Goldman Sachs Group Inc. became Wall Street's top money maker in asset management last year, beating out Morgan Stanley for the first time.
Such fees are prized in the securities industry for providing stability amid wide swings in trading and investment banking income.
Goldman collected $2.96 billion of money-management fees in the fiscal year that ended Nov. 30. Morgan Stanley had $2.91 billion and has yet to prove it will return to top status without making an acquisition.
Asset-management revenue at least doubled last year at Goldman, Merrill Lynch & Co., Lehman Brothers Holdings Inc., Bear Stearns Cos., and JPMorgan Chase & Co. Morgan Stanley's rose 6.2%.
The disparity helps explain why Morgan Stanley's chief executive officer, John Mack, was determined to buy all or part of BlackRock Inc. of New York, the No. 3 U.S. bond investor. Discussions on a deal have been unsuccessful to date.
"One of Mack's biggest challenges is to grow in asset management," said Geoff Bobroff, a fund industry consultant in East Greenwich, R.I. "The business provides a stable source of revenue to offset all the volatility in other parts of the company."
The challenge comes at a difficult point for Morgan Stanley, which last year was turned upside down by a boardroom shakeup that ousted Philip Purcell as CEO and triggered the defection of dozens of managers. Morgan Stanley's assets under management rose just 1.7%, to $431 billion, in the fiscal year, as clients pulled out $18.5 billion. Assets at Goldman climbed 18%, to $532 billion.
Since taking over Morgan Stanley seven months ago, Mr. Mack has pursued talks with BlackRock, which is mostly owned by Pittsburgh PNC Financial Services Group; replaced Mitchell Merin, who ran asset management for seven years; and hired outsiders from hedge funds to join a newly created alternative investments unit.
"Morgan Stanley Investment Management is focused on generating strong investment results for our clients," said a spokesman, Chad Peterson. "Under the new leadership of Owen Thomas and a strategy that emphasizes growth through product innovation, alternative investments, and our international business, we're well positioned for the future."
A Goldman spokeswoman, Andrea Raphael, declined to comment.
