Amid the turbulence in financial
markets, Morgan Stanley’s Global Wealth Management division
reported record levels of client inflows of nearly $15 billion in
the third quarter of 2007. Despite the subprime crisis, Morgan
Stanley “delivered strong performances across many core businesses
and achieved record results in our prime brokerage, derivatives and
interest rate and currencies businesses”, said John Mack, chairman
and chief executive of the firm.

Its Global Wealth Management division reported pre-tax profits of
$287 million, a year-on-year rise of 78 percent. Net revenues from
the division were $1.7 billion, up 23 percent after stronger
transactional revenues including higher revenues from underwriting
activity, growth in fee-based products and higher net interest
revenue from its deposit sweep programme.

Total client assets were $734 billion, a 14 percent increase from
last year’s third quarter. Client assets in fee-based accounts rose
15 percent to $211 billion over the last 12 months and represent 29
percent of total assets.

Goldman Sachs’s Asset Management division, including its private
client business, reported record earnings of $1.15 billion for the
third quarter, a 40 percent increase on the same quarter in
2006.

Net revenues in the division increased by 31 percent year-on-year
to $1.2 billion. Assets under management increased by $38 billion
to $796 billion during the quarter, reflecting money market net
inflows of $31 billion, non-money market net inflows of $19 billion
spread across all asset classes and net market depreciation of $12
billion, reflecting a fall in equity and alternative investments,
partially offset by an appreciation in fixed income assets.

“Given the difficult environment of the third quarter, many of our
businesses were challenged,” said Lloyd Blankfein, Goldman chairman
and chief executive of the firm. “But, overall, the quality of our
franchise produced strong results as clients continue to look to us
for advice and execution. The strength of our client relationships,
the diversity of our business and the talent and teamwork of our
people continue to drive our performance.”

However, net wealth management revenues at Bear Stearns for the
third fiscal quarter showed a negative return of $38 million
compared with the $233 million gain for the comparable 2006
quarter. The losses stem from a $200 million hit to Bear Stearns’s
high-grade hedge funds as a result of poor bets on the US subprime
mortgage market.

As a result, asset management net revenues came in at minus $186
million for the third quarter compared with $105 million a year
earlier. “The negative impact included the reversal of accrued
performance fees, the write-down of hedge fund investments and
receivables, and lower management fees related to proprietary hedge
fund products,” the bank noted.

A 15 percent increase in revenues at its Private Client Services
division did limit total losses. Revenue amounted to $148 million
compared to $128 million in the prior-year quarter due to
“increased client activity levels driven by market volatility and
the continued growth in fee-based assets”.

Assets under management increased 15 percent to $57.8 billion at
quarter-end, up from $50.2 billion.