"Think about it...McKinsey is the foremost management consultancy with better links/knowledge and influence over the World's leading companies. Its partners are very smart. Yet they can operate and compete in the highly competitive world of investment - not a management consultancy's core area of expertise - better than large, established professional money managers - without the competitive advantages coming from their insight as management consultants! Really! If that were true, they would spin off MIO and run it 'for profit' becoming one of the leading global money managers. Or does an opaque structure work better for them?"
- https://www.ft.com/content/7c6700bc-2976-11e6-8b18-91555f2f4...
This quote is misleading. It implies that McKinsey consulting partners are the ones making the investment strategies which is false. The large investment unit is run by... surprise surprise... finance professionals. Furthermore 90% of the MIO’s investments are in externally managed funds, the investment decisions of which the MIO does not control.
Spinning off the MIO as a for profit firm would frankly be misaligned with the firm values. It’s also not especially opaque, as it’s fully registered and files documents on its structure and what not. Journalists have simultaneously been using those filings and claiming the structure is opaque.
Again. It’s possible that McKinsey partners engage in insider trading (although it is very difficult as all trades in the firm are required to be approved by compliance). But I really don’t think there’s a logical thread by which partners take enormous risks to circumvent internal controls and provide tips to the MIO just to boost the fund performance. That’s a very high risk, low payoff idea, because even if your secret info is super profitable, it’s diluted across thousands of other partners before benefiting you personally. Claiming that it happens on a massive scale to offset that is just silly and is frankly a huge accusation with no basis. It’s fully possible that the fund was just well managed.
This article seems to be mostly anger fluff. A lot of it seems to reference someone’s lawsuit over a 401k deal with overly dramatic wording. Maybe someone can clarify but I don’t actually see anything illegal or even particularly unethical. As the article states, it’s not entirely unreasonable for a private company to offer better options to senior officials. Low level employee benefits are significantly above average and I don’t believe anyone seriously feels sleighted.
As for whether there is insider trading involved with the MIO, I think it is unlikely. The opportunity for fraud exists, but not moreso than the personal risk for committing fraud. I have no comment on the specifics of individuals behaviors. Might bad actors exist? Certainly. Although it would seem strange for them to try and commit fraud through a massive diluted operation like this. The culture of internal controls and communications is frankly very strong in my opinion.
People will be able to find examples of bad actors. I don’t feel it disproves any particular points. I do see active decisions about firm and personal ethics. And people are actively encouraged to not work on things they oppose.
There was a NYT article about a study looking at improving marketing for Opioids. No doubt, that was not good. The Chinese thing was distasteful. Does it represent the firm culture? Personally I don’t think so.
The media, the NYT in particular, has been painting the firm as an evil shadow organization. They released an article that basically said they’re going to continue to write attack articles against it because it’s secretive. Well it’s secretive because it protects client confidentiality.