Morgan Stanley Seeks $1.5 Billion For Private Equity Fund

Jan 15 2015 | 6:23am ET

By Sabrina Willmer (Bloomberg) -- Morgan Stanley’s private equity unit is seeking $1.5 billion for a fund that will make buyout investments mostly in North America even as banking peers withdraw from the asset class, said two people with knowledge of the matter.

The New York-based bank’s global private equity team is seeking more capital than the $1.2 billion predecessor raised in 2008, said the people, who asked not to be named because the information is private. Probitas Partners LP is helping the bank raise money, according to a regulatory filing.

Morgan Stanley, which has invested in private equity for almost 30 years, is keeping that business even as other banks exit such holdings. Citigroup Inc., JPMorgan Chase & Co. and Credit Suisse Group AG have divested in response to regulatory pressure or sold assets that aren’t central to their companies. The Volcker Rule, named for former Federal Reserve Chairman Paul Volcker, bars banks from investing more than 3 percent of Tier 1 capital in private-equity or hedge funds, or owning more than 3 percent of a fund.

Matt Burkhard, a spokesman at Morgan Stanley, declined to comment on the fundraising plans.

Morgan Stanley last week announced it raised about $1 billion for a second mezzanine-debt fund and last year gathered about $1.7 billion for its fourth Asia-focused private equity fund.

Mid-Sized Companies

Morgan Stanley’s global private equity team mostly invests $75 million to $150 million in medium-size companies with $100 million to $1 billion in enterprise value, according to the bank’s website. While it usually invests in North America, it can pursue investments in Europe and other regions.

The previous fund was producing a 17 percent internal rate of return after expenses and a multiple of 1.5 times invested capital as of Sept. 30, according to one of the people familiar with the matter.

Morgan Stanley’s buyout team is led by Alan Jones, who has worked at the bank since 1993 in various roles, including head of corporate finance, global co-head of the financial sponsors group and head of global leveraged finance. The group has invested about $6.7 billion from its five funds, according to the bank’s website.

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