Morgan Stanley’s alternative investment group raised $516 million to invest alongside hedge funds in longer-term wagers, as clients move away from more traditional bets in public markets.
In addition to co-investing, the pool of money will also buy investments in hedge funds from other limited partners — primarily so-called side pockets of illiquid securities created before 2008 that tend to sell at a large discount to the value of their holdings, said Mark van der Zwan, chief investment officer and head of the hedge fund team for the unit.
“We are looking to exploit themes with investment time horizons between hedge funds and private equity," said van der Zwan in a telephone interview. The bets generally have a lifespan of two to five years, he said.
Morgan Stanley created this strategic opportunities fund, its third since 2014, as institutions and high-net-worth clients flee funds that farm out money to hedge funds. Assets in those hedge funds of funds have seen net outflows every year since 2007, according to Hedge Fund Research.
The group at New York-based Morgan Stanley manages portfolios of hedge, private-equity and real-estate funds and had about $23 billion in assets under management and advisement as of March 31.