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What has to happen in Investment Management

Model as of

This page changes Investment Management inside the complete MS model. Every other vertical, corporate programme and valuation assumption stays in the selected portfolio case.

MS forward model
Horizon
Consolidated fair value $216.19 all other verticals held in this portfolio case
Final-quarter revenue $2.18B 8% of company revenue
Explicit segment contribution $7.25B EBITDA less segment capex, before corporate items

Ted Pick's own published scorecard, taken literally. The 4Q25 Strategic Update names four Firmwide Goals - ROTCE 20%, Wealth Management pre-tax margin 30%, client assets $10 trillion-plus and a 70% efficiency ratio. Three were beaten in the basis quarter (26.6% ROTCE, 30.5% Wealth margin, 65% efficiency) and the fourth was reached ($8,084B of Wealth client assets plus $2,004B of Investment Management AUM). This case treats those four numbers as FLOORS rather than targets - which is precisely what management declined to confirm when it left the 30% Wealth benchmark unchanged after a 30.5% print. It is named after the CEO because the framing is his, not the model's. Result: $216.19 a share, +0.62%, an implied 4.065x tangible book - which is the tape, at 4.0402x. What it does NOT achieve is a defence of that multiple on through-cycle returns: on the company's own published 2021-2025 average ROTCE of 17.6% the same identity justifies 2.473x, $131.50, 38.8% lower.

Investment Management

Basis quarter$1.65B
Final quarter$2.18B
Implied CAGR+6%
Final revenue mix8%

Asset management and related fees on $2,004B of assets under management or supervision, plus performance-based income. $1,646M of net revenues in the basis quarter, 7.7% of the firm before eliminations and the smallest of the three segments, at a 24.54% pre-tax margin. Long-term net flows were +$7.5B, driven entirely by Alternatives and Solutions (+$12.7B) against Equity outflows of -$12.5B. This is the one line in the firm with a stable, mechanically identifiable quarterly shape.

Last four quarters
2025 Q3 $1.65B Reported
2025 Q4 $1.72B Reported
2026 Q1 $1.53B Reported
2026 Q2 $1.65B Reported
Asset management and related feesPerformance-based income and other
Sequential growth +1.0%/qtr decaying toward +1.2% 1.0% on a DESEASONALISED base of $1,720.1M, below the 2.28% deseasonalised trailing-eight mean; AUM is at a record $2,004B.
Investment Management

Latest: $2.18B (2031Q2E)

Period Value
2023Q1 $1.29B
2023Q2 $1.28B
2023Q3 $1.34B
2023Q4 $1.46B
2024Q1 $1.38B
2024Q2 $1.39B
2024Q3 $1.46B
2024Q4 $1.64B
2025Q1 $1.60B
2025Q2 $1.55B
2025Q3 $1.65B
2025Q4 $1.72B
2026Q1 $1.53B
2026Q2 $1.65B
2026Q3E $1.73B
2026Q4E $1.87B
2027Q1E $1.77B
2027Q2E $1.73B
2027Q3E $1.82B
2027Q4E $1.97B
2028Q1E $1.87B
2028Q2E $1.83B
2028Q3E $1.92B
2028Q4E $2.09B
2029Q1E $1.98B
2029Q2E $1.94B
2029Q3E $2.04B
2029Q4E $2.21B
2030Q1E $2.10B
2030Q2E $2.06B
2030Q3E $2.16B
2030Q4E $2.35B
2031Q1E $2.23B
2031Q2E $2.18B

Assumptions & reasoning

  • The 24.54% margin is PRE-TAX INCOME margin - $404M on $1,646M - net of $1,242M of segment non-interest expenses. The segment carries NO provision: firm $98M less Institutional Securities $71M less Wealth Management $27M leaves exactly nil. The supplement rounds the margin to 25%.
  • SEASONALITY APPLIED, and this is the only line in the firm that earns factors: [0.9924, 0.9569, 0.9909, 1.0598] by ratio to a CENTRED four-quarter moving average over 2023 Q3-2025 Q4, normalised to a mean of exactly 1.0000. Signal 0.1028 against a worst window spread of 0.0430 is 2.39:1. What decides it is the Q4 cluster - 1.0627, 1.0653, 1.0576 across three years, a spread of 0.0077, the tightest anywhere in the segment history.
  • Both estimators agree on rank and direction: ratio-to-year-mean gives [0.9607, 0.9505, 1.0001, 1.0887], Q4 highest and Q2 lowest in both. The two most recent March quarters confirm the fall-back, -2.5% sequential in 2025 Q1 and -10.8% in 2026 Q1. The basis quarter is therefore DESEASONALISED to $1,646M / 0.9569 = $1,720.1M before the growth driver runs, so growthQoQ is a trend rate and not a sequential print.
  • HONEST CAVEAT ON THE MECHANISM: it is not the obvious one. Performance-based income does NOT peak in Q4 ($61M in 4Q23, $88M in 4Q24, $71M in 4Q25, against $151M in 1Q25 and $117M in 3Q25); the Q4 lift sits in the asset-management-and-related-fees line itself (1,555 against 1,384 in 2024, 1,649 against 1,534 in 2025). Morgan Stanley does not explain it, so the pattern is carried as empirical and stable rather than as a disclosed mechanism, and it should be re-tested after 2026 Q4 prints.
  • The seasonality is nearly weightless in any case: the segment is 7.7% of firm net revenues and 5.5% of firm pre-tax income, so a 6% Q4 factor moves firm revenue by under half a point. Long-term net flows were +$7.5B against +$12.2B a year earlier, driven entirely by Alternatives and Solutions (+$12.7B) against a sixth consecutive quarter of Equity outflows (-$12.5B), which is why the terminal margin is set at 21.0% between the 21.11% 2024-25 blend and the 22.27% last-six blend.
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