Morgan Stanley in flurry of alternatives deals

In recent days, the investment bank has announced three successive strategic investments alterative investment platforms, including a hedge fund, fund of hedge funds and a distressed investment firm, in an ongoing bid to bolster its alternative investment business.

As part of an effort to build its alternative investments business, global investment bank Morgan Stanley Investment Management (MSIM) has made three high-profile strategic investments this week. The new deals include investments in a distressed investment manager, a hedge fund and fund of hedge funds.

MSIM has aligned itself with Avenue Capital Group, a New York-based hedge fund that specialises in public and private distressed credit securities, bank loans, trade claims and private investments. The transaction gives the bank to gain a minority interest of undisclosed size in Avenue, Morgan Stanley said on Monday in a statement. Under the agreement, Avenue will maintain its status as an independent entity and will invest all proceeds from the transaction into Avenue’s hedge funds, the statement said.

Avenue, which currently has approximately $12 billion in assets under management, joined Greenwich Connecticut-based Pegasus Capital, another distressed debt specialists, to launch a fund in January of 2004.

On Tuesday, MSIM agreed to acquire FrontPoint Partners, a multi-strategy hedge fund with approximately $5.5 billion in assets under management, MSIM said in a statement on Tuesday. The deal is expected to close by December, the statement said.

At the completion of the transaction, FrontPoint’s investment teams will work with MSIM’s to manage the FrontPoint funds, the statement said, noting that the FrontPoint teams will also invest part of the proceeds from the deal into FrontPoint funds.

Philip Duff, FrontPoint’s chairman, will become a MSIM consultant and will work for John Mack, Morgan Stanley’s CEO, to improve firm strategy, the statement said. Paul Ghaffari, a FrontPoint founding partner, will establish his own independent investment firm.

The final arm of MSIM’s trio of investments announced this week involved hedge fund Landsdowne Partners. Morgan Stanley has acquired a 19 percent stake in the London-based hedge fund, the investment bank said in a statement on Wednesday. With more than $12 billion in assets under management, Landsdowne invests in European equity, global financials and emerging markets.

“This investment fits well with the long-term growth strategy we have outlined for MSIM,” Owen Thomas, president and CEO of MSIM, said in the statement. “Following on from our recently announced transactions with Avenue Capital and FrontPoint Partners, it further demonstrates our commitment to build a market-leading alternatives business.”