Morgan Stanley Agrees to Sell a Feeder-Fund Business to iCapital

(Bloomberg) -- Morgan Stanley agreed to sell a business that administers its alternative-investment feeder funds to iCapital Network, a financial-technology firm run by a former Goldman Sachs Group Inc. banker.

ICapital will assume oversight of 115 Morgan Stanley feeder funds, which invest in private equity, hedge funds and real estate for the bank’s wealth-management arm, New York-based iCapital said Friday in a statement that didn’t include terms.

ICapital has benefited from the willingness of Wall Street firms including Credit Suisse Group AG and Deutsche Bank AG to outsource some technology functions in an effort to cut costs. The agreement with Morgan Stanley will boost assets serviced by iCapital to $40 billion from $28 billion earlier this month, when it completed a similar transaction with Bank of America Corp.

The deal “will ultimately enhance what our clients will see and get out of our feeder-fund business," Jeremy Beal, head of alternative investments at Morgan Stanley, said in an interview. “Partnering with iCapital made a lot of sense as we try and grow this business.”

Morgan Stanley has been spending to support its network of 15,000 financial advisers, which produce the highest return on equity of any division at the bank. That includes renovating office space and agreeing last month to buy stock-plan administrator Solium Capital Inc. for more than $900 million.

The new arrangement will automate some tasks and simplify management of client relationships for advisers, while Morgan Stanley will continue to make investment decisions, iCapital Chief Executive Officer Lawrence Calcano said in an interview. The firm will offer jobs to an unspecified number of Morgan Stanley employees, primarily in operational roles.

--With assistance from Sonali Basak.

To contact the reporter on this story: Simone Foxman in New York at sfoxman4@bloomberg.net

To contact the editors responsible for this story: Pierre Paulden at ppaulden@bloomberg.net, Steven Crabill, Peter Eichenbaum

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