Morgan Stanley 2014 Annual Report Download - page 223

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
underwrites the securities issued in CLO transactions on behalf of unaffiliated sponsors and provides advisory
services to these unaffiliated sponsors. The Company sells corporate loans to many of these SPEs, in some cases
representing a significant portion of the total assets purchased. If necessary, the Company may retain unsold
securities issued in these transactions. Although not obligated, the Company generally makes a market in the
securities issued by SPEs in these transactions. These beneficial interests are included in Trading assets and are
measured at fair value.
Equity-Linked Notes. In an equity-linked note transaction included in Other in the tables above, the Company
typically transfers to an SPE either (1) a note issued by the Company, the payments on which are linked to the
performance of a specific equity security, equity index or other index or (2) debt securities issued by other
companies and a derivative contract, the terms of which will relate to the performance of a specific equity
security, equity index or other index. These transactions are designed to provide investors with exposure to
certain risks related to the specific equity security, equity index or other index.
Managed Real Estate Partnerships. The Company sponsors funds that invest in real estate assets. Certain of
these funds are classified as VIEs, primarily because the Company has provided financial support through
lending facilities and other means. The Company also serves as the general partner for these funds and owns
limited partnership interests in them. These funds were consolidated at December 31, 2014 and December 31,
2013.
Investment Management Investment Funds. The tables above do not include certain investments made by the
Company held by entities qualifying for accounting purposes as investment companies.
Transfers of Assets with Continuing Involvement.
The following tables present information at December 31, 2014 regarding transactions with SPEs in which the
Company, acting as principal, transferred financial assets with continuing involvement and received sales
treatment:
At December 31, 2014
Residential
Mortgage
Loans
Commercial
Mortgage
Loans
U.S. Agency
Collateralized
Mortgage
Obligations
Credit-
Linked
Notes
and Other(1)
(dollars in millions)
SPE assets (unpaid principal balance)(2) ................ $26,549 $58,660 $20,826 $24,011
Retained interests (fair value):
Investment grade .............................. $ 10 $ 117 $ 1,019 $ 57
Non-investment grade .......................... 98 120 — 1,264
Total retained interests (fair value) ............ $ 108 $ 237 $ 1,019 $ 1,321
Interests purchased in the secondary market (fair value):
Investment grade .............................. $ 32 $ 129 $ 61 $ 423
Non-investment grade .......................... 32 72 — 59
Total interests purchased in the secondary market
(fair value) ............................. $ 64 $ 201 $ 61 $ 482
Derivative assets (fair value) ......................... $ — $ 495 $ — $ 138
Derivative liabilities (fair value) ...................... $ — $ — $ — $ 86
(1) Amounts include CLO transactions managed by unrelated third parties.
(2) Amounts include assets transferred by unrelated transferors.
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