Morgan Stanley Wealth Management plans to cut underperforming and unpopular funds from its platform, Citywire understands.
The wirehouse has written to asset managers to inform them of the plans.
Morgan Stanley is to cut those funds which are not deemed commercially viable as well as those which are underperforming in their peer group, said a source familiar with the situation.
In terms of commercial viability it will begin by looking at those funds which have $25 million or less in total assets, as well as those which have attracted less than $10 million in assets from Morgan Stanley over four years.
Another source with knowledge of the situation said the wirehouse would consider cutting those funds with a one star rating from Morningstar as well as those with bottom decile three-year returns but which carry a total expense ratios in the highest 10%.
The project will be done in phases. It is understood that the wirehouse has begun assessing funds but has not yet cut any from the platform, a move which will happen by the end of the first quarter next year.
A spokeswoman for Morgan Stanley declined to comment.
According to the website The Mutual Fund Wire, Morgan Stanley will cut around 850 funds from the current 3,000 available to advisors.
Matching Merrill's move
Rival wirehouse Merrill Lynch Wealth Management is in the midst of a similar, if in fact more extensive, platform rationalization.
Merrill’s project was first announced in May and kicked off in September. It will result in the firm cutting the number of funds available on its advisor platform, Merrill One, from 3,500 to 1,800.
Merrill has previously pointed out that the culled funds only account for around 4% of assets on the platform and are being removed because they have underperformed or failed to attract $10 million of assets over a four-year period.
The wirehouse has hired fund research firm Morningstar to assist with the project. By the end of 2017 Morningstar will cover 1,100 funds, while Merrill’s home office due diligence team, led by Anna Snider, will cover 700.