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Morgan Stanley on the hunt for hedge fund acquisitions

Date: Thursday, April 12, 2007
Author: Shanny Basar, Financial News

Morgan Stanley is to continue to pursue acquisitions of alternative asset managers building on five hedge fund investments in the same number of months.

David Sidwell, chief financial officer of Morgan Stanley, said at the bank's annual shareholder meeting: “We will continue to grow asset management through acquisitions, minority stakes, team lift-outs and targeted external hiring and internal transfers.”

Last month Morgan Stanley agreed to buy a minority stake in Abax Global Capital, a new Hong Kong hedge fund management firm.

In December the Wall Street firm bought a controlling stake in New York hedge fund manager Brookville Capital Management. In November it moved on three firms, taking a significant minority stakes in UK manager Lansdowne Partners and US manager Avenue Capital, and taking control of FrontPoint, another US manager.

John Mack, chief executive of Morgan Stanley, said that asset management is now working more closely with the bank, but that it would take three to five years to complete its plan for growing the business.

Mack said 2006 was a tremendous year for Morgan Stanley and praised the institutional securities business, led by Zoe Cruz, for “taking tremendous risk in a smart and disciplined way.” He said: “This firm has the capability to take a lot more risk than it has in the past and I would argue that we are using our talent in a more productive way and I am comfortable with the risks we are taking.”

A proposal by the American Federation of State, County and Municipal Employees, a US public service pension plan, for an annual shareholder advisory vote on executive pay at Morgan Stanley was defeated with only 37% of shareholders voting in favor.

Morgan Stanley’s board had recommended that shareholders reject the proposal.