A giant hedge fund could be about to shake up Morgan Stanley

YouTube/ Kellogg School of Management

Morgan Stanley may be about to get the activist-investor treatment.

ValueAct, the activist hedge fund run by Jeff Ubben, disclosed a chunky position in the stock in the fund's 13F filing.

The fund bought 38 million shares in the second quarter, according to the filing. The stake is valued at over $1.1 billion at Morgan Stanley's current share price.

ValueAct is an activist fund, meaning that it takes stakes in companies and lobbies for changes — everything from a new CEO or a stock buyback — in order to increase stock value. The firm managed about $17.4 billion, including borrowed money, as of earlier this year, according to a regulatory filing.

Morgan Stanley, which has a valuation of about $56 billion, is by no means the largest company that ValueAct has targeted. It has also run campaigns against Microsoft, Adobe Systems, and Valeant Pharmaceuticals.

It isn't immediately clear what ValueAct will ask Morgan Stanley for. Bloomberg News cited a letter to the bank that praised its recent moves efforts to cut lending risks and raise capital. Bloomberg's Beth Jinks said that the letter described Morgan Stanley as an activist holding.

But The Wall Street Journal cited people familiar with the matter saying that ValueAct is not planning to ask for any major changes. An external spokeswoman for the hedge fund didn't immediately reply to a call seeking clarification.

Shares of Morgan Stanley rose in after-hours trading, gaining about 1.4%.

The bank has focused on wealth management under CEO James Gorman, and in the investment bank it has de-emphasized fixed-income trading.

It is a top player in traditional investment banking and equities, but is an also-ran in fixed income. The bank cut 25% of its fixed-income workforce last year.

YouTube/ Kellogg School of Management
The US Department of Justice sued ValueAct earlier this year, accusing it of violating premerger regulations relating to the proposed deal between Baker Hughes and Halliburton in 2014. In July, ValueAct settled the case for $11 million, the highest ever settlement for that charge. ValueAct previously said that it "fundamentally disagrees" with the DOJ's interpretation.

NOW WATCH: Hedge fund manager explains why America does not need to be uneasy about a Trump presidency