Morgan Stanley Rethinks Hedge Fund Stakes

Feb 3 2010 | 8:45pm ET

Morgan Stanley is considering its options regarding its stake in several hedge fund firms, its CEO said.

James Gorman told investors at a conference in New York that the Wall Street giant was “evaluating” its stakes in Avenue Capital Group, Lansdowne Partners and Traxis Partners, as well as its ownership of FrontPoint Partners. Gorman, who succeeded John Mack as CEO last month, did not specify what options the firm was evaluating.

Gorman’s comments follow his announcement last month that incoming Morgan Stanley Investment Management chief Greg Fleming would examine the firm’s ownership of the hedge fund managers.

Last month, President Barack Obama unveiled a plan to bar bank holding companies from owning, investing in or sponsoring hedge funds and private equity funds. Morgan Stanley, which became a bank holding company in 2008 to become eligible for federal bailout funding, is the sixth-largest bank in the U.S. by assets, and owns minority stakes in six hedge fund managers, in addition to FrontPoint, which it bought in 2006.

Last month, The Wall Street Journal reported that FrontPoint’s leaders were mulling a management buyout of the Connecticut firm.


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