Morgan Stanley assets climb 7.5% in third quarter

Morgan Stanley Investment Management's assets under management or supervision rose 7.5% to $715 billion in the quarter ended Sept. 30.

Over the 12-month period, combined long-term and liquidity assets managed and supervised by Morgan Stanley's institutional money management unit were up 41%, the parent company's earnings report released Thursday showed.

Chairman and CEO James P. Gorman told analysts on Thursday's earnings call that the $715 billion of total AUM as of Sept. 30 represented a new high, following on $665 billion as of June 30, which also was a quarterly record breaker.

Net flows into MSIM's long-term strategies, excluding liquidity funds, totaled $10.4 billion in the three months ended Sept. 30, compared to $15.4 billion in the prior quarter and $4.2 billion in the same quarter of 2019, the earnings report showed.

MSIM's total net inflow, including liquidity strategies, was $12.5 billion in the current quarter, compared with $36.1 billion in the previous three-month period and $13.3 billion in the third quarter of 2019.

Jonathan Pruzan, executive vice president and chief financial officer, described total net inflow to strategies run by the investment management unit as "strong," particularly in international equities and Asian private equity.

In fact, the breakdown of MSIM's net inflow in the third quarter was led by equities with $10 billion and fixed-income net inflow was $3.1 billion. Alternative/other strategies experienced net outflow of $2.7 billion in the quarter ended Sept. 30.

MSIM saw a significant decline in net inflow in its liquidity funds in the third quarter to $2.1 billion, compared $20.7 billion in the prior quarter and $9.1 billion a year earlier.

That said, liquid strategies continued to be the largest allocation within the institutional investment management unit at $271 million as of Sept. 30.

Assets managed or supervised in other strategies were equities, $202 billion; alternative/other, $150 million; and fixed income, $92 million.

Among MSIM's asset classes, equity assets rose the most in periods ended Sept. 30, up 20.2% for the quarter and 60.3% for the year.

Total assets managed or supervised in long-term strategies totaled $444 billion, up 11.8% for the quarter and 32.5% for the year ended Sept. 30.

Assets under management and supervision by MSIM will rise significantly next year when the acquisition of Eaton Vance by Morgan Stanley is completed in the second quarter.

When the deal was announced Oct. 8, the combined AUM of both firms was $1.2 trillion.

Mr. Gorman told to analysts on the call that the timing of the announcement of the Eaton Vance deal was somewhat awkward given the Oct. 2 completion of Morgan Stanley's acquisition of E-Trade Financial, but stressed that the money manager "was too good to pass up. We've been eyeing Eaton Vance for years as an ideal partner."

He added that "timing is critical" and noted that "quality assets don't sit on the shelf for long."

MSIM's net revenue was up 19.2% to $1.1 billion in the quarter ended Sept. 30 and up 38.2% for the year. As of Sept. 30, the investment unit's net income increased 46.3% to $225 million in the three-month period and 63% for the year.

Sophie Baker contributed to this report.