1095 Avenue of the Americas +1 212 698 3500 Main +1 212 698 3599 Fax www.dechert.com | |
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| STUART STRAUSS |
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| stuart.strauss@dechert.com +1 212 698 3529 Direct +1 212 698 0452 Fax |
December 2, 2015
Securities and Exchange Commission
Judiciary Plaza
100 F Street, NE
Washington, D.C. 20549
Attention: Asen Parachkevov, Division of Investment Management
Re: Morgan Stanley Institutional Fund, Inc. (the “Registrant” or the “Fund”)
(File No. 033-23166; 811-05624)
Dear Mr. Parachkevov:
Thank you for your telephonic comments regarding the Fund’s registration statement on Form N-1A relating to the addition of a new portfolio of the Fund, Emerging Markets Small Cap Portfolio (the “Portfolio”), filed with the Securities and Exchange Commission (the “Commission”) on September 18, 2015. The Fund has considered your comments and has authorized us to make responses, changes and acknowledgements discussed below relating to the Fund’s registration statement on its behalf. Below, we describe the changes made to the registration statement in response to the Commission staff’s (“Staff”) comments and provide any responses to or any supplemental explanations of such comments, as requested. These changes are expected to be reflected in Post-Effective Amendment No. 144 to the Fund’s registration statement on Form N-1A, which will be filed via EDGAR on or about December 2, 2015.
GENERAL COMMENTS TO FORM N-1A
Comment 1. Please file a letter responding to these comments from the Staff of the Commission that incorporates the “Tandy” information via EDGAR.
Response 1. This response letter, which incorporates the “Tandy” information, will be filed via EDGAR as correspondence.
COMMENTS TO THE PROSPECTUS
Comment 2. Per Item 3 of Form N-1A, please add an identifying page number to the section titled “Portfolio Summary—Fees and Expenses” related to the location of additional information on purchase discounts for the Portfolio.
Response 2. The disclosure has been revised accordingly.
Comment 3. Please state supplementally whether Morgan Stanley Investment Management Inc. (“the Adviser”) will recoup fees waived in prior years.
Response 3. We hereby confirm that the Adviser will not recoup fees waived in prior years.
Comment 4. In connection with valuing derivative instruments that are included in the Portfolio’s 80% investment policy, please confirm supplementally that the Portfolio does not use the notional value of such derivatives for purposes of such calculation. Please confirm whether the 80% policy includes either borrowing for investment purposes or derivatives, including how such calculations are made.
Response 4. We respectfully acknowledge your comment; however, we believe it is appropriate to use the notional value for certain derivative instruments, for example futures. The amount a fund actually “invests” in a futures contract is the margin it deposits with the futures commission merchant. Typically, this margin “purchases” a futures position with a much larger notional amount with the return received by the fund based on the notional amount of the futures position, not the initial margin posted. Accordingly, we believe that the notional amount of the contract provides a better measure of a fund’s overall economic exposure to a futures position. In addition, we hereby confirm that the Portfolio does not expect to engage in borrowing for investment purposes, but does count derivative instruments towards its 80% policy as disclosed in the section titled “Portfolio Summary—Principal Investment Strategies.”
Comment 5. Please consider revising the disclosure related to the definition of a small capitalization company to include the target range, rather than the top-end, of such a company’s market capitalization that the Portfolio will consider as “small cap” in formulating its investment strategy.
Response 5. We respectfully acknowledge the comment; however, we believe that the Portfolio’s current disclosure is consistent with Rule 35d-1.
Comment 6. Please revise the disclosure to state that the Adviser does not use solely jurisdiction of organization in determining whether an issuer is an issuer of a particular region per Rule 35d-1.
Response 6. We respectfully acknowledge your comment; however, we believe that jurisdiction of organization is an appropriate factor for determining compliance with Rule 35d-1. We also confirm that the Adviser takes into account the requirements of Rule 35d-1 in determining whether the Portfolio is exposed to the economic fortunes and risks of the geographic region indicated in the Portfolio’s name.
Comment 7. Please explain supplementally how the Portfolio determines whether an issuer is an issuer from an emerging or frontier emerging market.
Response 7. As disclosed in the section of the Prospectus titled “Details of the Portfolio—Process,” emerging market or developing countries are countries that major international financial institutions, such as the World Bank or the Portfolio’s benchmark index, generally consider to be less economically mature than developed nations, such as the United States or most nations in Western Europe. As further disclosed in this section, the term “frontier emerging markets” refers to those emerging market countries outside the “mainstream” emerging markets, whose capital markets have traditionally been difficult for foreign investors to enter or are in early stages of capital market and/or economic development.
Comment 8. Please consider revising the disclosure to more specifically indicate what constitutes “equity-linked securities” and “other specialty securities having equity features” in the section titled “Portfolio Summary—Principal Investment Strategies.”
Response 8. We respectfully acknowledge the comment; however, we believe that the Portfolio’s current disclosure is appropriate.
Comment 9. Please supplementally confirm that the Fund has considered whether the Portfolio’s use of derivatives and related disclosure is appropriate. Please see Letter to Karrie McMillan, Esq., General Counsel, Investment Company
Institute, from Barry Miller, Associate Director, Office of Legal and Disclosure, Re: Derivatives-Related Disclosures by Investment Companies (July 30, 2010).
Response 9. We confirm that the Fund has considered and determined that the Portfolio’s use of derivatives and related disclosure, as applicable, is appropriate in light of the Letter to Karrie McMillan, Esq., General Counsel, Investment Company Institute, from Barry Miller, Associate Director, Office of Legal and Disclosure, Re: Derivatives-Related Disclosures by Investment Companies (July 30, 2010).
Comment 10. Disclosure in the section titled “Portfolio Summary—Principal Risks” suggests that the Portfolio may invest in illiquid securities. If such investments are part of the Portfolio’s principal investment strategies, please add appropriate strategy disclosure to the section titled “Portfolio Summary—Principal Investment Strategies.” In addition, please confirm supplementally that the Portfolio complies with the 15% limitation on investment in illiquid securities under the Investment Company Act of 1940, as amended.
Response 10. Certain of the securities discussed in the section titled “Portfolio Summary—Principal Investment Strategies” may be deemed to be illiquid. Accordingly, we believe the current disclosure is appropriate. We further confirm that, as disclosed in the section of the Statement of Additional Information titled “Investment Policies and Strategies—Other Securities and Investment Strategies—Non-Publicly Traded Securities, Private Placements and Restricted Securities,” as a general matter, the Portfolio may not invest more than 15% of its net assets, determined at the time of investment, in illiquid securities.
Comment 11. To the extent that the Portfolio utilizes over-the-counter derivatives, privately placed securities or investments in initial public offerings as principal investment strategies, please add applicable disclosure to the sections titled “Portfolio Summary—Principal Investment Strategies” and “Portfolio Summary—Principal Risks.”
Response 11. We hereby confirm that to the extent that these strategies are considered principal investment strategies of the Portfolio, they are disclosed and appropriate risk disclosure is included in the applicable sections.
Comment 12. Please consider adding more specific disclosure related to structured investments in the sections titled “Portfolio Summary—Principal Investment Strategies” and “Portfolio Summary—Principal Risks.”
Response 12. We respectfully acknowledge the comment; however, we believe that the Portfolio’s current disclosure related to structured investments is appropriate.
Comment 13. Please revise the disclosure in the section titled “Taxes” to indicate that a shareholder may be taxed upon withdrawal of their funds with the Portfolio.
Response 13. We respectfully acknowledge the comment; however, we would like to point out that disclosure related to taxation upon redemption is included in this section.
COMMENTS TO THE STATEMENT OF ADDITIONAL INFORMATION
Comment 14. Please consider revising the table in the Statement of Additional Information listing the permissible strategies and investments for the Portfolio to differentiate between principal and non-principal strategies and investments.
Response 14. We respectfully acknowledge the comment; however, we believe that the Portfolio’s Prospectus makes clear which strategies and investments are principal and, accordingly, that the current disclosure is appropriate.
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In addition, we are authorized by our client to acknowledge the following on the Registrant’s behalf:
· the Registrant is responsible for the adequacy and accuracy of the disclosure in the filings;
· the Staff’s comments or changes to disclosure in response to Staff comments in the filings reviewed by the Staff do not foreclose the Commission from taking any action with respect to the filings; and
· the Registrant may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
If you would like to discuss any of these responses in further detail or if you have any questions, please feel free to contact me at (212) 698-3529 (tel) or Joanne Antico at (212) 296-6961 (tel). Thank you.
Best regards, |
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/s/ Stuart M. Strauss |
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Stuart M. Strauss |
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cc: Joanne Antico |
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