Atlanta-based fund manager Invesco is tipped to buy Morgan Stanley's Van Kampen fund business, according to the Wall Street Journal.

The deal, perhaps worth between $1 and $2 billion, would bring Invesco's assets under management up to around $550 billion and leave Morgan Stanley with a stake in Invesco of 10 per cent or so.

But Morgan Stanley is expected to get some cash as well as the Invesco holding – and the deal is far from fully agreed, with approval needed from the directors of Van Kampen's mutual funds, the publication said.

Morgan Stanley is selling because it sees its fund business as too small to compete in a market populated by giants.