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Morning Coffee: The Morgan Stanley bankers who won 2018. Why you should avoid the buy-side

Morgan Stanley made headlines around this time last year when it narrowly edged out Goldman Sachs as the world’s top equity underwriter – an honor that had previously been passed around between Goldman, J.P. Morgan and Bank of America. But unlike its rivals, Morgan Stanley is not giving back its crown. In fact, it significantly widened its edge as the best IPO bank in the industry.

Morgan Stanley increased its stock underwriting market share to more than 10% in 2018, up a full percentage point from the previous year when it just squeezed past Goldman Sachs, according to numbers compiled by Bloomberg. The U.S. bank now has a near-1.5 percentage point lead over its closest competitor as Goldman ceded market share in 2018.

Morgan Stanley's IPO empire is buoyed particularly by its overseas business and its top-ranked technology team led by famed rainmaker Michael Grimes, known for going the extra mile – and more – to win over clients, according to a recent Wall Street Journal exposé. A millionaire many times over, Grimes reportedly spent years moonlighting as an Uber driver to help position Morgan Stanley as the main contender to underwrite the expectedly-massive forthcoming IPO. Years! He also studied his daughter’s usage of Pandora ahead of the music-streaming service’s initial public offering and showed off his own family tree that he and his mother created while pitching

Part of what has made Morgan Stanley so formidable in underwriting is the stability at the top rung of the team. Grimes is a Morgan Stanley lifer, as are many of his senior colleagues who concentrate on other sectors. The bank also relies heavily on its private financing arm, tapping its high-net-worth clients to raise millions for startups that it hopes to eventually court when they go public. Goldman’s private fundraising franchise is “a fraction” the size of Morgan Stanley’s, according to Bloomberg. That advantage is surely a big help to its IPO bankers.

Elsewhere, 2019 is set to be one of the worst money-raising environments for hedge funds in recent memory. Just one new fund set to open its doors in the coming months has raised north of $1 billion in commitments. As a whole, the industry saw more than $11 billion in outflows during the first three quarters of 2018 as many notable hedge funds shuttered after posting disappointing returns. David Einhorn’s Greenlight Capital reportedly declined an eye-opening 34% in 2018.

The past year wasn’t much better for most asset managers. Facing competition from low-cost index funds as well as more profitable alternative funds, traditional active asset managers have both lost investors and been forced to cut fees, according to a new report. Active managers’ share of global industry revenues fell to 41% in 2017, down from 64% in 2003. That number is expected to shrink to 36% by 2022.


Here’s a great piece from Bloomberg that lays out the key points each big bank made in their newly-released 2019 investment outlooks. The word “bear” is used more than once. (Bloomberg)

Certain colleges and universities are employing a new and somewhat controversial tactic to lock in more applicants earlier in the year. Some students who applied through regular admissions are receiving emails asking them to commit to the school early if they are accepted. A preemptive commitment doesn’t guarantee admittance, but it would oblige students to pull their other applications if they get in. The tactic will surely up the pressure on students, as those who apply early on their own volition are historically greeted with a softer admission rate. (WSJ)

Former Goldman Sachs president and ex-Trump adviser Gary Cohn has reportedly found himself a new part-time gig. He’s going to be teaching a graduate-level course at Harvard about “bipartisanship and economic policy or something like that.” (Dealbreaker)

The number of positive drug tests increased by 13% between 2015 and 2017 at financial and insurance companies. (Dealbreaker)

The incoming CFO at Netflix has had an interesting week. He was fired by his previous employer, video game maker Activision, on New Year’s Eve for breaking a clause in his contract that barred him from negotiating with other potential employers. Spencer Neumann wasn’t on the street long, however. Netflix announced his hiring on Wednesday. (Bloomberg)

Starting this year, publicly-listed U.K. companies with more than 250 employees will need to justify pay packages for its directors to show that they align with the interest of shareholders. Companies will also need to disclose the ratio of its CEO’s pay compared to the median compensation of its employees. (The Times)

Senator Elizabeth Warren has launched an exploratory committee for a potential 2020 presidential run. The Massachusetts democrat has made her name in Washington by taking on big banks with a particular focus on industry pay. (Bloomberg)

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AUTHORBeecher Tuttle US Editor

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