Morgan Stanley Investment Management has introduced the Private Markets Asset Allocation Framework (PMAAF), a proprietary process designed to guide investors in allocating capital across private markets and different market cycles.
The firm highlights that private markets include a range of strategies, participants, assets, and dynamics. According to the release, these markets offer significant potential for excess returns and diversification compared to traditional public markets. However, factors such as limited data availability, delayed valuations, illiquidity, and behavioral biases can make investment decisions challenging.
Morgan Stanley Investment Management’s new framework seeks to address these issues by using a systematic and data-driven approach similar to methods used in public market allocation. The PMAAF is structured around three pillars: cycle indicators, quantitative fundamental scoring, and qualitative thematic overlay. These are reinforced with an independent monitoring process.
"We believe that today a larger and more diverse allocation, with more asset classes now accepted as 'core' alternatives, as well as an increasing number of new investors in private markets, requires a well-established, repeatable, objective and data-driven framework to support investment decisions. Our three-pillar framework, combining cycle indicators, quantitative fundamental scoring and qualitative thematic overlay, reinforced with an independent monitoring oversight process, could help investors navigate the challenges intrinsic to private markets," the statement said.
The Portfolio Solutions Group at Morgan Stanley Investment Management operates across all asset types—both traditional and alternative—and provides solutions ranging from fully liquid public assets to comprehensive portfolios that combine public and private assets.
The firm notes several risks associated with investing in private markets. "The views and opinions and/or analysis expressed are those of the author or the investment team as of the date of preparation of this material and are subject to change at any time without notice due to market or economic conditions and may not necessarily come to pass. Furthermore, the views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring, after the date of publication. The views expressed do not reflect the opinions of all investment personnel at Morgan Stanley Investment Management (MSIM) and its subsidiaries and affiliates (collectively 'the Firm'), and may not be reflected in all the strategies and products that the Firm offers."
They also clarify that any forecasts or estimates are speculative in nature: "Forecasts and/or estimates provided herein are subject to change and may not actually come to pass. Information regarding expected market returns and market outlooks is based on the research, analysis and opinions of the authors or the investment team. These conclusions are speculative in nature, may not come to pass and are not intended to predict the future performance of any specific strategy or product the Firm offers. Future results may differ significantly depending on factors such as changes in securities or financial markets or general economic conditions."
Additionally, Morgan Stanley states that materials have been prepared using publicly available information along with internal data but cautions about their reliability: "This material has been prepared on the basis of publicly available information, internally developed data and other third-party sources believed to be reliable. However, no assurances are provided regarding the reliability of such information and the Firm has not sought to independently verify information taken from public and third-party sources."
They stress that their communication does not constitute advice: "This material is a general communication which is not impartial...and does not constitute an offer or a recommendation to buy or sell any particular security or adopt any specific investment strategy." Investors are advised to seek independent legal and financial advice before making decisions.
The release further notes limitations regarding liability for use of this information: "Morgan Stanley Investment Management Inc., its affiliates...shall have no liability whatsoever in connection with any such information’s actual or purported accuracy...or suitability."
Charts included are for illustrative purposes only; past performance does not guarantee future results.
Definitions provided include Bloomberg US Aggregate—a benchmark index composed mainly of U.S.-traded bonds across government-related sectors.
For full details on disclosures related to this announcement—including risk considerations—readers can refer directly to Morgan Stanley's article PDF.