UNITED STATES
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549

	FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2007 or

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from                to

Commission File Number 0-23577


	MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.

	(Exact name of registrant as specified in its charter)

		Delaware						     13-3461507
(State or other jurisdiction of		     		 (I.R.S. Employer
incorporation or organization)			      Identification No.)


Demeter Management Corporation
330 Madison Avenue, 8th Floor
New York, NY                   		   		          10017
(Address of principal executive offices)            	  (Zip Code)

Registrant?s telephone number, including area code  	(212) 905-2700









(Former name, former address, and former fiscal
 year, if changed since last report)

Indicate by check mark whether the registrant
 (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities
 Exchange Act of 1934 during the preceding
12 months (or for such shorter period that
 the registrant was required to file such
reports), and (2) has been subject to such
 filing requirements for the past 90 days.

Yes    X       	No___________


Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.
 See definition of ?accelerated filer
and large accelerated filer? in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer___Accelerated filer___Non-accelerated filer  X


Indicate by check mark whether the registrant is
 a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes___  No X



<page> <table> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.

	INDEX TO QUARTERLY REPORT ON FORM 10-Q

	March 31, 2007

<caption>



PART I. FINANCIAL INFORMATION

				<c>
Item 1. Financial Statements

		Statements of Financial Condition as of March 31, 2007
		(Unaudited) and December 31, 2006..........................2

		Statements of Operations for the Quarters Ended
		March 31, 2007 and 2006 (Unaudited)........................3

		Statements of Changes in Partners? Capital for the
		Quarters Ended March 31, 2007 and 2006 (Unaudited) ........4

		Statements of Cash Flows for the Quarters Ended
		March 31, 2007 and 2006 (Unaudited)........................5

		Notes to Financial Statements (Unaudited)...............6-13

Item 2.	Management?s Discussion and Analysis of
			Financial Condition and Results of Operations.......14-23

Item 3.	Quantitative and Qualitative Disclosures about
			Market Risk.........................................23-36

Item 4.	Controls and Procedures.............................36-37

Item 4T.	Controls and Procedures................................37


PART II. OTHER INFORMATION

Item 1A.Risk Factors...........................................38

Item 6.	Exhibits...............................................38
</table>


<page> <table> PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

	MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
	STATEMENTS OF FINANCIAL CONDITION
<caption>
			March 31,	December 31,
			        2007        	        2006
			$	$
			(Unaudited)
ASSETS

		<c>	<c>

Equity in futures interests trading accounts:
	Unrestricted cash	26,130,771	30,147,827
	Restricted cash	    1,885,255	    1,421,435

	     Total cash	   28,016,026	  31,569,262

     Net unrealized gain on open contracts (MS&Co.)	1,457,631	    101,838
     Net unrealized gain (loss) on open contracts (MSIL)	           (249,872)	        77,188

		Total net unrealized gain on open contracts	     1,207,759	      179,026

	Net option premiums	         (75,690)	                              -

		Total Trading Equity	29,148,095	31,748,288

Interest receivable (Morgan Stanley DW)	          98,338	      107,594

		Total Assets	    29,246,433	 31,855,882

LIABILITIES AND PARTNERS? CAPITAL

Liabilities

Redemptions payable	721,752	491,468
Accrued management fees 	36,126	        39,487
Administrative expenses payable	32,800	52,917
Accrued incentive fee	            -       	        64,875

		Total Liabilities	      790,678	      648,747

Partners? Capital

Limited Partners (27,597.808 and
	29,305.386 Units, respectively)	28,155,563	30,865,627
General Partner (294.245 and
     324.245 Units, respectively)	        300,192	      341,508

		Total Partners? Capital	    28,455,755	  31,207,135

		Total Liabilities and Partners? Capital	    29,246,433	  31,855,882
NET ASSET VALUE PER UNIT	                                                        1,020.21	       1,053.24
	The accompanying notes are an integral part
	of these financial statements.
</table>


<page> <table> 	MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
	STATEMENTS OF OPERATIONS
(Unaudited)

<caption>


  	                                                                                        For the Quarters Ended March 31,


                                                                         		         2007   	     2006
                                                                               	                     $		        $

		<c>		<c>
INVESTMENT INCOME
	Interest income (Morgan Stanley DW)	             301,731			      309,034

EXPENSES
	Brokerage commissions (Morgan Stanley DW)		379,543	451,735
	Management fees 	      	113,611	220,625
	Administrative expenses		12,000	30,000
	Transaction fees and costs		           11,848	      27,297

		  Total Expenses		      517,002	    729,657


NET INVESTMENT LOSS	     (215,271)	    (420,623)


TRADING RESULTS
Trading profit (loss):
	Realized		(1,777,920)	2,667,097
	Net change in unrealized		    1,028,733	    (869,288)

               Total Trading Results		     (749,187)	   1,797,809

NET INCOME (LOSS)  	     (964,458) 	   1,377,186


NET INCOME (LOSS) ALLOCATION

	Limited Partners                                                  		      (953,748)	    1,362,000
	General Partner                                                  	       	(10,710)       	         15,186

NET INCOME (LOSS) PER UNIT

	Limited Partners                                                  		                    (33.03)	   37.38
	General Partner                                                   		                    (33.03) 	   37.38


<fn>



	The accompanying notes are an integral part
	of these financial statements.
</table>
<page> <table> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
	STATEMENTS OF CHANGES IN PARTNERS? CAPITAL
For the Quarters Ended March 31, 2007 and 2006
(Unaudited)



<caption>

				Units of
				Partnership	Limited	General
				     Interest     	    Partners    	     Partner     	      Total
					$	$	$

	<c>	<c>	<c>	<c>
Partners? Capital,
December 31, 2005	38,406.074	38,064,633	406,938 	38,471,571

Net Income                                                              ?    	             1,362,000	15,186	1,377,186

Redemptions	   (2,416.711)	       (2,420,504)            (32,212)        (2,452,716)

Partners? Capital,
March 31, 2006	    35,989.363	   37,006,129	       389,912	 37,396,041




Partners? Capital,
December 31, 2006	29,629.631	30,865,627	341,508 	31,207,135

Net Loss                         ? 	              (953,748)             (10,710)	(964,458)

Redemptions	   (1,737.578)	       (1,756,316)             (30,606)       (1,786,922)

Partners? Capital,
March 31, 2007	    27,892.053	   28,155,563	             300,192	 28,455,755







<fn>


The accompanying notes are an integral part
	of these financial statements.
</table>
<page> <table> 	MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
	STATEMENTS OF CASH FLOWS
(Unaudited)



<caption>


				     For the Quarters Ended March 31,

				                  2007        	        2006
				         $	$


CASH FLOWS FROM OPERATING ACTIVITIES

			<c>	<c>
Net income (loss)	(964,458)	1,377,186
Noncash item included in net income (loss):
	Net change in unrealized	(1,028,733)	869,288

(Increase) decrease in operating assets:
	Restricted cash	(463,820)	(1,525,970)
     Net options premiums 					         75,690			-
	Interest receivable (Morgan Stanley DW)    	9,256	(8,878)

Decrease in operating liabilities:
	Accrued management fees 	(3,361)                           (40,972)
	Administrative expenses payable  	                                                       (20,117)	(7,814)
  	Accrued incentive fee  	                                                           (64,875)	                 -

Net cash provided by (used for) operating activities	   (2,460,418)	        662,840


CASH FLOWS FROM FINANCING ACTIVITIES

Cash paid for redemptions of Units	   (1,556,638)	   (2,273,204)

Net cash used for financing activities	   (1,556,638)	   (2,273,204)

Net decrease in unrestricted cash	(4,017,056)	(1,610,364)

Unrestricted cash at beginning of period	  30,147,827	  34,746,433

Unrestricted cash at end of period	   26,130,771	   33,136,069




<fn>

	The accompanying notes are an integral part
	of these financial statements.

</table>


<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS

March 31, 2007

(Unaudited)


The unaudited financial statements contained herein include, in
the opinion of management, all adjustments necessary for a fair
presentation of the results of operations and financial condition
of Morgan Stanley Diversified Futures Fund L.P. (the
?Partnership?).  The financial statements and condensed notes
herein should be read in conjunction with the Partnership?s
December 31, 2006 Annual Report on Form 10-K.

1.  Organization
Morgan Stanley Diversified Futures Fund L.P. is a Delaware limited
partnership organized in 1987 to engage primarily in the
speculative trading of futures contracts, options on futures and
forward contracts, and forward contracts on physical commodities
and other commodity interests, including, but not limited to,
foreign currencies, financial instruments, metals, energy, and
agricultural products.

The Partnership?s general partner is Demeter Management
Corporation (?Demeter?). Effective April 1, 2007, Morgan Stanley
DW Inc. (?Morgan Stanley DW?), which previously acted as the
non-clearing broker, was merged into Morgan Stanley & Co.
Incorporated (?MS&Co.?), which has assumed all of the
responsibilities of

<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Morgan Stanley DW.  Upon completion of the merger, MS&Co. has
become the Partnership?s principal commodity broker-dealer
and also acts as the counterparty on all trading of foreign
currency forward contracts.  In addition, Morgan Stanley & Co.
International Limited (?MSIL?) serves as the commodity broker
for trades on the London Metal Exchange.  Effective April 13,
2007, Morgan Stanley & Co. International Limited changed its name
to Morgan Stanley & Co. International plc.  Morgan Stanley Capital
Group Inc. ("MSCG") acts as the counterparty on all trading of
options on foreign currency forward contracts.  The commodity
brokers prior to April 1, 2007, were Morgan Stanley DW, MS&Co.,
and MSIL.  Demeter, MS&Co., MSIL, and MSCG are wholly-owned
subsidiaries of Morgan Stanley. Hyman Beck & Company Inc. (?Hyman
Beck? or the ?Trading Advisor?) is the trading advisor to the
Partnership.

2.  Related Party Transactions
The Partnership?s cash is on deposit with Morgan Stanley DW
(through March 31, 2007), MS&Co., and MSIL in futures, forward,
and options trading accounts to meet margin requirements as
needed.  Effective April 1, 2007, MS&Co. pays the Partnership
interest income on 80% of the Partnership?s average daily Net



<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Assets for the month at a rate equal to the monthly average yield
on 4-week U.S. Treasury bill discount rate during such month.
The Partnership pays brokerage commissions to MS&Co. (Morgan
Stanley DW, prior to April 1, 2007).  Prior to April 1, 2007,
Morgan Stanley DW paid the Partnership monthly interest income on
80% of its average daily Net Assets for the month at the
prevailing rate on U.S. Treasury bills.

3.  Financial Instruments
The Partnership trades futures contracts, options on future and
forward contracts, and forward contracts on physical commodities
and other commodity interests, including, but not limited to,
foreign currencies, financial instruments, metals, energy, and
agricultural products.  Futures and forwards represent contracts
for delayed delivery of an instrument at a specified date and
price.  Risk arises from changes in the value of these contracts
and the potential inability of counterparties to perform under the
terms of the contracts. There are numerous factors which may
significantly influence the market value of these contracts,
including interest rate volatility.




<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The market value of exchange-traded contracts is based on the
settlement price quoted by the exchange on the day with respect
to which market value is being determined.  If an exchange-traded
contract could not have been liquidated on such day due to the
operation of daily limits or other rules of the exchange, the
settlement price shall be the settlement price on the first
subsequent day on which the contract could be liquidated.  The
market value of off-exchange-traded contracts is based on the
fair market value quoted by the counterparty.

The Partnership?s contracts are accounted for on a trade-date
basis and marked to market on a daily basis.  The Partnership
accounts for its derivative investments in accordance with the
provisions of Statement of Financial Accounting Standards No. 133,
?Accounting for Derivative Instruments and Hedging Activities?
(?SFAS No. 133?).  SFAS No. 133 defines a derivative as a
financial instrument or other contract that has all three of the
following characteristics:

1)	One or more underlying notional amounts or payment
provisions;
2)	Requires no initial net investment or a smaller initial net
investment than would be required relative to changes in
market factors;
3)	Terms require or permit net settlement.
<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Generally, derivatives include futures, forward, swap or options
contracts, and other financial instruments with similar
characteristics such as caps, floors, and collars.

The net unrealized gains on open contracts, reported as a
component of ?Equity in futures interests trading accounts? on
the
Statements of Financial Condition, and their longest contract
maturities were as follows:

                        Net Unrealized Gains
                          on Open Contracts                Longest Maturities

                 Exchange-  Off-Exchange-              Exchange- Off-Exchange-
Date              Traded       Traded        Total      Traded      Traded
                     $           $             $

Mar. 31, 2007	666,502	541,257	1,207,759	 Mar. 2008	  Mar. 2008
Dec. 31, 2006     151,298	 27,728	  179,026	 Sep. 2007    Mar. 2007


The Partnership has credit risk associated with counterparty non-
performance.  As of the date of the financial statements, the
credit risk associated with the instruments in which the
Partnership trades is limited to the amounts reflected in the
Partnership?s Statements of Financial Condition.

The Partnership also has credit risk because Morgan Stanley DW
(through March 31, 2007), MS&Co., MSIL, and/or MSCG act as the
futures commission merchants or the counterparties, with respect
to most of the Partnership?s assets.  Exchange-traded futures,

<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

exchange-traded forward, and exchange-traded futures-styled
options contracts are marked to market on a daily basis, with
variations in value settled on a daily basis.  Morgan Stanley DW
(through March 31, 2007), MS&Co., and MSIL, each as a futures
commission merchant for the Partnership?s exchange-traded futures,
exchange-traded forward, and exchange-traded futures-styled
options contracts, are required, pursuant to regulations of the
Commodity Futures Trading Commission (?CFTC?), to segregate from
their own assets, and for the sole benefit of their commodity
customers, all funds held by them with respect to exchange-traded
futures, exchange-traded forward, and exchange-traded futures-
styled options contracts, including an amount equal to the net
unrealized gains (losses) on all open exchange-traded futures,
exchange-traded forward, and exchange-traded futures-styled
options contracts, which funds, in the aggregate, totaled
$28,682,528 and $31,720,560 at March 31, 2007 and December 31,
2006, respectively. With respect to the Partnership?s off-
exchange-traded forward currency contracts and forward currency
options contracts, there are no daily settlements of variation in
value, nor is there any requirement that an amount equal to the
net unrealized gains (losses) on such contracts be segregated.
However, the Partnership is required to meet margin requirements
equal to the net unrealized loss on open forward currency
contracts in the Partnership accounts with the counterparty, which

<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

is accomplished by daily maintenance of the cash balance in a
custody account held at Morgan Stanley DW for the benefit of
MS&Co.  With respect to those off-exchange-traded forward currency
contracts, the Partnership is at risk to the ability of MS&Co.,
the sole counterparty on all such contracts, to perform.  With
respect to those off-exchange-traded forward currency option
contracts, the Partnership is at risk to the ability of MSCG, the
sole counterparty on all such contracts to perform.  The
Partnership has a netting agreement with the counterparties. These
agreements, which seek to reduce both the Partnership?s and the
counterparties? exposure on off-exchange-traded forward currency
contracts, should materially decrease the Partnership?s credit
risk in the event of MS&Co.?s or MSCG?s bankruptcy or insolvency.

4.  New Accounting Developments
In July 2006, the Financial Accounting Standards Board (?FASB?)
issued interpretation No. 48, ?Accounting for Uncertainty in
Income Taxes ? an interpretation of FASB Statement 109? (?FIN
48?).  FIN 48 clarifies the accounting for income taxes by
prescribing the minimum recognition threshold a tax position must
meet before being recognized in the financial statements.  FIN 48
is effective for the Partnership as of January 1, 2007.  Based on
its analysis, management believes that the adoption of FIN 48
will not impact the Partnership?s Financial Statements.

<page> MORGAN STANLEY DIVERSIFIED FUTURES FUND L.P.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

In September 2006, the FASB issued SFAS No. 157, ?Fair Value
Measurements? (?SFAS No. 157?).  SFAS No. 157 defines fair
value,
establishes a framework for measuring fair value, and expands
disclosures about fair value measurements.  SFAS NO. 157 is
effective for the Partnership as of January 1, 2008.  The impact
to the Partnership?s Financial Statements, if any, is currently
being assessed.

































<page> Item 2.	MANAGEMENT?S DISCUSSION AND ANALYSIS OF FINANCIAL
	CONDITION AND RESULTS OF OPERATIONS


Liquidity.  The Partnership deposits its assets with Morgan
Stanley DW (through March 31, 2007), MS&Co., and MSIL as commodity
brokers in separate futures, forward, and options trading accounts
established for the Trading Advisor.  Such assets are used as
margin to engage in trading and may be used as margin solely for
the Partnership?s trading.  The assets are held in either non-
interest bearing bank accounts or in securities and instruments
permitted by the CFTC for investment of customer segregated or
secured funds.  Since the Partnership?s sole purpose is to trade
in futures, forwards, and options, it is expected that the
Partnership will continue to own such liquid assets for margin
purposes.

The Partnership?s investment in futures, forwards, and options
may, from time to time, be illiquid.  Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as ?daily price fluctuations limits? or ?daily
limits?.  Trades may not be executed at prices beyond the daily
limit.  If the price for a particular futures or options contract
has increased or decreased by an amount equal to the daily limit,
positions in that futures or options contract can neither be taken
nor liquidated unless traders are willing to effect trades at or
within the limit.  Futures prices have occasionally moved the
daily limit for several consecutive days with little or no
trading.  These market conditions could prevent the Partnership
<page> from promptly liquidating its futures or options contracts
and result in restrictions on redemptions.

There is no limitation on daily price moves in trading forward
contracts on foreign currencies.  The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets, subjecting it to
substantial losses.  Either of these market conditions could
result in restrictions on redemptions.  For the periods covered by
this report, illiquidity has not materially affected the
Partnership?s assets.

There are no known material trends, demands, commitments, events,
or uncertainties at the present time that are reasonably likely to
result in the Partnership?s liquidity increasing or decreasing in
any material way.

Capital Resources.  The Partnership does not have, nor does it
expect to have, any capital assets.  Redemptions of units of
limited partnership interest (?Unit(s)?) in the future will
affect the amount of funds available for investments in futures,
forwards, and options in subsequent periods.  It is not possible
to estimate the amount, and therefore the impact, of future
outflows of Units.

<page> There are no known material trends, favorable or
unfavorable, that would affect, nor any expected material changes
to, the Partnership?s capital resource arrangements at the
present time.

Off-Balance Sheet Arrangements and Contractual Obligations.  The
Partnership does not have any off-balance sheet arrangements, nor
does it have contractual obligations or commercial commitments to
make future payments that would affect its liquidity or capital
resources.

Results of Operations
General.  The Partnership?s results depend on the Trading Advisor
and the ability of the Trading Advisor?s trading program to take
advantage of price movements in the futures, forward, and options
markets.  The following presents a summary of the Partnership?s
operations for the three month periods ended March 31, 2007 and
2006, and a general discussion of its trading activities during
each period.  It is important to note, however, that the Trading
Advisor trades in various markets at different times and that
prior activity in a particular market does not mean that such
market will be actively traded by the Trading Advisor or will be
profitable in the future.  Consequently, the results of
operations of the Partnership are difficult to discuss other than
in the context of the Trading Advisor?s trading activities on
behalf of the Partnership during the period in question. Past
performance is no guarantee of future results.
<page>
The Partnership?s results of operations set forth in the financial
statements on pages 2 through 13 of this report are prepared in
accordance with accounting principles generally accepted in the
United States of America, which require the use of certain
accounting policies that affect the amounts reported in these
financial statements, including the following:  The contracts the
Partnership trades are accounted for on a trade-date basis and
marked to market on a daily basis.  The difference between their
cost and market value is recorded on the Statements of Operations
as ?Net change in unrealized trading profit (loss)? for open
(unrealized) contracts, and recorded as ?Realized trading profit
(loss)? when open positions are closed out.  The sum of these
amounts constitutes the Partnership?s trading results.  The market
value of a futures contract is the settlement price on the
exchange on which that futures contract is traded on a particular
day. The value of a foreign currency forward contract, is based on
the spot rate as of the close of business.  Interest income, as
well as management fees, incentive fees, brokerage commissions,
and transaction fees and costs of the Partnership are recorded on
an accrual basis.

Demeter believes that, based on the nature of the operations of
the Partnership, no assumptions relating to the application of
critical accounting policies other than those presently used could
reasonably affect reported amounts.

<page>
For the Quarter Ended March 31, 2007
The Partnership recorded total trading results including interest
income totaling $(447,456) and expenses totaling $517,002,
resulting in a net loss of $964,458 for the quarter ended March
31, 2007.  The Partnership?s net asset value per Unit decreased
from $1,053.24 at December 31, 2006, to $1,020.21 at March 31,
2007.

The most significant trading losses of approximately 1.7% were
experienced in the currency sector primarily during late February
and early March from short positions in the Japanese yen relative
to the U.S. dollar, euro, and British pound as the value of the
Japanese yen reversed sharply higher amid an almost 10% drop in
the Shanghai stock market and a warning from Rodrigo Rato,
Managing Director of the International Monetary Fund, that a weak
Japanese yen "could lead to more entrenched exchange rate
misalignments that worsen global imbalances" encouraged traders
to unwind short positions in the Japanese yen against most of its
major rivals.  Furthermore, investor speculation that
consistently strong economic data out of Japan might force the
Bank of Japan to continue raising interest rates in order to
combat possible inflation also pushed the value of the Japanese
yen higher.  Additional losses were incurred during later
February and early March from short positions in the Swiss franc
versus the U.S. dollar as the value of the Swiss franc moved
higher on news that Switzerland?s economy had accelerated faster
<page> than expected in February for the second straight month.
Elsewhere in the currency sector, losses were incurred during
March from long positions in the New Zealand dollar versus the
U.S. dollar as the value of the New Zealand dollar declined after
the Reserve Bank of New Zealand indicated that interest rates
might remain steady in the near-term.  Additional losses of
approximately 1.2% were incurred in the global interest rate
sector, primarily during February from short positions in U.S
fixed-income futures as prices reversed sharply higher due to a
worldwide flight to quality after a sell-off in the global equity
markets that began on February 27, 2007, with comments from
former U.S. Federal Reserve Chairman Alan Greenspan that the U.S.
economy could be due for a recession.  In addition, concerns that
tighter credit conditions in China and Japan might dampen global
growth first sent Chinese stock markets plunging before the sell-
off spread to other equity markets.  Within the metals sector,
losses of approximately 0.6% were incurred primarily in February
and March from short positions in copper futures as prices moved
higher on continued speculation that low stockpiles and supply
disruptions might create a supply shortage in the future and news
of stronger than expected Chinese industrial data.  Additional
losses were recorded in the metals markets from short positions
in gold futures as prices increased amid uncertainty regarding
the future direction of the U.S. dollar.  Further losses of
approximately 0.4% were experienced within the global stock index
sector during February and March from long positions in U.S. and
French equity index futures as prices fell suddenly and sharply
<page> due to the aforementioned factors that affected the global
interest rate futures markets.  Smaller losses of approximately
0.1% were experienced within the energy markets primarily in
January and February from short positions in natural gas futures
as prices reversed higher amid colder weather in the U.S
Northeast and news from the U.S. Department of Energy that
supplies were weaker than expected.  A portion of the
Partnership?s losses for the quarter was offset by gains of
approximately 0.5% in the agricultural sector primarily during
March from long positions in cocoa futures as prices moved higher
after dry weather in the Ivory Coast increased speculation that
this year?s crop might be smaller than expected, as well as
increased political tensions in that country.  Lastly, gains were
experienced from short futures positions in sugar as prices moved
lower during January due to speculative-selling, while prices
fell during March amid increased production from Brazil,
Thailand, and India.


For the Quarter Ended March 31, 2006
The Partnership recorded total trading results including interest
income totaling $2,106,843 and expenses totaling $729,657,
resulting in net income of $1,377,186 for the quarter ended March
31, 2006.  The Partnership?s net asset value per Unit increased
from $1,001.71 at December 31, 2005, to $1,039.09 at March 31,
2006.

<page> The most significant trading gains of approximately 5.0%
were recorded in the global stock index futures markets from long
positions in European, Australian, and Japanese stock index
futures as global equity markets trended higher during the
quarter on strong corporate earnings, and solid economic data.
Additional gains of approximately 2.3% were experienced in the
metals markets during January and March from long positions in
copper, aluminum, zinc, and nickel as prices strengthened amid
weak supplies, forecasts for continued buying by China, and
acceleration in demand from Japan, Europe, and the U.S.
Elsewhere in the metals markets, gains were recorded from long
futures positions in silver and gold as precious metals prices
moved higher on persistent demand from foreign central banks.
Silver prices were also boosted after news that a silver-backed
Exchange Traded Fund would soon launch and create greater
investment interest in the metal.  Within the global interest
rate futures markets, gains of approximately 0.7% were recorded,
primarily during March, from short positions in U.S., European,
and Japanese interest rate futures as global bond prices trended
lower amid strength in regional equity markets and investor
sentiment that interest rates in the United States, the European
Union, and Japan would rise.  A portion of these gains for the
quarter was offset by losses of approximately 2.5% in the
currency markets from long U.S. dollar positions versus the
Japanese yen, Swiss franc, and the Australian dollar as the U.S.
dollar?s value reversed lower against these currencies during
January on expectations that a string of increases in interest
<page> rates by the U.S. Federal Reserve would soon come to an
end.  Also pushing the value of the U.S. dollar lower against its
rivals was speculation that China, with a massive U.S. dollar
reserve, might move to diversify some of its assets into other
currencies.  Further losses in the currency sector were
experienced during February from short U.S. dollar positions
relative to the Japanese yen, euro, and the Australian dollar as
the value of the U.S. dollar reversed higher after declining U.S.
unemployment and increased wage inflation data led investors to
predict that U.S. interest rates would continue to increase.
Smaller losses were incurred during March from long U.S. dollar
positions relative to the Swiss franc as the value of the franc
reversed higher in tandem with European currencies after the
release of generally positive economic data from the Euro-Zone
reinforced expectations that European interest rates would
continue to rise.  Additional losses of approximately 1.7% were
experienced in the energy markets during February from long
positions in crude oil futures as prices declined after an
announcement by Chinese government authorities that China would
place an emphasis on prospecting alternative energy sources in
the future, reports of larger than expected supplies from the
International Energy Agency, and mild weather in the U.S.
Northeast.  Further losses in the energy markets were recorded
during March from short positions in crude oil futures as prices
strengthened early in the month on supply fears fueled by news of
geopolitical tensions in Nigeria and Iran.  Smaller losses of
approximately 0.3% were recorded in the agricultural markets,
<page> primarily during February, from long positions in coffee
futures as prices declined on news of crop growth and higher
harvest rates from Brazil, the world?s largest coffee producer.
Elsewhere in the agricultural sector, losses were experienced
from both long and short positions in cotton and cocoa as prices
moved without consistent direction throughout a majority of the
quarter amid conflicting news regarding supply and demand.


Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Introduction

The Partnership is a commodity pool engaged primarily in the
speculative trading of futures, forwards, and options.  The
market-sensitive instruments held by the Partnership are acquired
for speculative trading purposes only and, as a result, all or
substantially all of the Partnership?s assets are at risk of
trading loss.  Unlike an operating company, the risk of market-
sensitive instruments is inherent to the primary business activity
of the Partnership.

The futures, forwards, and options on such contracts traded by
the Partnership involve varying degrees of related market risk.
Market risk is often dependent upon changes in the level or
volatility of interest rates, exchange rates, and prices of
financial instruments and commodities, factors that result in
frequent changes in the fair value of the Partnership?s open
positions, and consequently in its earnings, whether realized or
unrealized, and cash flow. Gains and losses on open positions of
<page> exchange-traded futures, exchange-traded forward, and
exchange-traded futures-styled options contracts are settled
daily through variation margin.  Gains and losses on off-
exchange-traded forward currency contracts are settled upon
termination of the contract.  However, the Partnership is
required to meet margin requirements equal to the net unrealized
loss on open forward currency contracts in the Partnership
accounts with the counterparty, which is accomplished by daily
maintenance of the cash balance in a custody account held at
Morgan Stanley DW for the benefit of MS&Co.

The Partnership?s total market risk may increase or decrease as
it is influenced by a wide variety of factors, including, but not
limited to, the diversification among the Partnership?s open
positions, the volatility present within the markets, and the
liquidity of the markets.

The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements.  Margin requirements generally range between 2% and
15% of contract face value.  Additionally, the use of leverage
causes the face value of the market sector instruments held by
the Partnership typically to be many times the total
capitalization of the Partnership.

The Partnership?s past performance is no guarantee of its future
results.  Any attempt to numerically quantify the Partnership?s
<page> market risk is limited by the uncertainty of its
speculative trading.  The Partnership?s speculative trading and
use of leverage may cause future losses and volatility (i.e.,
?risk of ruin?) that far exceed the Partnership?s experience to
date under the ?Partnership?s Value at Risk in Different Market
Sectors? section and significantly exceed the Value at Risk
(?VaR?) tables disclosed.

Limited partners will not be liable for losses exceeding the
current net asset value of their investment.

Quantifying the Partnership?s Trading Value at Risk
The following quantitative disclosures regarding the Partnership?s
market risk exposures contain ?forward-looking statements?
within the meaning of the safe harbor from civil liability
provided for such statements by the Private Securities Litigation
Reform Act of 1995 (set forth in Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934).
All quantitative disclosures in this section are deemed to be
forward-looking statements for purposes of the safe harbor, except
for statements of historical fact.

The Partnership accounts for open positions on the basis of mark
to market accounting principles.  Any loss in the market value of
the Partnership?s open positions is directly reflected in the
Partnership?s earnings and cash flow.

<page> The Partnership?s risk exposure in the market sectors
traded by the Trading Advisor is estimated below in terms of VaR.
The Partnership estimates VaR using a model based upon historical
simulation (with a confidence level of 99%) which involves
constructing a distribution of hypothetical daily changes in the
value of a trading portfolio. The VaR model takes into account
linear exposures to risk including equity and commodity prices,
interest rates, foreign exchange rates, and correlation among
these variables. The hypothetical changes in portfolio value are
based on daily percentage changes observed in key market indices
or other market factors (?market risk factors?) to which the
portfolio is sensitive.  The one-day 99% confidence level of the
Partnership?s VaR corresponds to the negative change in portfolio
value that, based on observed market risk factors, would have been
exceeded once in 100 trading days, or one day in 100.  VaR
typically does not represent the worst case outcome.  Demeter uses
approximately four years of daily market data (1,000 observations)
and re-values its portfolio (using delta-gamma approximations) for
each of the historical market moves that occurred over this time
period.  This generates a probability distribution of daily
?simulated profit and loss? outcomes.  The VaR is the
appropriate percentile of this distribution.  For example, the 99%
one-day VaR would represent the 10th worst outcome from Demeter?s
simulated profit and loss series.

The Partnership?s VaR computations are based on the risk
representation of the underlying benchmark for each instrument or
<page> contract and do not distinguish between exchange and non-
exchange dealer-based instruments. They are also not based on
exchange and/or dealer-based maintenance margin requirements.

VaR models, including the Partnership?s, are continually evolving
as trading portfolios become more diverse and modeling techniques
and systems capabilities improve.  Please note that the VaR model
is used to numerically quantify market risk for historic
reporting purposes only and is not utilized by either Demeter or
the Trading Advisor in their daily risk management activities.
Please further note that VaR as described above may not be
comparable to similarly-titled measures used by other entities.

The Partnership?s Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership?s open positions as a percentage of total Net Assets
by primary market risk category at March 31, 2007 and 2006. At
March 31, 2007 and 2006, the Partnership?s total capitalization
was approximately $28 million and $37 million, respectively.

Primary Market           March 31, 2007         March 31, 2006
Risk Category	  	      Value at Risk          Value at Risk

Currency		  		    	(1.22)%			  (0.50)%

Interest Rate			    	(1.17)			  (1.78)

Equity					(0.42)    			  (1.12)

Commodity					(0.77)		   	  (0.72)

Aggregate Value at Risk	    	(1.60)%   	  	 	  (2.55)%

<page> The VaR for a market category represents the one-day
downside risk for the aggregate exposures associated with this
market category. The Aggregate Value at Risk listed above
represents the VaR of the Partnership?s open positions across all
the market categories, and is less than the sum of the VaRs for
all such market categories due to the diversification benefit
across asset classes.

Because the business of the Partnership is the speculative trading
of futures, forwards, and options on such contracts, the
composition of its trading portfolio can change significantly over
any given time period, or even within a single trading day.  Such
changes could positively or negatively materially impact market
risk as measured by VaR.

The table below supplements the quarter-end VaR set forth above
by presenting the Partnership?s high, low, and average VaR, as a
percentage of total Net Assets for the four quarter-end reporting
periods from April 1, 2006, through March 31, 2007.

The Partnership?s low VaR, as a percentage of total Net Assets
for the four quarter-end reporting periods from April 1, 2006,
through March 31, 2007, is zero as there were no open positions
in the Partnership during the period September 15, 2006, through
November 30, 2006, due to the termination of VK Capital Inc.


<page>
Primary Market Risk Category        High      Low      Average
Currency						(1.22)%	  -		 (0.61)%

Interest Rate					(1.17)	  -		 (0.58)

Equity						(0.65)	  -		 (0.27)

Commodity						(0.77)	  -		 (0.43)


Aggregate Value at Risk			(1.60)%	  -		 (0.90)%


Limitations on Value at Risk as an Assessment of Market Risk
VaR models permit estimation of a portfolio?s aggregate market
risk exposure, incorporating a range of varied market risks,
reflect risk reduction due to portfolio diversification or hedging
activities, and can cover a wide range of portfolio assets.
However, VaR risk measures should be viewed in light of the
methodology?s limitations, which include, but may not be limited
to the following:
*	past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
*	changes in portfolio value caused by market movements may
differ from those of the VaR model;
*	VaR results reflect past market fluctuations applied to
current trading positions while future risk depends on future
positions;
*	VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
<page>
*	the historical market risk factor data used for VaR estimation
may provide only limited insight into losses that could be
incurred under certain unusual market movements.

In addition, the VaR tables above, as well as the past performance
of the Partnership, give no indication of the Partnership?s
potential ?risk of ruin?.

The VaR tables provided present the results of the Partnership?s
VaR for each of the Partnership?s market risk exposures and on an
aggregate basis at March 31, 2006, and for the four quarter-end
reporting periods from April 1, 2006, through March 31, 2007.  VaR
is not necessarily representative of the Partnership?s historic
risk, nor should it be used to predict the Partnership?s future
financial performance or its ability to manage or monitor risk.
There can be no assurance that the Partnership?s actual losses on
a particular day will not exceed the VaR amounts indicated above
or that such losses will not occur more than once in 100 trading
days.

Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances.  These balances and any market risk they may represent
are immaterial.

<page> The Partnership also maintains a substantial portion of
its available assets in cash at MS&Co. (Morgan Stanley DW, prior
to April 1, 2007); as of March 31, 2007, such amount is equal to
approximately 94% of the Partnership?s net asset value.  A
decline in short-term interest rates would result in a decline in
the Partnership?s cash management income. This cash flow risk is
not considered to be material.

Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality, and multiplier features of the Partnership?s market-
sensitive instruments, in relation to the Partnership?s Net
Assets.

Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership?s
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures -
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. The Partnership?s primary market risk
exposures, as well as the strategies used and to be used by
Demeter and the Trading Advisor for managing such exposures, are
subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership?s
<page> risk controls to differ materially from the objectives of
such strategies. Government interventions, defaults and
expropria-tions, illiquid markets, the emergence of dominant
fundamental factors, political upheavals, changes in historical
price relationships, an influx of new market participants,
increased regulation, and many other factors could result in
material losses, as well as in material changes to the risk
exposures and the risk management strategies of the Partnership.
Investors must be prepared to lose all or substantially all of
their investment in the Partnership.

The following were the primary trading risk exposures of the
Partnership at March 31, 2007, by market sector.  It may be
anticipated, however, that these market exposures will vary
materially over time.

Currency.   The largest market exposure of the Partnership at
March 31, 2007, was to the currency sector.  The Partnership?s
currency exposure is to exchange rate fluctuations, primarily
fluctuations which disrupt the historical pricing relationships
between different currencies and currency pairs.  Interest rate
changes, as well as political and general economic conditions
influence these fluctuations.  The Partnership trades a large
number of currencies, including cross-rates - i.e., positions
between two currencies other than the U.S. dollar.  At March 31,
2007, the Partnership?s major exposures were to the euro,
Australian dollars, New Zealand dollars, Japanese yen, British
<page> pound, and South African rand currency crosses, as well as
to outright U.S. dollar positions.  Outright positions consist of
the U.S. dollar vs. other currencies.  These other currencies
include major and minor currencies.  Demeter does not anticipate
that the risk associated with the Partnership?s currency trades
will change significantly in the future.

Interest Rate.  The second largest market exposure of the
Partnership at March 31, 2007, was to the global interest rate
sector.  This exposure was primarily spread across European,
Japanese, U.S., Canadian, and Australian interest rate sectors.
Interest rate movements directly affect the price of the
sovereign bond futures positions held by the Partnership and
indirectly affect the value of its stock index and currency
positions.  Interest rate movements in one country, as well as
relative interest rate movements between countries, materially
impact the Partnership?s profitability.  The Partnership?s
primary interest rate exposure is generally to interest rate
fluctuations in the U.S. and the other G-7 countries.  The G-7
countries consist of France, the U.S., Britain, Germany, Japan,
Italy, and Canada.  However, the Partnership also takes futures
positions in the government debt of smaller countries ? e.g.,
Australia.  Demeter anticipates that the G-7 countries? interest
rate will remain the primary interest rate exposure of the
Partnership for the foreseeable future.  The speculative futures
positions held by the Partnership may range from short to long-
<page> term instruments.  Consequently, changes in short, medium,
or long-term interest rates may have an effect on the
Partnership.

Equity.  At March 31, 2007, the Partnership had market exposure
to the global stock index sector, primarily to equity price risk
in the G-7 countries.  The stock index futures traded by the
Partnership are by law limited to futures on broadly?based
indices.  At March 31, 2007, the Partnership?s primary exposures
were to the FTSE 100 (Britain), NIKKEI 225 (Japan), and DAX
(Germany) stock indices.  The Partnership is exposed to the risk
of adverse price trends or static markets in the European, Asian,
and U.S. stock indices.  Static markets would not cause major
market changes, but would make it difficult for the Partnership
to avoid trendless price movements, resulting in numerous small
losses.

Commodity:
		Metals.  	The third largest market exposure of the Partnership
at March 31, 2007, was to the metals sector.  The
Partnership's metals exposure was to fluctuations in the
price of precious metals, such as gold and base metals, such
as copper and zinc.  Economic forces, supply and demand
inequalities, geopolitical factors, and market expectations
influence price movements in these markets.  The Trading
Advisor utilizes its trading system(s) to take positions when
<page> market opportunities develop, and Demeter anticipates
that the Partnership will continue to do so.

		Soft Commodities and Agriculturals.  At March 31, 2007, the
Partnership had market exposure in the markets that comprise
these sectors.  Most of the exposure was to the cotton,
coffee, cocoa, and sugar markets.  Supply and demand
inequalities, severe weather disruptions, and market
expectations affect price movements in these markets.

		Energy.  At March 31, 2007, the Partnership had market
exposure in the energy sector.  The Partnership?s primary
energy exposure was to futures contracts in natural gas.
Natural gas has exhibited volatility in price resulting from
weather patterns and supply and demand factors and will
likely continue in this choppy pattern.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at March 31, 2007:

Foreign Currency Balances.  The Partnership?s primary foreign
currency balances at March 31, 2007, were in euro, Japanese
yen, Australian dollars, British pound, Canadian dollars, and
Swiss franc.  The Partnership controls the non-trading risk
of foreign currency balances by regularly converting them
<page> back into U.S. dollars upon liquidation of their
respective positions.

Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Advisor, separately, attempt to
manage the risk of the Partnership?s open positions in essentially
the same manner in all market categories traded.  Demeter attempts
to manage market exposure by diversifying the Partnership?s assets
among different market sectors and trading approaches, and by
monitoring the performance of the Trading Advisor daily.  In
addition, the Trading Advisor establishes diversification
guidelines, often set in terms of the maximum margin to be
committed to positions in any one market sector or market-
sensitive instrument.

Demeter monitors and controls the risk of the Partnership?s non-
trading instrument, cash.  Cash is the only Partnership investment
directed by Demeter, rather than the Trading Advisor.

Item 4.  CONTROLS AND PROCEDURES
(a)	As of the end of the period covered by this quarterly report,
the President and Chief Financial Officer of Demeter, the
general partner of the Partnership, have evaluated the
effectiveness of the Partnership?s disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the
Exchange Act), and have judged such controls and procedures to
be effective.
<page>
(b)	There have been no material changes during the period covered
by this quarterly report in the Partnership?s internal control
over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act) or in other factors that could
significantly affect these controls subsequent to the date of
their evaluation.

Item 4T.  CONTROLS AND PROCEDURES
Not applicable.
<page> PART II.  OTHER INFORMATION
Item 1A. RISK FACTORS
Information regarding risk factors appears in Item 2.
?Management?s Discussion and Analysis of Financial Condition and
Results of Operations? and Item 3.  ?Quantitative and
Qualitative Disclosures about Market Risk? of this Form 10-Q.
There have been no other material changes from the risk factors
previously referenced in the Partnership?s Report on Form 10-K for
the fiscal year ended December 31, 2006.

Item 6.  EXHIBITS
31.01	Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.02	Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
32.01	Certification of President of Demeter Management
Corporation, the general partner of the Partnership,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
32.02	Certification of Chief Financial Officer of Demeter
Management Corporation, the general partner of the
Partnership, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.





<page>







SIGNATURE



Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.




                      Morgan Stanley Diversified Futures Fund L.P.
                      (Registrant)

                      By:   Demeter Management Corporation
                            (General Partner)

May 15, 2007          By:/s/Lee Horwitz
                            Lee Horwitz
                            Chief Financial Officer





The General Partner which signed the above is the only party
authorized to act for the Registrant.  The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.








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