Invesco deal to have minimal impact on MSIM in Asia

Oct 20, 2009

Morgan Stanley is exiting its retail mutual fund business in the US, including Van Kampen Investments, and will only lose its Japan equities retail business.

Morgan Stanley Investment Management's Asian business is unlikely to be significantly affected following the takeover by Invesco announced yesterday, says Blair Pickerell, Asia head of MSIM.

Atlanta-based Invesco will buy Morgan Stanley's retail asset management business, including Van Kampen Investments, for $1.5 billion. Invesco will pay for the deal with both cash and stock, leaving Morgan Stanley with a 9.4% Invesco stake.

Invesco will gain a global book of $119 billion of assets invested across equity, fixed income, alternative and unit investment trusts, along with 650 professionals involved in investments, distribution and operation support.

Both boards have approved the transaction, and the deal is expected to close in mid-2010, subject to regulatory, client and shareholder approvals. Invesco has a profit target of 11% in the first 12 months and aims to generate an internal rate of return of 30% after fully closing the deal.

Hong Kong-based Pickerell says the deal's impact on MSIM's Asian business is expected to be minimal. The bulk of the transaction focuses on Morgan Stanley's retail business in the US.

Morgan Stanley will hold onto all of its business presence in Asia, except its Japanese equities business. The Japan team -- which overlaps with shareholder Mitsubishi UFJ's own mutual fund business -- numbers 35, eight of whom are investment professionals focused on Japanese equities.

Pickerell says the deal will further sharpen Morgan Stanley's institutional focus. Its six-strong Asian institutional sales team will continue to market MSIM's five core pillars of products to Asian clients. These include its core, long-only strategies, merchant banking products, hedge funds, fund of alternative funds manufactured in the US and liquidity management solutions.

A few Asian institutional or private clients with investments in Morgan Stanley's mutual funds will be transferred to Invesco.

Separately, following recent departures, the business heads for Singapore and Australia will not be replaced.

MSIM's deal is the latest to feature an investment bank's exit from its non-core asset management business. Earlier exits included Credit Suisse's sale of its traditional long-only investment management business to Aberdeen Asset Management and the acquisition of Barclays Global Investors by BlackRock.