ValueAct, a San Francisco-based hedge fund, has selected Morgan Stanley as its new target.
ValueAct is an activist fund, meaning that it doesn't only buy shares but also lobbies for organizational changes in order to increase the value of stocks. So what are ValueAct's plans for Morgan Stanley?
In the second quarter, the hedge fund bought 38 million Morgan Stanley's shares (Milan Stock Exchange: Mediaset [MS]) for $1.1 billion, what accounts for approximately 2% stake in the company.
Interestingly, ValueAct's CEO Jeff Ubben says that they are not planning to lobby for major changes in the investment bank as they are satisfied with the current Morgan Stanley's strategy.
“We are completely supportive of Mr Gorman and impressed by his leadership over the past six years”, Mr Ubben told the Financial Times.
Financial Times said that Morgan Stanley has been dealing with changes brought about by the "radically changed regulatory landscape". The investment bank has been continuously cutting on the costs of nonessential travel, shutting down data centers and relocating its employees to lower-cost locations. The bank also cut up to 25% of its fixed-income jobs in late 2015.
This Monday, Morgan Stanley's shares were up 1,68% reaching $29,66, later going up to $30 in the extended session.
Some experts called ValueAct's stake in Morgan Stanley "an added insurance policy for investors".
Before Morgan Stanley, ValueAct has taken activist roles in Microsoft (NASDAQ: Microsoft Corporation [MSFT]), Valeant Pharmaceuticals (NYSE: VRX) and American Express (NYSE: American Express Company [AXP]), where it advocated for significant organizational changes such as Microsoft's management restructuring of 2013.