UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HODLINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number: 811-10593

Morgan Stanley Institutional Fund of Hedge Funds LP

(Exact Name of Registrant as specified in Charter)

One Tower Bridge

100 Front Street, Suite 1100

West Conshohocken, Pennsylvania 19428-2881

(Address of principal executive offices)

Barry Fink, Esq.

Morgan Stanley Investment Management Inc.

1221 Avenue of the Americas

New York, NY 10020

(Name and address of agent for service)

Registrant’s Telephone Number, including Area Code: (610) 260-7600

Date of fiscal year end: December 31

Date of reporting period: September 30, 2006

Item 1. Schedule of Investments.

The Registrant’s schedule of investments as of the close of the reporting period prepared pursuant to Rule 12-12 of Regulation S-X is as follows:

Morgan Stanley Institutional Fund of Hedge Funds LP

Schedule of Investments (Unaudited)

September 30, 2006

Description	First Acquisition Date	Cost		Fair Value			Percent of Partners’ Capital
Investment Funds
Convertible Arbitrage
KBC Convertible Opportunities Fund L.P.	7/1/2002	$	486,741	$	489,639		0.02	%
Lydian Partners II L.P.	7/1/2002		53,750,000		63,601,430		2.45
Total Convertible Arbitrage			54,236,741		64,091,069		2.47
Distressed
Avenue Asia Investments, L.P.	7/1/2002		18,100,000		28,035,251		1.08
Avenue Europe Investments, L.P.	8/1/2004		38,000,000		44,026,174		1.70
ORN European Distressed Debt Fund LLC	11/1/2003		32,631,840		37,431,244		1.44
Total Distressed			88,731,840		109,492,669		4.22
Equity Long/Short - High Hedge
FrontPoint Healthcare Fund, L.P.	5/1/2003		22,000,000		27,786,785		1.07
Highbridge Long/Short Equity Fund, L.P.	1/1/2005		29,000,000		32,181,195		1.24
Total Equity Long/Short - High Hedge			51,000,000		59,967,980		2.31
Equity Long/Short - Opportunistic
Atlas Advantage Fund, L.P.	7/1/2006		27,000,000		30,393,183		1.17
Delta Institutional, LP	3/1/2004		47,400,000		58,978,761		2.28
Elm Ridge Capital Partners, L.P.	7/1/2004		14,000,000		15,679,209		0.60
Gotham Asset Management (U.S.), L.P.	8/1/2003		1,999,839		2,403,274		0.09
Karsch Capital II, LP	5/1/2004		64,000,000		70,310,019		2.71
Lancer Partners, L.P.	7/1/2002		15,625,000		—	(a)	0.00
Lansdowne Global Financials Fund, L.P.	10/1/2004		52,000,000		71,376,421		2.75
Tiger Global, L.P.	1/1/2003		18,500,000		26,722,389		1.03
Value Partners China Hedge Fund LLC	2/1/2005		28,000,000		30,743,503		1.19
Visium Balanced Fund, LP	12/1/2005		60,000,000		65,760,402		2.54
Total Equity Long/Short - Opportunistic			328,524,839		372,367,161		14.36

1

Morgan Stanley Institutional Fund of Hedge Funds LP

Schedule of Investments (Unaudited) (continued)

September 30, 2006

Description	First Acquisition Date	Cost		Fair Value			Percent of Partners’ Capital
Investment Funds (continued)
Event Driven Credit
Plainfield Special Situations Onshore Feeder Fund LP	8/1/2005	$	60,000,000	$	64,284,720		2.48	%
Total Event Driven Credit			60,000,000		64,284,720		2.48
Fixed Income Arbitrage
Endeavour Fund I LLC	3/1/2004		64,450,000		66,333,543		2.56
Platinum Grove Contingent Capital Partners, L.P.
(formerly, Oak Hill CCF Partners, L.P.)	2/1/2005		80,000,000		85,922,189		3.31
Total Fixed Income Arbitrage			144,450,000		152,255,732		5.87
Macro
Brevan Howard L.P.	8/1/2004		79,500,000		85,334,318		3.29
Peloton Multi-Strategy Fund, LP	6/1/2006		38,500,000		38,300,102		1.48
Total Macro			118,000,000		123,634,420		4.77
Merger/Risk Arbitrage
Deephaven Event Fund LLC	1/1/2006		104,300,000		116,401,663		4.49
Total Merger/Risk Arbitrage			104,300,000		116,401,663		4.49
Mortgage Arbitrage
Ellington Mortgage Partners, L.P.	7/1/2002		65,750,000		85,397,674		3.29
Highland Spectrum Fund, LP	4/1/2006		70,427,065		72,793,710		2.81
Metacapital Fixed Income Relative Value Fund, L.P.	7/1/2003		17,068,910		18,117,482		0.70
New Ellington Credit Partners, LP	2/1/2006		90,000,000		94,887,608		3.66
Safe Harbor Fund, L.P. (b)	7/1/2002		18,750,000		8,800,416	(a)	0.34
Structured Servicing Holdings, L.P.	7/1/2002		40,825,940		51,954,523		2.00
Total Mortgage Arbitrage			302,821,915		331,951,413		12.80

2

Morgan Stanley Institutional Fund of Hedge Funds LP

Schedule of Investments (Unaudited) (continued)

September 30, 2006

Description	First Acquisition Date	Cost		Fair Value		Percent of Partners’ Capital
Investment Funds (continued)
Multi-Strategy
Amaranth Partners L.L.C.	11/1/2004	$	92,000,000	$	50,104,767	1.93	%
Citadel Wellington LLC	7/1/2002		101,250,000		141,894,542	5.47
D.E. Shaw Composite Fund, L.L.C.	9/1/2005		115,171,336		130,184,549	5.02
D.E. Shaw Oculus Fund, L.L.C.	11/1/2004		34,000,000		46,841,671	1.81
HBK Fund L.P.	7/1/2002		104,161,678		128,541,000	4.96
OZ Domestic Partners, L.P.	7/1/2002		37,500,000		62,227,534	2.40
Polygon Global Opportunities Fund LP	7/1/2005		140,000,000		162,344,988	6.26
Q Funding III, L.P.	7/1/2002		7,052,089		14,039,847	0.54
QVT Associates LP	9/1/2006		54,000,000		54,777,600	2.11
Total Multi-Strategy			685,135,103		790,956,498	30.50
Other Arbitrage
Laxey Investors L.P.	9/1/2004		56,000,000		64,445,037	2.48
Western Investment Activism Partners LLC	1/1/2006		52,124,131		55,463,026	2.14
Total Other Arbitrage			108,124,131		119,908,063	4.62
Relative Value Credit
Artesian GMSCAF (Onshore) Series LP - OP2	2/1/2006		21,626,034		22,591,307	0.87
Mariner - Credit Risk Advisors Relative Value Fund, LP	9/1/2003		13,000,000		16,517,794	0.64
Par IV Fund, L.P.	11/1/2004		12,000,000		14,185,614	0.55
Trilogy Financial Partners, L.P.	1/1/2003		25,000,000		31,697,152	1.22
Total Relative Value Credit			71,626,034		84,991,867	3.28
Restructurings and Value
Empyrean Capital Fund, LP	7/1/2004		17,218,296		18,961,861	0.73
One East Partners, LP	8/1/2006		58,000,000		58,999,270	2.27
Total Restructurings and Value			75,218,296		77,961,131	3.00

3

Morgan Stanley Institutional Fund of Hedge Funds LP

Schedule of Investments (Unaudited) (continued)

September 30, 2006

Description	First Acquisition Date	Cost		Fair Value		Percent of Partners’ Capital
Investment Funds (continued)
Statistical Arbitrage
Thales Fund, L.P.	7/1/2002	$	44,562,254	$	46,727,865	1.80	%
Total Statistical Arbitrage			44,562,254		46,727,865	1.80
Total Investments in Investment Funds			2,236,731,153		2,514,992,251	96.97
Short-Term Investments
State Street Euro Dollar Time Deposit 4.25% due 10/02/06			15,156,991		15,156,991	0.58
Total Short-Term Investments			15,156,991		15,156,991	0.58
Total Investments in Investment Funds and Short-Term Investments		$	2,251,888,144		2,530,149,242	97.55
Other Assets, less Liabilities					63,454,448	2.45
Total Partners’ Capital				$	2,593,603,690	100.00	%

Detailed information about the Investment Funds’ portfolios is not available.

(a) Fair valued by Morgan Stanley AIP GP LP, the Registrant’s investment adviser.

(b) In liquidation.

4

Item 2. Controls and Procedures

(a) The Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Registrant in the form N-Q was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, based upon such officers’ evaluation of these controls and procedures as of a date within 90 days of the filing date of the report.

(b) There were no changes or corrective actions during the Registrant’s third fiscal quarter with regard to significant deficiencies or material weaknesses in the Registrant’s internal controls over financial reporting or in other factors that could materially affect the Registrant’s internal controls over financial reporting.

Item 3. Exhibits

(a) Certifications of Principal Executive Officer and Principal Financial Officer attached to the report as part of EX-99. CERT.

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused his report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) Morgan Stanley Institutional Fund of Hedge Funds LP

By:	/s/ Ronald E. Robison
Name:	Ronald E. Robison
Title:	Principal Executive Officer
Date:	November 27, 2006

Pursuant to the requirement of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ Ronald E. Robison
Name:	Ronald E. Robison
Title:	Principal Executive Officer
Date:	November 27, 2006
By:	/s/ James Garrett
Name:	James Garrett
Title:	Principal Financial Officer
Date:	November 27, 2006