James P. Gorman Executive Chairman | Morgan Stanley
Morgan Stanley Wealth Management has introduced a new tool, the Equity Vulnerability Score, through its Global Investment Office. This proprietary tool is designed to help clients and financial advisors assess the risk of U.S. stocks potentially dropping in value.
The tool aims to provide insights for investors with concentrated equity positions, defined by Morgan Stanley as five or fewer stocks constituting more than 30% of a portfolio's risk. Such positions are common among company founders, those receiving equity compensation, and early investors. As these positions grow, they may expose investors to underperformance and higher volatility.
Historically, the Global Investment Office found that individual stocks in the Russell 1000 Index were more volatile than the index itself since 2014. "As a leader in both equity compensation and in providing guidance to founders, early-stage investors, and executives of publicly traded companies, we see this is a significant and often overlooked challenge for many of the clients our Advisors serve," said Steve Edwards, Senior Investment Strategist at Morgan Stanley Wealth Management.
The Equity Vulnerability Score evaluates stocks based on three categories: Financial Stability, Fundamental Momentum, and Volatility and Tail Risk. It complements Morgan Stanley’s Tactical Equity Framework by identifying short-term opportunities for stronger performance.
For further details on this initiative by Morgan Stanley Wealth Management or other services offered by Morgan Stanley, visit their official website.