Bloomberg - Morgan Stanley Chief Executive Officer John Mack said tumbling markets may drive some hedge funds out of business, prompting his firm to “resize.”

“Friends in that community say that by year-end, you’ll see the number of firms in the hedge-fund area shrink, I’ve heard as large as 30 percent,” Mack, 63, told CNBC today. As the industry contracts, “we need to resize our prime brokerage,” he said.

Morgan Stanley’s prime brokerage unit, which lost clients last month after the bankruptcy of Lehman Brothers Holdings Inc. fueled a global bank crisis, is regaining some customers since sealing a $9 billion investment from Mitsubishi UFJ Financial Group Inc., Mack said.

“Funds that took some of their money, in some cases all their money, are coming back,” he said. “Without question those people who pulled out are coming back.”

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