Morgan Stanley Offering Hedge Funds The Opportunity To Hold Assets In Their Trust

Morgan Stanley is attempting to lure hedge fund clients back to its prime brokerage (see WSJ article). As a carrot, Morgan is planning to announce that hedge fund clients will be allowed to hold some of their assets in the MS Trust National Association, instead of being held in the brokerage units of the firm (for a small fee, of course). This could be significant given that many hedge funds are worried about their assets being held in a brokerage unit after the collapse of Lehman Brothers. Of interest is that assets held in the trust will not be federally insured, like deposits, but will still nonetheless probably be considered safer given their separation from the brokerage operations. It will be interesting to see if in the months to come whether or not more financial firms follow suit. In the mean time, it is one more indication (among others, see second WSJ article) that the hedge fund industry is starting to get back to normal. You can decide whether that is good or bad.