Hedge fund ValueAct took a fresh stake in Morgan Stanley, but the activist investors weren't necessarily angling for major changes at the investment bank.
ValueAct chief Jeff Ubben told CNBC his fund has liked what it's seen from the bank's CEO James Gorman. That endorsement came despite the stock's sharp drop so far this year even as the S&P 500 has hit fresh record highs this month.
"We're very supportive of Gorman's work," said Ubben by email.
"While the narrative so far has been held captive to the regulatory burden on the capital intensive business, we think the narrative is misguided," he said. "Our focus has been on the low capital-intensive growth businesses," which include wealth and investment management.
The hedge fund acquired 38 million shares of Morgan Stanley, equivalent to an around 2 percent stake in the investment bank, according to regulatory filings.
In a new letter to its investors on Monday night, the hedge fund said, "We believe there is a disproportionate amount of time and energy spent over-analyzing Morgan Stanley's trading and lending business, and fretting about its Fed oversight. While these issues are not unimportant, and significantly contribute to fluctuations in quarter-to-quarter results, it feels like missing the forest for the trees."
Ubben told CNBC that "trapped capital" in Morgan Stanley's FICC (fixed-income, commodity and currency) business can either be returned to shareholders "or it earns a fair return due to industry-wide disinvestment."
Earlier this year, after stress tests aimed at gauging Wall Street's ability to respond to a financial crisis, the Federal Reserve said that Morgan Stanley would be required to submit a new capital plan by the end of the year.
Last month, Morgan Stanley reported second-quarter earnings that topped analysts' estimates, with earnings per share of 75 cents and revenue of $8.9 billion. The Street was expecting earnings per share of 59 cents on $8.3 billion in revenue. In the comparable period a year ago, the bank reported 79 cents a share in earnings on $9.74 billion in revenue.
—Jon Marino contributed to this article.