Morgan Stanley (MS.N) aims to raise $500 million from clients for a new fund that will invest in niche assets that may hard to liquidate quickly and are too complicated for most private equity or hedge funds, according to a document seen by Reuters.
The Wall Street bank is talking to investors about the private equity-style fund, called North Haven Tactical Value, that it plans to launch in the coming months, the document said.
The fund could potentially invest in assets that are far from the mainstream such as anticipated royalty sales from biotech firms, tax receivable agreements and index dividend swaps, as well as growth equity in fast-growing companies.
The fund must comply with the Volcker Rule, meaning only 3 percent of its capital can come from the bank, with client money comprising the rest.
The document said the fund will be led by Tom Cahill, a longtime Morgan Stanley banker who helped lead debt transactions involving aircraft, power generation facilities and real estate.
A Morgan Stanley spokeswoman declined to comment.
Other firms with similar funds include Blackstone Group LP (BX.N) and Goldman Sachs Group Inc (GS.N), through its special situations group.
Morgan Stanley is trying to grow its investment management division, which represents about 7 percent of the firm’s total revenue and has around $435 billion in assets under management. Businesses like wealth and investment management are considered more stable sources of revenue than trading, where profits can swing wildly each quarter.
In 2015, Morgan Stanley named former capital markets executive Dan Simkowitz as the head of asset management. It has begun to raise capital for other funds as well, focusing on Asian companies and sustainable investments.
More investment managers are raising funds that invest in niche illiquid assets. Major banks pulled back from these types of investments following the 2007-2009 financial crisis due to risk aversion and higher capital requirements.
Thirty-three special situations funds are seeking around $16 billion in capital since the beginning of the year, according to private equity data provider Preqin.