to announce an asset management alliance with a Japanese bank.

Under its agreement with Sanwa Bank Ltd. of Osaka, New York-based Morgan Stanley will begin distributing investment trusts -- the Japanese equivalent of mutual funds -- in Sanwa bank branches this fall. Eventually, Sanwa's affiliated securities companies will sell the trusts as well.

Morgan Stanley, which has no retail securities outlets in Japan, already distributes investment trust products through more than 40 Japanese financial institutions, a spokesman said.

Sanwa is the firm's first bank partner. Morgan Stanley has $238 billion of retail assets under management.

The institutions are to collaborate on product selection and distribution strategy, and Morgan Stanley is to provide sales support.

Until recently only securities firms could sell investment trusts in Japan. Last December, however, the government lifted a ban on over-the-counter sale of investment trusts by banks handling deposits.

The legislation also opened the door for foreign investment managers to advise pension funds and sell mutual funds in Japan. Risk-averse Japanese have tended to keep their money in low-yield bank accounts.

But with an estimated $10.6 trillion of financial assets held by individuals, coupled with deregulation, U.S. institutions have become interested in Japan's retail mutual fund market.

Morgan Stanley is the latest U.S. asset manager to forge a distribution agreement with a Japanese bank. Fidelity Investments and Massachusetts Financial Services, both of Boston, are among its predecessors.

In a statement, Koichi Miyazaki, senior executive officer of Sanwa's asset management group, said the alliance would let the bank expand its retail asset management and securities businesses.

The bank began a reorganization of its retail securities business this year, including establishing the asset management group in February.

In March Partners Asset Management Co., the former Yamaichi Investment Trust Management Co., became a wholly owned subsidiary of Sanwa Bank Group. Sanwa had acquired an interest in Partners in March 1998. The bank is now seeking to add distribution capabilities to that its asset management capacity.

Sanwa Bank California in Los Angeles subadvises about $380 million of assets for securities affiliates of its parent, but that relationship is not likely to be affected by the Morgan Stanley agreement, said Richard A. Weiss, the subsidiary's chief investment officer.

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