Morgan Stanley Spins Out VC

Morgan Stanley (NYSE: MWD) last week bid adieu to Morgan Stanley Venture Partners, which spun out as an independent venture capital firm.

The new firm, called Crossmark Capital, will be owned by the six-person investment team from Morgan Stanley Venture Partners and led by President and General Partner William Harding. Morgan Stanley Venture Partners was founded in 1986 and has raised $1.2 billion in six funds. It will continue to operate out of New York and Menlo Park, Calif. as a new independent firm.

Morgan Stanley will continue to be a general partner of and limited partner in Crossmark Capital. Other LPs that have backed Morgan Stanley Venture Partners include KeySpan Energy, Liberty Mutual, Marsh & McLennan, Mitsui Trust and Banking, Rockwell International Ventures, Sumitomo Trust & Banking Co. and Warner-Lambert, according to Thomson Venture Economics (publisher of PE Week).

A limited partner told PE Week on condition of anonymity that the spinout is a positive development. The LP says that putting money to work in an independent venture fund is better and more favorable than investing in a group owned by a large financial conglomerate, as there is great potential for a conflict of interest with large sprawling groups such as Morgan Stanley.

Morgan Stanley President and COO Mitchell Merin said in a statement that the separation comes through a mutual agreement between Morgan Stanley and the venture group. Harding said in the same statement that Crossmark Capital would retain the same team and investment strategy.

Crossmark Capital represents the second private equity group spinout from Morgan Stanley. Last year Morgan Stanley spun out Morgan Stanley Capital Partners into an independent firm called Metalmark Capital. Similar to Crossmark Capital, Morgan Stanley serves as a general partner of and limited in the firm.

Morgan Stanley Capital Partners has invested $7 billion into a variety of private equity deals throughout its 18-year history.