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By Reuters
August 16, 2016

ValueAct Capital Management LP took a 1.98% stake in Morgan Stanley, regulatory filings showed on Monday, drawn by the Wall Street bank’s shift towards stable, fee-based businesses like wealth management.’

Morgan Stanley’s (ms) shares were up 1.15% at $30 in extended trading.

The San Francisco-based activist hedge fund said the market did not fully appreciate the transformation of Morgan Stanley’s business since 2008, to an asset-light, fee-based advisory, and wealth management business, which has grown to represent nearly 80% of its profits, up from just 30% before the 2008 economic crisis.

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The hedge fund said the market was spending a “disproportionate amount of time and energy” on the bank’s exposure to stock and bond trading businesses, according to an investment letter seen by Reuters.

Morgan Stanley, which has struggled to improve its bond trading business for years, showed signs of executing a turnaround when it delivered better-than-expected second-quarter bond trading revenue.

Morgan Stanley is also in the midst of cost-cutting, targeting $1 billion by 2017. As part of this effort, the bank cut nonessential travel by half this year, and is also closing data centers and shifting employees to lower-cost hubs.

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“This stake by ValueAct is an added insurance policy for investors,” said CLSA bank analyst Mike Mayo. “If Morgan Stanley’s management team fails to meet their growth targets then certainly ValueAct will hold them to that.”

ValueAct Capital Management played a key role in shaking up Microsoft’s (msft) management in 2013.

Through Monday’s close, Morgan Stanley’s stock had fallen about 7% this year.

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