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Money Management

Morgan Stanley’s AUM falls for the quarter, year as revenue gains

Morgan Stanley (MS) Investment Management had $463 billion in assets under management or supervision as of Dec. 31, down 1.7% from three months earlier and down 3.9% from a year earlier.

MSIM reported net inflows of $10.7 billion for the fourth quarter vs. net outflows of $6.8 billion in the third quarter and net inflows of $23.9 billion in the fourth quarter of 2017, an earnings statement released Thursdayby parent company Morgan Stanley showed.

The flows were driven by $13.9 billion in net inflows from liquidity strategies and $400 million in net inflows from alternatives, partially offset by $2.7 billion of net outflows from fixed income and $900 million from equities.

Broken down by assets, MSIM managed $164 billion in liquidity assets as of Dec. 31, up 9.3% from Sept. 30 and down 6.3% from Dec. 31, 2017. Alternative investments totaled $128 billion as of Dec. 31, down 3.8% from three months earlier and flat from 12 months earlier.

Equities totaled $103 billion in assets as of Dec. 31, down 12% from Sept. 30 and down 1.9% from a year earlier. Fixed-income assets declined 4.2% to $68 billion compared to the prior quarter and down 6.8% vs. a year earlier.

On an earnings call with analysts Thursday, James Gorman, Morgan Stanley's chairman and CEO, outlined the parent company's intention to make "bolt-on acquisitions" for the firm's investment management and wealth management businesses.

Referencing the firm's 2018 acquisition of mortgage lender Mesa West Capital, which brought $5 billion to the investment management division and experienced strong inflows in 2018, Mr. Gorman said Morgan Stanley is pursuing a "string-of-pearls acquisition" strategy by seeking smaller managers that will be additive to the firm's equity, fixed-income and alternative businesses.

"There are a lot of spaces where we can add value," Mr. Gorman said, stressing "we're not about to do a megadeal."

Net revenue of MSIM was $684 million in the most recent quarter, compared to $653 million in the previous quarter and $637 million in the quarter ended Dec. 31, 2017.

Net investment management income was $65 million in the fourth quarter vs. $80 million in the prior quarter and a loss $35 million in fourth quarter 2017.