Investment Strategies

Media Report Says McKinsey's Investment Arm Raises "Conflicts Of Interest"; Firm Hits Back

Tom Burroughes, Group Editor, June 7, 2016

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A report says the global consultancy, which has advised sectors such as wealth management, has built a $5 billion investment arm.

Global consulting powerhouse McKinsey has reportedly built up a $5 billion internal investment arm to manage the wealth of current and former partners.

A report by the Financial Times said McKinsey Investment Office Partners raises “questions over possible conflicts of interest”.

The investment arm, the FT said, is overseen by a 12-strong board of the consultant’s most senior partners and advisors. The report was based on documents seen by the news service.

The firm’s partners on the board — which include the heads of the Americas, energy, investment banking, and private equity divisions — do not disclose their work at the fund in their corporate biographies, and they are not named on MIO’s website, the report said.

"There is no conflict of interest. MIO is managed independently, and all its activities are separate from McKinsey's consulting operations, for example having separate offices and IT systems. MIO operates on a ‘blind trust’ basis, with MIO’s investment managers being unaware of the firm’s clients and consultants being unaware of MIO’s underlying investments," McKinsey said in a statement emailed to this publication.

"MIO is regulated by the SEC and the FCA. The MIO board does not make investment decisions, which are delegated to MIO management. MIO does not invest directly in individual public company securities. The board also ensures a rigorous policy to avoid conflicts of interest is in place and enforced," it added.

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