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For many retail investors, they have probably loudly sighed relief for not getting a piece of Facebook Inc (NASDAQ:FB) in it’s IPO or soon afterwards. But in a classic case of not so fast, some may have indirectly purchased the stock thanks to their mutual fund holdings.

In a Wall Street Journal story by Joe Light, he wrote that at least 160 U.S.-based mutual funds and exchange-traded funds purchased Facebook in May as disclosed by Morningstar Inc. from its June and July monthly disclosures. This included mutual funds by Fidelity Investments, Morgan Stanley Investment Management Inc. and OppenheimerFunds Inc.

For some of the funds that purchased the shares wouldn’t be considered your “normal” investors for a high-growth technology company. Some funds interested in Facebook came from those looking to invest in either dividend-paying companies or low-priced “value” stocks. Facebook would not fall under either of these categories.

Light also notes that from reviewing the disclosures, it’s a nice reminder that yes mutual-fund managers do have leeway in the investments they choose for their funds. It serves as a friendly reminder to retail investors.

Mutual fund consultant Geoff Bobroff said, “Even if John Q. Public didn’t buy [Facebook] directly, he may own one of the hundreds of mutual funds that did.”

It’s a nice buyer beware warning but what also may be of interest to John Q. Public is that the fact that Morgan Stanley’s (NYSE:MS) funds overseen by Morgan Stanley Investment Management had the greatest percentage of their portfolios in Facebook.

If case you have quickly forgotten, Morgan Stanley (NYSE:MS) was Facebook’s lead underwriter for its IPO.

According to the Wall Street Journal, by the end of May, more than 6.5 percent of the Morgan Stanley Focus Growth Fund had invested in Facebook. This included purchases on the private market prior to the IPO as noted by portfolio disclosures.

A Morgan Stanley spokeswoman has not commented.

In addition, the firm has at least seven funds with over five percent of their portfolios holding shares of Facebook. This translates to  about 50 times the weighting that Facebook holds in the Russell 1000 index of large-capitalization stocks.

Is this a big deal?

Michael Kalscheur, a financial planner with Castle Wealth Advisors LLC said to the Wall Street Journal, “That’s a huge gamble. Are you really going to put an IPO as a top-five holding in a fund?”

This begs the question of whether Morgan Stanley was looking out for its own interests rather than its customers. After the numerous debacles in Facebook, the investment bank has come out on the losing end.

We’ve written a few articles on this including this one here. We’ve also noted that Morgan Stanley shorted the stock in hopes of propping up the price. 

In a more recent story again suggesting an attempt to increase Facebook’s price, Morgan Stanley’s analysts placed a “Buy” rating on the stock.

So with the recent disclosures about Morgan Stanley’s large fund holdings on Facebook Inc (NASDAQ:FB), is this another example of the bank trying to rise the stock’s price? Maybe.