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Date:04/09/12

Fun With OPM! Morgan Stanley's Clients Have $3 Billion in Facebook, and Other Gory Details

The Wall Street Journal reported in an excellent article last week that Morgan Stanley (MS), the lead underwriter for Facebook’s (FB) IPO, made big bets on Facebook. Morgan Stanley stood solidly behind its client, not with its own money, of course — with its clients’ money.

Morgan Stanley went all out with OPM (that’s Other People’s Money). At last count, its clients have $3 billion riding on Zuckerberg. Most other funds that bought Facebook have made it less than 1% of their portfolios, but not funds run by Morgan Stanley! Just marvel at some of the funds and the percentage of assets in Facebook (according to the most recent figures, provided by the Journal).





Morgan Stanley Focus Growth B – 7.72%
Morgan Stanley Inst Advantage H – 6.71%
Morgan Stanley Inst Glbl Advantage I – 5.19%
Morgan Stanley Inst Glbl Discovery I – 4.79%
Morgan Stanley Inst Global Opportunity I – 6.42%
Morgan Stanley Inst Opportunity H — 7.39%
Morgan Stanley Institutional Growth I — 6.63%
Morgan Stanley Multi Cap Growth B — 6.42%

Looking back at this earlier chart that ran in the Journal, it looks like some of the funds have a BIGGER percentage in Facebook at last count than they did as of May 31. If we’re not mistaken, the Focus Growth, Global Discovery and Global Opportunity funds all fall in that group. Focus Growth alone has $1.586 billion worth of Facebook shares. The runner up is Institutional Growth with $848 million. As of May 31:

Morgan Stanley Focus Growth — 6.60%
Morgan Stanley Institutional Advantage — 5.43%
Morgan Stanley Institutional Global Discovery — 4.33%
Morgan Stanley Institutional Global Opportunity — 6.36%
Morgan Stanley Institutional Growth Portfolio — 6.34%
Morgan Stanley Institutional Opportunity — 6.39%

But wait, Morgan Stanley had good access and might have "bought" a lot of these shares before the IPO. That means its clients got in Facebook early and have still made lots of money, right? If only. It looks like a lot of these funds loaded up on shares in May, the month of the IPO. That means that even if we don’t know exactly how much they paid for the shares, it’s probably safe to say that a third to half of their shares, depending on the fund, have lost a lot of value. That $3 billion that’s now in Facebook may have been worth a few billion more.




Investors in Morgan Stanley’s own funds might totally understand this situation. After all, people make mistakes, lots of investors have lost money on Facebook. But gee, some might get the impression that Morgan Stanley used OPM to keep a high-profile client happy while it was collecting underwriting fees. If any investors get an idea like that, they might be pretty pissed. We’ll have to see if any investors like that raise their hands.





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