By Shasha Dai
Of DOW JONES LBO WIRE
Morgan Stanley Private Equity will stay within its Wall Street
parent for now, said people familiar with the situation.
Morgan Stanley (MS) will continue to honor its capital
commitment to the arm's most recent fund, Morgan Stanley Capital
Partners V LP, which had a final closing late last year on a little
more than $1 billion, the people said.
Nearly one-third of the commitment to the fund came from the
parent and its employees, with the remainder from outside
investors. Because Morgan Stanley's commitment was made before May
1, the bank is still able to fund the commitment as provided for by
the Dodd-Frank law passed last month, the people said. Over time,
however, Morgan Stanley will have to dilute its stake in the fund
to within 3% as required by the law.
Morgan Stanley Private Equity is a slimmed-down version of
itself from a few years ago. In early 2008, Morgan Stanley started
raising Morgan Stanley Capital Partners V, with a target of $6
billion. The parent bank had committed up to $2 billion to the
fund. A few months into fund-raising efforts, the financial market
imploded, causing the fund to close far below the target.
Stephen Trevor, co-head of a division whose responsibilities
included overseeing direct private equity and real estate
investments, left the firm recently. Morgan Stanley Private Equity
is led by Managing Director Alan Jones.
The arm recently did its first British deal, agreeing to acquire
60% of Zenith Vehicle Contracts Group Ltd., a provider of vehicle
outsourcing and management services. Other investments include
McKechnie Aerospace, a provider of components for the aerospace
industry; supermarket chain Tops Markets LLC; child-care provider
Learning Care Group; steel company Breitenfeld AG; and natural gas
exploration and production company Triana Energy LLC.
In addition to the direct private-equity arm, Morgan Stanley has
interests in other private-equity funds, as well as hedge funds and
real estate funds, whose value stood at $4.5 billion as of June
30.
Under the Dodd-Frank law, those investments will be limited to
3% of the bank's Tier 1 capital. As of June 30, the bank posted
Tier 1 capital of $53.5 billion, meaning its private fund holdings
are capped at $1.6 billion.
Like other banks, Morgan Stanley has as long as 12 years to
comply with the federal law.
(Dow Jones LBO Wire covers news about private equity.)
-By Shasha Dai, Dow Jones LBO Wire; 212-416-2037;
shasha.dai@dowjones.com