Morgan Stanley raises $1bn fund of funds

The bank’s Alternative Investment Partners division will target buyout funds in North America and Western Europe, global venture and global special situations funds.

Morgan Stanley has raised $1.14 billion for its fourth fund of funds, a 15 percent increase over its third fund of funds, which closed on $1 billion in 2006.

The fund, Morgan Stanley Private Markets Fund IV, targets buyout funds based in North America and Western Europe, global venture funds and global special situation funds.

Distressed opportunities and secondaries are two attractive areas in today’s environment, Tom Dorr, chief investment officer with Morgan Stanley’s private equity fund of funds team, said in a statement.

The team expects to invest in about 30 to 35 primary funds, 10 to 20 co-investments and five to 10 secondaries. About 45 to 50 percent of the investments will be in the US, 30 to 40 percent in Western Europe and 15 to 20 percent in the rest of the world, including developed economies like Japan and emerging markets, according to Dorr.

Morgan Stanley’s second fund of funds closed on $500 million in 2005. LPs in the past fund of funds include the Iceland State Employees’ Pension Fund and the Northumberland County Council Pension fund.

In January, Morgan Stanley expanded its secondaries fund of funds team in London, adding Christophe Nicolas as executive director. The team is made up of eight members integrated within the overall 30-person strong private equity fund of funds group.

Last year, the Alternative Investment Partners division opened an office in Hong Kong to cover Asian private equity fund of funds investments. The bank relocated Jie Gong from the US to Hong Kong to open the office, and the team there focuses on fund investments, co-investments and secondary investments.

Morgan Stanley Alternative Investment Partners, which houses the bank’s funds of funds, is a division of Morgan Stanley Investment Management. Alternative Investment Partners manages portfolios of hedge funds, private equity funds and real estate funds for institutions and high networth individuals.

Morgan Stanley Investment Management has about $399 billion in assets under management as of 30 November, 2008.