If you work for Morgan Stanley's investment bank now, you might want to explore your options. And you won't need to move outside the bank to do it.
In a presentation yesterday at a banking conference organized by Merrill Lynch, Daniel Simkowitz, head of Morgan Stanley Investment Management, outlined the huge growth the bank expects from its investment management unit in the next five years. Between now and 2024, Simkowitz sees revenues increasing by around 50%. This isn't an unreasonable expectation: revenues in the business already increased around 50% since 2016.
To anyone who works for Morgan Stanley's institutional securities group (ISG), which houses trading and banking, this will look impressive. In the third quarter of 2019, institutional securities was the biggest business for the bank, with revenues of $5bn compared to $4.4bn for wealth management and just $0.8bn for investment management. However, revenues in institutional securities were flat versus the previous year, while investment management revenues rose 17%.
More importantly, profits in the investment management business are rising fast, and profits in the institutional securities group are shrinking. Institutional securities profits are still more than 10 times higher than investment management profits, but with investment management profits up 30% this year (hover on the chart for the numbers), it's easy to see what comes next.
That thing is...synergies. Just as Credit Suisse has its feted 'international trading solutions group' which delivered a 43% increase in revenues this year by delivering global markets capabilities to wealth management clients, so Morgan Stanley is heading in the same direction. In yesterday's presentation, Simkowitz said Morgan Stanley wants to make the most of the synergies between wealth management, investment management and the investment bank. "We're turning from not just being an alpha and product provider...to being a solutions provider," he said.
Some of Morgan Stanleys bankers and traders are already detecting better opportunities in the other divisions. Simkowitz said particular effort is being put into growing the private credit business, which is hiring as Morgan Stanley 'attacks' the space "pretty aggressively" and tries to become a "large core player." He said ten of the 13 leaders in Morgan Stanley's private credit business already come from the institutional securities group.
Simkowitz is welcoming the ex-bankers and traders with open arms. Many of the growth opportunities in investment management are "linked to an ISG capability," he said, listing the names various other bankers who've moved into investment management too. With 50% growth forecast, this seems to be where the opportunity lies now.
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