Morgan Stanley is in the middle of raising equity for a new core open-ended European property fund for institutional investors that will be the last piece in the jigsaw for its rejuvenated real estate business, Bisnow can reveal.

The investment management division of the bank is in the market securing capital for the Morgan Stanley Prime Property Fund Europe, market sources who have been briefed on the strategy told Bisnow. Earlier this year it poached Paddy Bingham from Invesco Real Estate to run the fund, and according to a post on LinkedIn, it is hiring further staff to manage the portfolio once it has started buying assets.

Capital raising for the fund started earlier this year, and a first slug of equity could be announced before the end of the year.

The fund will be the third regional open-ended fund buying prime assets managed by the company. The original Morgan Stanley Prime Property Fund is 47 years old and manages around $30B of assets in all real estate sectors across the U.S. The fund is part of the giant Odyssey index of U.S. open-ended core funds.

Such funds are much rarer in Europe and Asia, and Morgan Stanley is one of many managers that have launched new open-ended vehicles in these markets in recent years, including Nuveen and JP Morgan.

Morgan Stanley launched its Prime Property Fund Asia in 2017 with an initial $650M in equity, and having established that vehicle, it is now turning its attention to Europe for a similar vehicle.

Like its counterparts in the U.S. and Asia, the fund would look to buy very safe assets in gateway cities using no debt, market sources with knowledge of the fund told Bisnow. Institutional investors are interested in these funds because they provide solid, safe returns, with some element of liquidity.

They are highly lucrative for investment managers because they provide a consistent source of fees compared to the income that comes from raising closed-ended funds, which is inherently more sporadic. A $1B fund might provide more than $10M in annual fees, which when capitalised at a multiple of earnings of 8-10x, gives the management of such a fund an enterprise value of around $100M.

The fund will be the final piece of Morgan Stanley’s global real estate strategy, sources said. Its business will have two prongs: the North Haven series of higher risk value-add/opportunistic real estate funds, and the three regional open-ended core funds.

It has built this strategy since the financial crisis, before which it was a purely opportunistic investor, with its funds hitting the buffers because of high levels of leverage.

Morgan Stanley declined to comment.