L.P. Weyerhaeuser Team Joins Morgan Alts Venture –

Weyerhaeuser Co. appears ready to transfer its entire $3.5 billion pension portfolio to Morgan Stanley Dean Witter & Co., New York, which on March 17 hired five investment managers from the wood products giant to help launch a new venture that will expand the firm’s alternative investment products, such as hedge funds and venture capital.

“Given the scale of our assets, we think that affiliating with a major investment firm makes sense,” said a Weyerhaeuser spokesperson. “The transfer of our investment team to Morgan Stanley Dean Witter Alternative Investment Partners is an amicable one and our goal is for it to have no effect on how our plan is managed or administered.”

Negotiations to transfer Weyerhaeuser’s pension assets along with its internal managers are expected to conclude by March 31, the spokesperson said.

Through the deal, Morgan Stanley will get Weyerhaeuser’s managers and their 15-year track record handling the company’s pension assets, roughly $2 billion of which are in alternative asset classes. For its part, Weyerhaeuser will benefit from access to Morgan Stanley’s assets and research to build its returns from alternative investments, company executives said.

Jack Coates, manager of the Federal Way, Wash.-based Weyerhaeuser pension fund, will be chief investment officer of the new firm, while Putnam Coes, currently a vice president in Morgan Stanley’s investment management group, will be its chief operating officer, the company said. The unit will work out of the Morgan Stanley unit Miller Anderson & Sherrerd, West Conshohocken, Pa.

The new venture is intended to boost the securities firm’s alternative asset management business by responding to rising demand from institutional clients and wealthy individuals, the spokesperson said. It comes three months after Morgan Stanley bought Chicago-based Greystone Partners, which manages roughly $3 billion for families with more than $100 million in assets and also deals regularly with hedge funds.

Morgan Stanley’s deal with Weyerhaeuser is reminiscent of the October 1997 decision by AT&T Investment Management to send its seven-person private equity team to J.P. Morgan Investment Management, New York, along with some $3.8 billion in private equity assets.

“These types of deals are likely to become more common,” said Chris Thorsheim, a managing director at StoneRidge Investment Partners, Malverne, Pa. “It allows companies with large assets to focus more on their core business and keep their key managers on board at the same time. They also stand to gain some fee advantages.”