MS · Forward model · Investment Management
What has to happen in Investment Management
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Investment Management
Basis quarter$1.65B
Final quarter$2.08B
Implied CAGR+5%
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: $2.08B (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 | $1.72B |
| 2026Q4E | $1.86B |
| 2027Q1E | $1.76B |
| 2027Q2E | $1.72B |
| 2027Q3E | $1.80B |
| 2027Q4E | $1.94B |
| 2028Q1E | $1.84B |
| 2028Q2E | $1.80B |
| 2028Q3E | $1.88B |
| 2028Q4E | $2.04B |
| 2029Q1E | $1.93B |
| 2029Q2E | $1.88B |
| 2029Q3E | $1.97B |
| 2029Q4E | $2.14B |
| 2030Q1E | $2.03B |
| 2030Q2E | $1.98B |
| 2030Q3E | $2.07B |
| 2030Q4E | $2.24B |
| 2031Q1E | $2.13B |
| 2031Q2E | $2.08B |
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.