MORGAN Stanley has told investors that its $8.8bn (£5.6bn) real estate fund may lose nearly two-thirds of its money due to bad investments, it is understood.
It is thought that the $5.4bn loss would be the biggest in the history of private equity real estate investing.
But by mid-2009, the firm had already written down those losses, according to quarterly financial reports.
It is thought that the losses come after the bank made various European and Asian property investments, including the European Central Bank’s headquarters in Frankfurt, a collection of InterContinental hotels and a development project in Tokyo.
Although Morgan Stanley declined to comment on the matter, it is understood that the company said its real estate group has “a long-standing history of investing through many different business cycles over the past two decades”.
The news comes as a former Morgan Stanley broker, Thomas Hicks, was ordered by a US securities arbitration panel to pay $1.6m back to the firm to resolve a case involving a signing on bonus he received when he joined the bank in 2006.