According to a report by CNBC, which cited unnamed sources familiar with the situation, the investment bank is contemplating reducing its stake in the fund following the introduction of new financial regulations by the US authorities.
The new bill of financial reform is slated to limit the amount of capital firms can invest in supposed risky investments such as hedge funds and private equity.
Although a spokesperson for the bank declined to comment on the news, Morgan Stanley is reported to be contemplating undertaking the spin-off over the course of the next three months.
Certain employees may remain at Morgan Stanley following the move, CNBC reported.
The bank is one of many thought to be planning to divest themselves of investments in private equity and hedge funds, even though the new legislation may not implemented for some years.
Earlier this week, Bank of America announced it had spun off a private equity division to set up Ridgemont Equity Partners.
By Jim Ottewill