Morgan Stanley Aims to Be Leader in Asset-Management by 2013
Morgan Stanley hopes to become an industry leader in asset management by 2013, building from its current 0.5 percent market share, said Gregory Fleming, hired last year to turn around the business.
“There are and have been challenges" in the Morgan Stanley Investment Management unit, Fleming, 47, said today at a conference in New York sponsored by Bank of America Corp. ‘‘The good news is that these challenges are fixable, and in a defined period of time. The strengths of MSIM, the ones that would take longer to fix, are the most important components to a top asset- management business."
Morgan Stanley Chief Executive Officer James Gorman hired Fleming in December to revive a unit that posted pretax losses in every quarter of 2008 and 2009. The division reported pretax profit of $279 million in the third quarter as it reaped gains from real estate funds.
The asset-management group plans to help drive earnings growth at the sixth-largest U.S. bank by next year, Fleming said. The core funds business hopes to have industry-leading margins in an area that often has pretax margins of 30 percent to 35 percent, according to Fleming.
The firm sold its retail asset-management business to Invesco Ltd. earlier this year for $1.37 billion. Morgan Stanley is also giving up control of FrontPoint to the fund unit’s managers and will retain a minority stake. The firm said in a regulatory filing earlier this month that it expects to lose $70 million before taxes on the FrontPoint sale.
Hedge Funds
Chief Financial Officer Ruth Porat said on a conference call last month that Morgan Stanley may sell additional hedge- fund stakes to free up capital. Morgan Stanley is reviewing every principal investment in its asset-management unit, Fleming said.
‘‘Owning minority stakes in hedge funds or other vehicles attracts a significant capital charge,’’ Fleming said. ‘‘If ultimately we decide that they’re not part of the larger strategy, and we can efficiently allocate capital somewhere else, then we’re going to do that.’’
Morgan Stanley had slightly more than $300 million of seed capital in FrontPoint and plans to ‘‘repatriate’’ that in the near future, Gorman said in October. Morgan Stanley also holds minority stakes in Avenue Capital Group and Lansdowne Partners.
To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net.
To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.
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