Morgan Stanley has been shuffling executives and its sales strategy for its Van Kampen mutual fund unit, The Wall Street Journal reports. The funds are part of Morgan Stanley Investment Management, which has $600 billion in assets and accounted for 40% of the firm's income before taxes in 2007.

Approximately one-third of that income is generated by Morgan Stanley's fund division, a third of which is sold to retail investors. The rest is primarily institutionally and foreign-sold.

It has also puzzled industry observers as to why Morgan hasn't merged the funds with its BlackRock alternative and hedge fund unit.

Among the funds faring the worst are Van Kampen money market funds. But other funds are also doing poorly, among them the Van Kampen Equity & Income Fund, down 2.3% for the year, a full 3.4 percentage points below its benchmark.

As a result, assets in the funds overall have declined 12.7% from a year ago, to $71.7 billion as of March, down from $82.2 billion.

Morgan Stanley Co-President James Gorman recently said the funds' performance has been "suboptimal. We do have meaningful performance issues, particularly in our retail funds business, [now a] major focus."

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