Morgan Stanley Investment Management is counting on overseas growth to help get the firm back on track as revenue has continued to fall.
But the hurdles are high, particularly in Europe, where unfavorable market conditions in the retail sector, combined with recent high-profile departures, have weakened the firm, according to analysts and consultants.
Still, industry watchers say several companywide initiatives — including an effort to further broaden alternative product offerings most notably in hedge funds — are beginning to pay off internationally and will place MSIM in a more competitive position in the long term.
The asset management subsid-iaries of global financial services firms generally are playing a more important role in stabilizing their parent companies' earnings because management fees help to offset the volatility in the trading and investment banking businesses.
Financial institutions are “realizing that the asset management business is beneficial, especially right now due to the attractive multiples, at least compared to the investment banking side,” said Ben Phillips. Mr. Phillips is managing director at investment bank Putnam Lovell in New York, but has been named a partner at money manager consultant Casey Quirk & Associates LLC, Darien, Conn.
It is no different at MSIM, where the credit turmoil has brought a renewed sense of purpose for the asset management division in relation to its parent company, New York-based Morgan Stanley. Morgan Stanley has been battered by about $14 billion in write-downs since last summer, but the damages are viewed by analysts as less severe than at other major competitors such as Citigroup Inc. and Merrill Lynch & Co. Inc., both of New York, and UBS AG, Zurich. Morgan Stanley is not likely to have to sell its asset management division in order to raise capital at this point, analysts said.
MSIM reported $605 billion in assets under management as of May 31, an 8% increase from the previous year. In quarter ended May 31, the manager reported net inflows of $15.5 billion, representing the seventh consecutive quarter of net inflows.