Morgan Stanley, owner of the world's largest brokerage, said it will combine the municipal bond trading desks of its institutional business and wealth-management units.
The joint venture will be run by Patrick Haskell, head of municipal securities for the firm's fixed-income unit, and Eric Benedict, who leads capital markets for the brokerage, the New Wednesday in an internal memo, which was obtained by Bloomberg News.
Jim Wiggins, a Morgan Stanley spokesman, confirmed the memo's contents.
Chief executive James Gorman has said partnerships between the investment bank and brokerage will help the firm double return on equity by this year. In 2013, Morgan Stanley bought the remaining stake in the brokerage, which has more than 16,000 advisers and $1.91 trillion of client assets.
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“For institutional and retail investors, the joint venture will provide the broadest possible inventory and unmatched purchasing power,” according to the memo, written by Andy Saperstein, who oversees the brokerage's investment products and services unit, and fixed-income co-heads Michael Heaney and Robert Rooney. “Combining our municipal inventory in a single balance sheet will enable us to enhance our risk-management discipline across the organization.”
The bank said in January 2013 that it had 35 initiatives to combine efforts between the institutional and brokerage units. In 2012, Morgan Stanley created a fixed-income sales group for middle-market clients under Benedict and transferred some customers from its investment bank to its wealth-management division.
The $3.7 trillion municipal market has rebounded after posting negative returns in 2013 for the first time since 2008. State and local debt has gained 3.25 percent this year, outpacing the 1.38 percent return on U.S. Treasuries and 2.27 percent on corporate securities, Bank of America Merrill Lynch data show.
Morgan Stanley was one of the underwriters of Puerto Rico's record $3.5 billion sale of junk-rated municipal debt Tuesday.