Morning Coffee: Morgan Stanley’s small MD class has a few mysteries. When staff cuts are a sign of good news

Congratulations to the 173 Morgan Stanley bankers who were promoted to managing director in yesterday’s announcement.  The first class of Ted Pick’s term as CEO is a little bit on the small side compared to expectations; it’s more than the 155 promotions for 2024, but less than the 184 who got the bump up in 2023.  While Goldman Sachs, Citi and Bank of America have been opening up the floodgates (and perhaps clearing a backlog of people who might have deserved promotion earlier during the lean years), MS is apparently still keeping the club small and selective.

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That’s not the only point of interest.  In previous years, Morgan Stanley was always keen to headline the gender balance of its promotions – 37% of last year’s class were women, and 40% in 2023.  This year, we’re just told that with the new additions, women will make up 27% of the total MD ranks, compared to 24% two years ago.  Although it’s not possible to calculate precisely, it looks as if progress here has slowed slightly.  Back in 2023, we suggested that possession of a Y chromosome was turning into a barrier to promotion at MS; there might have been a bit of rebalancing going on in the last year.

Another area of rebalancing appears to be with respect to the divisions of the bank.  Fully 46% of the new MDs came from the Institutional Securities Group, corresponding to the investment banking business lines. That’s up from 44% last year and only 40% in 2023.  Investment bankers tend to be much keener to put themselves forward when they’re expecting a bull market.  But CEO Ted Pick will want to keep an eye on this ratio. Although Institutional Securities is the biggest single revenue contributor at Morgan Stanley, the asset management and wealth management businesses are extremely important to MS’s valuation, and it really wouldn’t do to let employees there feel like the new regime was ignoring them.

The real mystery, though – and not just for Morgan Stanley – is that looking at new promotions to Managing Director only ever gives part of the picture.  It’s much more difficult to understand what’s happening in terms of external hires, to say nothing of the pattern of departures, resignations and retirements.  It’s also never straightforward to relate promotions and headcount to revenue.  The year-end Dealogic figures seem to suggest that MS gained half a percentage point of market share in global investment banking during 2024, and the trading revenues also seemed to outperform peers. Someone at Morgan Stanley has earned a promotion, even if it's not only all the new MDs.

Elsewhere, in most companies, an all-staff memo saying that 200 employees were going to be made redundant would usually occasion mass panic and be the worst possible news with which to start the New Year.  But most companies aren’t BlackRock, which has over 21,000 employees to begin with, meaning that only 1% of staff are at risk.  In fact, after adding 3,750 headcount last year and with a pipeline of 2,000 additions coming in as the HPS, Global Infrastructure Partners and Preqin deals complete, it’s actually quite surprising that the process of “aligning resources with the firm’s strategy” can be done with so few reductions.

When you compare it to previous years, it looks even better.  This time last year, BlackRock cut 600 staff at the start of 2024; the year before that it was 500.  It’s not a company that’s scared of making material redundancies if it thinks it’s under pressure.  So the fact that 2025 has only begun with a minor rightsizing ought to be considered a vote of confidence in the future.

Meanwhile …

As the multistrategy hedge funds get bigger, and some of the most successful pod-shop managers branch out into funds of their own (usually seeded by their former employer), the distinction between multistrat and fund-of-funds is getting blurry, with potentially interesting implications for the future economics of the industry. (FT Alphaville)

In exactly this kind of “super-pod” move, Nicolas Monaghan is starting a $1bn hedge fund called Mistral, exclusively trading with cash from the macro business of Schonfeld for the moment and maybe opening up to outsiders later.  Here’s hoping he’s not distracted by the ongoing court case in which his former employer Garda Capital Partners is suing Schonfeld (but not him) for allegedly recruiting him, allegedly in breach of a non-compete agreement he signed as part of a deal in which he and his team moved to Zug for tax purposes. (Bloomberg)

What is behind the trend for controversial American billionaires to start getting interested in British news?  Leon Black is apparently considering becoming the anchor investor in a consortium to buy the Daily Telegraph. (WSJ)

Perhaps it’s a coincidence, but the bulge bracket banks which resigned from the Net Zero Banking Alliance earlier this week have now received the good news that the Attorney General of Texas is no longer going to be reviewing whether they should be allowed to take part in muni bond deals in the state. (Bloomberg)

If China is serious about becoming a financial superpower, it’s really going to have to stop doing things like this – after making some remarks at a conference, the chief economist of SDIC Securities found that Xi Jinping was angry at him, and now he’s forbidden from appearing in public. (WSJ)

As UBS, Nomura and Morgan Stanley, among others, try to get some of their money back from the Archegos bankruptcy settlement, they are finding that the claims of former employees of Bill Hwang for unpaid bonuses may rank ahead of them. (Bloomberg)

Possibly a sign of the times – the American Express Centurion Lounge at JFK Airport, a common place to find bankers on their way to a deal, has shut down its meditation and wellness center and installed a free coffee bar. (NY Post)

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