value over time.
What is Tactical Asset Allocation?
Incorporates active decisions to overweight or to underweight
asset classes in the near term relative to their strategic
allocation based on: (i) the current and projected financial and
economic environment; (ii) evaluations of risk in global asset
markets; and (iii) other fundamental, valuation and
psychological, technical and/or liquidity factors.
What is the Investment Process for the Asset
Allocation Model Portfolios?
The portfolios employ a dynamic asset allocation process that
combines long-term investment strategies (strategic asset
allocation) with short-term portfolio adjustments (tactical asset
allocation).
Active vs. Passive Investments
An important consideration when determining investment
selection is the choice between active and passive
investments—either for individual asset allocations or for the
portfolio as a whole. Changing market cycles, the investor’s
time horizon and the volatility, liquidity and efficiency of
individual asset classes can all affect the decision whether to
choose active or passive investments for your portfolio.
MORGAN STANLEY
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Asset Allocation Model Portfolios (continued)
Active Management
An actively managed portfolio relies on the expertise of a
portfolio manager to choose the investment’s holdings in an
attempt to outperform a predetermined benchmark over the
course of a full market cycle. Most mutual funds are actively
managed.
Passive Management
A passively managed investment is typically designed to mimic
a benchmark in an attempt to match the benchmark’s returns
before expenses, not exceed them. Most exchange-traded funds
(ETFs) are considered passively managed investments.
What is the Security Selection Process for the Asset
Allocation Model Portfolios?
Eligible securities go through an in-depth research and
evaluation process; key evaluation criteria can include
investment strategy, track record, manager tenure and
experience, expense ratios, tracking error, style purity, liquidity
and relative strength rankings, amongst other factors.
Which Asset Classes can be Included in the Asset
Allocation Model Portfolios?
Cash/cash equivalents, fixed-income, US equity and
international equity.
What are the Key Features of Investing in the
Asset Allocation Model Portfolios?
• Diversification
• Flexibility
• In-depth investment due-diligence
• Account consolidation
• Strategic and tactical investment advice
• Disciplined portfolio rebalancing
• Comprehensive portfolio performance reporting
What is the Eligible Universe of Securities for the
Asset Allocation Model Portfolios?
Open-end mutual funds, closed-end mutual funds, exchangetraded funds (ETFs) and exchange-traded notes (ETNs).
What is the Portfolio Management Program?
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.
MORGAN STANLEY
3
Asset Allocation Model Portfolios
Five models based on investment objective and risk tolerance
Model 1
Income Strategy
Model 2
Income and Growth
Strategy
Model 3
Balanced Strategy
Model 4
Moderate Growth
Strategy
Model 5
Growth Strategy
Investment Objective
Conservation of capital and
current income are the primary
investment objectives.
Investment Objective
Conservation of capital and
current income are the primary
investment objectives; a
secondary investment objective is
moderate growth of capital.
Investment Objective
Both current income and growth
of capita are equally important
investment considerations.
Investment Objective
Growth of capital is the primary
investment objective; secondary
considerations are conservation
of capital and current income.
Investment Objective
Long term growth of capital is the
primary investment objective.
Investor Risk Tolerance
Can tolerate infrequent, very
limited declines through difficult
phases in a market cycle.
Investor Risk Tolerance
Can tolerate limited declines
through difficult phases in a
market cycle.
Investor Risk Tolerance
Can tolerate moderate declines
through difficult phases in a
market cycle.
Investor Risk Tolerance
Can tolerate two to three quarters
of negative absolute returns
through difficult phases in a
market cycle.
Investor Risk Tolerance
Can tolerate more than one year
of negative absolute returns
through difficult phases in a
market cycle.
Cash/Cash
Equivalents
5%
Cash/Cash
Equivalents
4%
Cash/Cash
Equivalents
3%
Fixed Income
Investments
66%
Fixed Income
Investments
47%
Cash/Cash
Equivalents
2%
Equity
Investments
30%
Fixed Income/
Cash Equivalents
1%
Equity
Investments
99%
Equity
Investments
70%
Equity
Investments
50%
Fixed Income
Investments
95%
Fixed
Income
Investments
28%
Asset Allocation Key
Cash & Cash Equivalents
Fixed Income Investments
Equity Investments
• Money Market Funds
• Government Bonds
• US Equities
• Ultra Short Bond Funds
• Corporate Bonds
• International Equities
• Municipal Bonds
• Securitized Bonds
MORGAN STANLEY
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Asset Allocation Model Portfolios
ETF Strategy
as of 02/03/14
Investment Sector & Security Name
Symbol
Investment Style
Cash & Cash Equivalents Allocation
Money Market
MNYMKT
Fixed Income Allocation
Model 1
Model 2
Model 3
Model 4
Model 5
Income
Income and
Growth
Balanced
Moderate
Growth
Growth
5%
4%
3%
2%
5%
4%
3%
2%
1%
1%
95%
66%
47%
28%
0%
Vanguard Short-Term Corporate Bond ETF
VCSH
Short-Term Bond
15.0%
10.0%
7.0%
5.0%
Vanguard Intermediate-Term Bond ETF
BIV
Intermediate-Term Bond
15.0%
10.0%
7.0%
5.0%
iShares iBoxx $ Investment Grade Corp Bond ETF
LQD
Corporate Bond
15.0%
10.0%
7.0%
5.0%
PIMCO 0-5 Year High Yield Corporate Bond ETF
HYS
High Yield Bond
10.0%
8.0%
7.0%
3.0%
iShares U.S. Preferred Stock ETF
PFF
Preferred Stock
10.0%
7.0%
5.0%
3.0%
SPDR Barclays Capital Convertible Bond ETF
CWB
Convertible Bond
10.0%
7.0%
5.0%
3.0%
PowerShares Senior Loan Portfolio ETF
BKLN
Bank Loan
10.0%
7.0%
5.0%
2.0%
iShares JPMorgan USD Emerging Markets Bond ETF
EMB
Emerging Markets Bond
10.0%
7.0%
4.0%
2.0%
0%
30%
50%
70%
99%
20.0%
33.0%
46.0%
65.0%
15.0%
Equity Allocation
US Equity
SPDR S&P Dividend ETF
SDY
Large Value
7.0%
10.0%
12.0%
Guggenheim S&P 500 Pure Growth ETF
RPG
Large Growth
6.0%
10.0%
12.0%
20.0%
Guggenheim S&P 500 Pure Value ETF
RPV
Mid Cap Value
4.0%
7.0%
12.0%
16.0%
Vanguard Small-Cap Growth ETF
VBK
Small Cap Growth
International Equity
3.0%
6.0%
10.0%
14.0%
10.0%
17.0%
24.0%
34.0%
iShares MSCI Japan ETF
EWJ
Japan Stock
3.0%
4.5%
6.0%
8.0%
Vanguard FTSE Europe ETF
VGK
Europe Stock
3.0%
4.5%
6.0%
8.0%
iShares MSCI EAFE Small Cap ETF
SCZ
Foreign Small/Mid Blend
2.0%
3.0%
4.0%
6.0%
PowerShares DWA Emerg Mkts Tech Lders ETF
PIE
Emerging Markets
2.0%
5.0%
8.0%
12.0%
MORGAN STANLEY
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Asset Allocation Model Portfolios
Mutual Fund Strategy
Investment Sector & Security Name
as of 02/03/14
Symbol
Investment Style
Cash & Cash Equivalents Allocation
Money Market
MNYMKT
Fixed Income Allocation
Model 1
Model 2
Model 3
Model 4
Model 5
Income
Income and
Growth
Balanced
Moderate
Growth
Growth
5%
4%
3%
2%
5%
4%
3%
2%
1%
95%
66%
47%
28%
0%
Lord Abbett Short Duration Income - Class F
LDLFX
Short-Term Bond
15.0%
11.0%
8.0%
5.0%
DoubleLine Total Return I
DBLTX
Intermediate-Term Bond
15.0%
11.0%
8.0%
5.0%
4.0%
1%
Loomis Sayles Strategic Income Y
NEZYX
Multi-Sector Bond
15.0%
10.0%
7.0%
PIMCO Income P
PONPX
Multi-Sector Bond
15.0%
10.0%
7.0%
4.0%
AllianceBernstein High Income Adv
AGDYX
High Yield Bond
15.0%
10.0%
7.0%
4.0%
Eaton Vance Floating Rate I
EIBLX
Bank Loan
10.0%
7.0%
5.0%
3.0%
Templeton Global Total Return Adv
TTRZX
World Bond
10.0%
7.0%
5.0%
3.0%
0%
30%
50%
70%
99%
23.0%
38.0%
53.0%
75.0%
15.0%
Equity Allocation
US Equity
SunAmerica Focused Dividend Strategy A
FDSAX
Large Value
5.0%
8.0%
12.0%
American New Economy F2
NEFFX
Large Growth
3.0%
5.0%
7.0%
10.0%
ClearBridge Aggressive Growth I
SAGYX
Large Growth
3.0%
5.0%
7.0%
10.0%
Touchstone Sands Capital Select Growth Y
CFSIX
Large Growth
3.0%
5.0%
7.0%
10.0%
AllianceBernstein Discovery Growth Adv
CHCYX
Mid Cap Growth
3.0%
5.0%
6.5%
10.0%
Touchstone Mid Cap Y
TMCPX
Mid Cap Blend
3.0%
5.0%
6.5%
10.0%
Hotchkis & Wiley Small Cap Value A
HWSAX
Small Cap Value
1.5%
2.5%
3.5%
5.0%
Wasatch Small Cap Growth
WAAEX
Small Cap Growth
1.5%
2.5%
3.5%
5.0%
7.0%
12.0%
17.0%
24.0%
International Equity
Matthews Asia Growth Inv
MPACX
Diversified Pacific/Asia
2.0%
3.0%
4.0%
6.0%
Oakmark International I
OAKIX
Foreign Large Blend
2.0%
3.0%
4.0%
6.0%
Wasatch International Growth
WAIGX
Foreign Small/Mid Growth
1.0%
2.0%
3.0%
4.0%
Thornburg Developing World I
THDIX
Emerging Markets
2.0%
4.0%
6.0%
8.0%
MORGAN STANLEY
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Asset Allocation Model Portfolios
ETF/Mutual Fund Strategy
Investment Sector & Security Name
as of 02/03/14
Symbol
Investment Style
Cash & Cash Equivalents Allocation
Money Market
MNYMKT
Fixed Income Allocation
Model 1
Model 2
Model 3
Model 4
Model 5
Income
Income and
Growth
Balanced
Moderate
Growth
Growth
5%
4%
3%
2%
5%
4%
3%
2%
1%
95%
66%
47%
28%
0%
Vanguard Short-Term Corporate Bond ETF
VCSH
Short-Term Bond
7.5%
6.0%
4.0%
2.0%
Lord Abbett Short Duration Income - Class F
LDLFX
Short-Term Bond
7.5%
6.0%
4.0%
2.0%
DoubleLine Total Return I
DBLTX
Intermediate-Term Bond
10.0%
7.0%
5.0%
3.0%
Vanguard Intermediate-Term Bond ETF
BIV
Intermediate-Term Bond
10.0%
7.0%
5.0%
3.0%
1%
Loomis Sayles Strategic Income Y
NEZYX
Multi-Sector Bond
12.5%
9.0%
6.0%
4.0%
PIMCO Income P
PONPX
Multi-Sector Bond
12.5%
9.0%
6.0%
4.0%
AllianceBernstein High Income Adv
AGDYX
High Yield Bond
7.5%
6.0%
4.5%
3.0%
PIMCO 0-5 Year High Yield Corporate Bond ETF
HYS
High Yield Bond
7.5%
6.0%
4.5%
3.0%
Eaton Vance Floating Rate I
EIBLX
Bank Loan
5.0%
2.5%
2.0%
1.0%
PowerShares Senior Loan Portfolio ETF
BKLN
Bank Loan
5.0%
2.5%
2.0%
1.0%
iShares JPMorgan USD Emerging Markets Bond ETF
EMB
Emerging Markets Bond
5.0%
2.5%
2.0%
1.0%
Templeton Global Total Return Adv
TTRZX
World Bond
5.0%
2.5%
2.0%
1.0%
0%
30%
50%
70%
99%
20.0%
33.0%
46.0%
65.0%
7.5%
Equity Allocation
US Equity
SunAmerica Focused Dividend Strategy A
FDSAX
Large Value
3.5%
4.5%
5.5%
SPDR S&P Dividend ETF
SDY
Large Value
3.5%
4.5%
5.5%
7.5%
Guggenheim S&P 500 Pure Growth ETF
RPG
Large Growth
3.0%
4.5%
7.0%
10.0%
Touchstone Sands Capital Select Growth Y
CFSIX
Large Growth
3.0%
4.5%
7.0%
10.0%
Guggenheim S&P 500 Pure Value ETF
RPV
Mid Cap Value
2.0%
4.0%
5.5%
8.0%
AllianceBernstein Discovery Growth Adv
CHCYX
Mid Cap Growth
2.0%
4.0%
5.5%
8.0%
Vanguard Small-Cap Growth ETF
VBK
Small Cap Growth
1.5%
3.5%
5.0%
7.0%
Wasatch Small Cap Growth
WAAEX
Small Cap Growth
1.5%
3.5%
5.0%
7.0%
10.0%
17.0%
24.0%
34.0%
International Equity
Oakmark International I
OAKIX
Foreign Large Blend
3.0%
4.0%
6.0%
8.0%
iShares MSCI Japan ETF
EWJ
Japan Stock
1.5%
2.5%
3.0%
4.0%
Vanguard FTSE Europe ETF
VGK
European Stock
1.5%
2.5%
3.0%
4.0%
iShares MSCI EAFE Small Cap ETF
SCZ
Foreign Small/Mid Blend
1.0%
1.5%
2.0%
3.0%
Wasatch International Growth
WAIGX
Foreign Small/Mid Growth
1.0%
1.5%
2.0%
3.0%
PowerShares DWA Emerg Mkts Tech Lders ETF
PIE
Emerging Markets
1.0%
2.5%
4.0%
6.0%
Thornburg Developing World I
THDIX
Emerging Markets
1.0%
2.5%
4.0%
6.0%
MORGAN STANLEY
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Investing can be an intimidating prospect for many people. Today’s capital markets are complex,
and the thought of sifting through thousands of available investments can be overwhelming. Most
investors simply do not have the time or experience to gather and analyze all of the data
necessary to make informed investment decisions. In such situations, it may make sense to
partner with an experienced professional who understands your financial needs and can dedicate
the time and resources to help you meet them.
For over 30 years, Christopher Eckert has been helping investors prepare for and navigate
through significant life events and financial transitions. To learn more about how his wealth
management process can help you meet the challenges these major life transitions pose to your
financial security, please visit his website or call for a complimentary consultation.
MORGAN STANLEY
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This material is intended only for clients and prospective clients of the Portfolio Management program in the United States. It has been
prepared solely for informational purposes only and it is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or other
financial instrument, or to participate in any trading strategy.
Christopher Eckert is a Financial Advisor with Morgan Stanley Smith Barney and Portfolio Manager participating in the Morgan Stanley Smith
Barney 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.
To learn more about the Portfolio Management Program, please contact your Morgan Stanley Smith Barney Financial Advisor. The Portfolio
Management program is described in the applicable Morgan Stanley Smith Barney ADV Part 2, available at www.smithbarney.com/adv or from
your Financial Advisor.
Past performance of any security is not a guarantee of future performance. There is no guarantee that this investment strategy will work under all
market conditions.
Please contact your Financial Advisor for a complete listing of all transactions that occurred during the last twelve months.
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 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.
Top holdings, sector allocation, portfolio statistics and credit quality are based on the recommended portfolio for new investors as of the date
specified. Holdings lists indicate the largest security holdings by allocation weight as of the specified date. Other data in this material is believed to
be accurate as of the date this material was prepared unless stated otherwise. Data in this material may be calculated by Morgan Stanley or by
third party providers licensed by the Financial Advisors or Morgan Stanley.
Material in this presentation has been obtained from sources that we believe to be reliable, but we do not guarantee its accuracy, completeness or
timeliness. Third party data providers make no warranties or representations relating to the accuracy, completeness or timeliness of the data they
provide and are not liable for any damages relating to this data.
Morgan Stanley Wealth Management has no obligation to notify you when information in this presentation changes.
MORGAN STANLEY
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Mutual Funds and Exchange Traded Funds are sold by prospectus only. The prospectus
contains the investment objectives, risks, fees, charges and expenses, and other
information regarding the mutual fund and variable annuity contract and its underlying
investments, which should be carefully considered before investing. Prospectuses are
available through your Financial Advisor. Read the prospectus carefully before you invest
or send money.
© 2014 Morgan Stanley Smith Barney LLC Member SIPC.
MORGAN STANLEY
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