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MSREF pulls out of separate accounts

Morgan Stanley Real Estate focuses on commingled fund operation as it pulls out of the separate accounts business.

Morgan Stanley Real Estate is withdrawing from the separate account business and will focus its efforts instead on commingled funds.

A spokesperson for the investment bank said today Morgan Stanley would “over time” move out of separate accounts “to focus on the real estate commingled funds business”.

According to media reports, the likely reason for the move is to target businesses generating higher fees and ones which give Morgan Stanley greater control. Commingled funds would allow Morgan Stanley to make all of the investment decisions, compared with non-discretionary separate accounts, where pensions funds tend to have the final say.

The move comes as investment banks globally focus on increasing revenues and shift towards less volatile investment strategies.

Morgan Stanley’s latest commingled real estate fund has already been hit by the credit crunch though – with the final close of Morgan Stanley Real Estate Fund (MSREF) VII Global deferred for around six months.

In November, PERE reported that Morgan Stanley had raised more than $6 billion for MSREF VII Global, with another $2 billion soft circled.

According to those briefed on the situation, MSREF has deferred the final close from September 2008 until the first quarter of 2009, after its LPs asked for more time. But Morgan Stanley is confident it can get close to the original target of $10 billion, the sources added. Morgan Stanley’s predecessor fund, MSREF VI International, raised $8 billion in June 2007.