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| STUART STRAUSS
+1 212 698 3529 Direct +1 212 698 0452 Fax |
August 26, 2016
Securities and Exchange Commission
Judiciary Plaza
100 F Street, NE
Washington, D.C. 20549
Attention: Lisa Larkin, Division of Investment Management
Re: Morgan Stanley Institutional Fund, Inc. (the “Fund”)
(File No. 33-23166; 811-05624)
Dear Ms. Larkin:
Thank you for your telephonic comments regarding the Fund’s registration statement on Form N-1A relating to the Multi-Asset Portfolio’s (the “Portfolio”) intention to invest in a wholly-owned subsidiary of the Portfolio organized as a company under the laws of the Cayman Islands filed with the Securities and Exchange Commission (the “Commission”) on June 27, 2016. 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. 153 to the Fund’s registration statement on Form N-1A, which will be filed via EDGAR on or about August 26, 2016.
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 separate from the registration statement filing.
COMMENTS TO THE PROSPECTUS
Comment 2. Please state supplementally whether the Adviser’s fee waiver will continue from at least one year from the date of the Prospectus and whether the Adviser will recoup fees waived in prior years.
Response 2. We hereby confirm that the Adviser’s fee waiver will continue from at
least one year from the date of the Prospectus and that the Adviser will not recoup fees waived in prior years.
Comment 3. The Fund discloses that the Portfolio may engage in transactions involving various types of swaps. To the extent the Portfolio engages in total return swaps it must set aside an appropriate amount of segregated assets. See generally Investment Company Act Release No. 10666 (Apr. 18, 1979). Please note that the Commission issued a concept release exploring issues relating to the use of derivatives by funds, including whether current market practices involving derivatives are consistent with the leverage provisions of the Investment Company Act of 1940, as amended (the “Investment Company Act”). See Investment Company Act Release No. 29776 (Aug. 31, 2011). Accordingly, please be aware that the Commission or its Staff could issue future guidance related to derivatives (such as total return swaps) and leverage, including guidance related to coverage requirements, which could impact the manner in which a Portfolio operates.
Response 3. We are aware that the Commission or its Staff could issue future guidance related to derivatives and leverage, including guidance related to coverage requirements, which could impact the manner in which the Portfolio operates. In addition, we hereby confirm that the Portfolio segregates/earmarks the appropriate amount of assets in connection with its investments in total return swaps.
Comment 4. Please add a parenthetical immediately subsequent to the first mention of leverage to include a plain English explanation of leverage.
Response 4. The disclosure has been revised accordingly.
Comment 5. Please consider whether, in light of the Portfolio’s investment in securities in the United Kingdom, whether to add additional risk disclosure related to “Brexit.”
Response 5. We respectfully acknowledge the comment; however, we do not believe such disclosure to be necessary to include in the Prospectus and have instead included applicable risk disclosure in the Statement of Additional Information.
Comment 6. Please confirm that the table entitled “Annual Total Returns” has been included in the Prospectus.
Response 6. We hereby confirm that the table entitled “Annual Total Returns has been included in the Prospectus.
Comment 7. Pursuant to Item 4(b)(2)(ii) of Form N-1A, please include the Portfolio’s return as of the most recent quarter end immediately subsequent to the table entitled “Annual Total Returns.”
Response 7. We respectfully acknowledge the comment; however, Item 4(b)(2)(ii) states to include the year-to-date return information as of the end of the most recent quarter in a footnote to the bar chart if a fund’s fiscal year is other than a calendar year. The Portfolio’s fiscal year is that of a calendar year; accordingly, no footnote has been added.
Comment 8. Please confirm that, if the Portfolio enters into credit default swap arrangements, the Portfolio covers the full notional amount of each swap agreement where protection is sold.
Response 8. We hereby confirm that the Portfolio covers the notional amount of each credit default swap agreement pursuant to which protection is sold.
Comment 9. Pursuant to Item 9(b) Instruction 7 of Form N-1A, please add disclosure explaining any tax consequences of increased portfolio turnover and how portfolio turnover may affect Portfolio performance generally.
Response 9. We respectfully acknowledge the comment; however, such disclosure is included in the section of the Prospectus entitled “Portfolio Summary—Portfolio Turnover.”
Comment 10. With respect to the controlled foreign corporation (“CFC”), please (i) confirm that the CFC complies with applicable laws and regulations related to affiliated transactions and custody; (ii) identify the custodian of the CFC; (iii) confirm that the financial statements to be included of the CFC will be consolidated with those of the Portfolio; (iv) confirm that the management fee and other expenses of the CFC will be included in the fee table of the Prospectus; (v) confirm that the CFC and its Board of Directors will designate an agent for service of process; and (vi) confirm that the CFC and its Board of Directors will agree to inspections pursuant to Section 31 of the Investment Company Act and maintain books and records in compliance with applicable laws and regulations.
Response 10. We hereby confirm items (i), (iii), (iv), (v) and (vi). With respect to item (ii), the CFC’s custodian is State Street Bank and Trust Company.
Comment 11. Pursuant to Item 16 of Form N-1A, please consider whether differences in the Portfolio’s portfolio turnover rate over the most recent two fiscal years varies significantly. If so, please include relevant disclosure in the Prospectus.
Response 11. We respectfully acknowledge the comment; however, we believe that such variations are not significant.
Comment 12. Please explain supplementally why “Other Expenses” for Class IS shares are higher than those for other Classes.
Response 12. Class IS shares of the Portfolio recently launched and the “Other Expenses” line item is higher than the other Classes as Class IS seeks to obtain additional assets to realize economies of scale.
Comment 13. Pursuant to Item 6(a) of Form N-1A, please disclose the Portfolio’s minimum subsequent investment requirement.
Response 13. We respectfully acknowledge the comment; however, the Portfolio has no minimum subsequent investment requirement.
COMMENTS TO THE STATEMENT OF ADDITIONAL INFORMATION
Comment 14. Please reconcile the Portfolio’s categorization as non-diversified and the inclusion of a fundamental policy prohibiting the Portfolio from investing in a manner inconsistent with its classification as a diversified company.
Response 14. The disclosure has been revised accordingly.
COMMENTS TO THE PART C
Comment 15. Please include the CFC’s Management Agreement as an exhibit to the Part C.
Response 15. We respectfully acknowledge the comment; however, Form N-1A Item 28(d), which relates to the filing of investment advisory contracts as exhibits to a registration statement, requires the filing of investment advisory contracts relating to the management of a fund’s assets, not a subsidiary’s assets. Furthermore, we do not believe that the CFC’s Management Agreement, nor any other subsidiary-level service provider contract, falls within the meaning of “Other Material Contracts” set forth in Form N-1A Item 28(h). Accordingly, we have not included the CFC’s Management Agreement as an exhibit to the Fund’s registration statement.
In addition, we are authorized by our client to acknowledge the following on the Fund’s behalf:
· the Fund 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 Fund 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 (212) 698-0453 (fax). Thank you.
Best regards,
/s/ Stuart M. Strauss |
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Stuart M. Strauss |
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cc: Edward J. Meehan