Morgan Stanley 2010 Annual Report Download - page 170

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Hedge Funds. Investments in hedge funds may be subject to initial period lock-up restrictions or gates. A hedge
fund lock-up provision is a provision that provides that, during a certain initial period, an investor may not make
a withdrawal from the fund. The purpose of a gate is to restrict the level of redemptions that an investor in a
particular hedge fund can demand on any redemption date.
•Long-short Equity Hedge Funds. Amount includes investments in hedge funds that invest, long or short,
in equities. Equity value and growth hedge funds purchase stocks perceived to be undervalued and sell
stocks perceived to be overvalued. Investments representing approximately 19% of the fair value of the
investments in this category cannot be redeemed currently because the investments include certain initial
period lock-up restrictions. The remaining restriction period for 100% of investments subject to lock-up
restrictions ranged from one to three years at December 31, 2010. Investments representing
approximately 29% of the fair value of the investments in long-short equity hedge funds cannot be
redeemed currently because an exit restriction has been imposed by the hedge fund manager. The
restriction period for 100% of investments subject to an exit restriction is expected to be less than a year
at December 31, 2010.
•Fixed Income/Credit-Related Hedge Funds. Amount includes investments in hedge funds that employ
long-short, distressed or relative value strategies in order to benefit from investments in undervalued or
overvalued securities that are primarily debt or credit related. At December 31, 2010, investments
representing approximately 24% of the fair value of the investments in fixed income/credit-related hedge
funds cannot be redeemed currently because the investments include certain initial period lock-up
restrictions. The remaining restriction period for these investments was less than one year at
December 31, 2010.
•Event-Driven Hedge Funds. Amount includes investments in hedge funds that invest in event-driven
situations such as mergers, hostile takeovers, reorganizations or leveraged buyouts. This may involve the
simultaneous purchase of stock in companies being acquired and the sale of stock in its acquirer, hoping
to profit from the spread between the current market price and the ultimate purchase price of the target
company. At December 31, 2010, investments representing approximately 64% of the value of the
investments in this category cannot be redeemed currently because the investments include certain initial
period lock-up restrictions. The remaining restriction period for these investments was less than one year
at December 31, 2010.
•Multi-strategy Hedge Funds. Amount includes investments in hedge funds that pursue multiple
strategies to realize short and long-term gains. Management of the hedge funds has the ability to
overweight or underweight different strategies to best capitalize on current investment opportunities. At
December 31, 2010, investments representing approximately 37% of the fair value of the investments in
this category cannot be redeemed currently because the investments include certain initial period lock-up
restrictions. The remaining restriction period for 71% of investments subject to lock-ups was two years or
less at December 31, 2010. The remaining restriction period for the other 29% of investments subject to
lock-up restrictions was estimated to be greater than three years at December 31, 2010.
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