Alternative Investments

Consider a Different Way to Diversify Your Portfolio

Alternative investments can provide an opportunity for you to diversify your portfolio through an extensive range of products.

All managed by investment professionals, our alternative investments platform includes single manager hedge funds, funds of hedge funds, managed futures, private equity, real estate and exchange funds.

Alternative Investment Capabilities at Morgan Stanley

The Alternative Investments Capabilities Brochure covers a wide range of topics, including the potential benefits of alternative investments, open-architecture platform highlights, and rigorous investment manager and fund selection due diligence. Read More.

Choose From Our Alternative Investments

  • Single Manager Hedge Funds are privately managed investment funds that utilize sophisticated strategies in both the international and domestic markets. They're designed to potentially offset losses during a market downturn and often seek to generate returns higher than traditional stock and bond investments.
  • Funds of Hedge Funds are actively managed portfolios of hedge funds and other alternative investments products.
  • Managed Futures employ professional money managers called Commodity Trading Advisors to direct investments in global currencies, interest rates, equities, metals, energy and agricultural markets through the use of futures, forwards and options on the basis of technical and fundamental analysis.
    • Private Equity typically invests globally in nonpublic entities with a value-add approach, seeking to acquire undervalued/underperforming entities or ones with significant growth potential with the objective of reselling at a higher price in the future. Underlying asset classes include buyouts, venture capital and mezzanine debt.
    • Real Estate refers to negotiated private investments in real estate assets with the objective of generating current income and/or reselling at a higher value in the future.
    • Exchange Funds are private vehicles enabling holders of concentrated stock positions to exchange those stocks for a diversified portfolio.

    Determine If These Investments Fit Your Needs

    Many choose alternative investments because their returns have a low correlation with those of traditional asset classes. In addition to an attractive risk adjusted return potential, alternative investments allow you to diversify your portfolio by investment strategy, portfolio manager, industry sector, geography and liquidity needs. Your Financial Advisor/Private Wealth Advisor can use multidimensional allocation tools to evaluate if alternatives can complement your portfolio.

    Our Manager Selection Process

    Through an extensive due diligence process, our alternative investment managers are identified, evaluated and thoroughly vetted. Past performance, fidelity to investment style, expertise in the use of leverage and an understanding of risk management are some of the factors in our rigorous evaluation.

    Are You Qualified to Invest in Alternatives?

    If you're looking to add alternative investments to your holdings, you should be a sophisticated investor and be able to understand the complex investment strategies sometimes employed, and tolerate the risks and liquidity constraints of alternative asset classes. Therefore, please review carefully the risk considerations described below.

    To find out if you're qualified to invest in alternative investments, please talk to your Financial Advisor or Private Wealth Advisor as eligibility requirements vary greatly when compared to traditional investments.

    1 Alternative Investments often engage in speculative investment techniques involving a high degree of risk and are only suitable for long-term, qualified investors.


    The sole purpose of the preceding is to inform, and it in no way is intended to be an offer or solicitation to purchase or sell any security, other investment or service, or to attract any funds or deposits, does not constitute an offering, and is meant only to provide a broad overview for discussion purposes. All information provided here is subject to change without notice. If and when an investment opportunity is structured, all investors must obtain and carefully read the related fund's offering memorandum or prospectus, which will contain the information needed to evaluate the potential investment and provide important disclosures regarding risks, fees and expenses. No offer of any interest in any product will be made in any jurisdiction in which the offer, solicitation or sale is not authorized, or to any person to whom it is unlawful to make such offer, solicitation or sale.

    Investing in alternative investments is speculative, not suitable for all clients, and intended for experienced and sophisticated investors who are willing to bear the high economic risks of the investment, which can include:

    • loss of all or a substantial portion of the investment due to leveraging, short-selling or other speculative investment practices;
    • lack of liquidity in that there may be no secondary market for the fund and none expected to develop;
    • volatility of returns;
    • restrictions on transferring interests in a fund;
    • potential lack of diversification and resulting higher risk due to concentration of trading authority when a single advisor is utilized;
    • absence of information regarding valuations and pricing;
    • delays in tax reporting;
    • less regulation and higher fees than mutual funds;
    • funds of hedge funds often have a higher fee structure than single manager funds as a result of the additional layers of fees;
    • risks associated with the operations, personnel, and processes of the manager.

    Investing in managed futures products is speculative, not suitable for all investors, and is intended for experienced and sophisticated investors who are willing to bear the loss of their entire investment. Performance of these products may be volatile, and while they may provide the potential for positive returns in both rising and declining markets, the potential for loss is equal. Some of the important risks are: trading profits and interest income may not offset substantial fees; the ability to redeem interests may be limited and there may be no secondary market; conflicts of interest may exist in the management of an investment vehicle; advisors may be changed without notice to investors; and the vehicle may not be registered under the Investment Company Act of 1940. Individual funds will have specific risks related to their investment programs that will vary from fund to fund. Prospective investors of any alternative investment should refer to the specific fund's offering document , which will fully describe the specific risks and considerations associated with a specific alternative investment. Diversification does not assure a profit or protect against loss in declining markets.

    Past performance is no guarantee of future results. In the ordinary course of its business, Morgan Stanley engages in a broad spectrum of activities including, among others, financial advisory services, investment banking, asset management activities, sponsoring and managing private investment funds. In engaging in these activities, the interests of Morgan Stanley may conflict with the interests of clients.

    Investments mentioned above may not be suitable for all investors. Before making any investment, each investor should carefully consider the risks associated with the investment and make a determination based upon the investor's own particular circumstances, that the investment is consistent with the investor's investment objectives. In order to be eligible to invest in an alternative investment fund, investors must be an Accredited Investor, as defined by Rule 501 of Regulation D of the 1933 Act. For certain funds, investors must also be a Qualified Client, as defined by Rule 205-3 of the Investment Advisers Act of 1940, as amended, a Qualified Eligible person, as defined in Rule 4.7 of the general regulations under the Commodity Exchange Act, and/or a Qualified Purchaser, as defined by Section 2(a)(51) of the 1940 Act. Morgan Stanley may impose an eligibility standard for a particular alternative investment fund that may be higher than those required to meet either the Accredited Investor, Qualified Client, Qualified Eligible Person and/or Qualified Purchaser standards.

    Diversification does not assure a profit or protect against loss in declining markets.

    Interests (1) are not FDIC-insured, (2) are not deposits or other obligations of a bank, (3) are not guaranteed by a bank, and (4) involve investment risks, including possible loss of principal. Morgan Stanley Smith Barney LLC is a registered broker-dealer, not a bank.

    2012-PS-1050 (9/2012), CRC727733