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As McKinsey Sells Advice, Its Hedge Fund May Have a Stake in the Outcome

nytimes.com

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Re: As McKinsey Sells Advice, Its Hedge Fund May Have a Stake in the Outcome

#31

Post by leroy_masochist »

staticautomatic wrote: post #21
leroy_masochist wrote: post #11

Earlier quoted context omitted.

In the case of Goldman it's because they do better work than other firms on behalf of their investment banking clients and keep getting rehired, which is why they've had the world's strongest IB franchise for several decades

Unless you count Goldman taking the other side of those same IB deals against their own clients...

That wasn't banking, it was sales and trading.

While Birnbaum and the other individuals involved in Abacus acted especially douchey in front of Congress, the point that was apparently lost on many people was that when a market maker sells something off their prop books, they are inherently short that thing

Re: As McKinsey Sells Advice, Its Hedge Fund May Have a Stake in the Outcome

#33

Post by FabHK »

b_tterc_p wrote: post #30

Seems highly unlikely that there’s any actual secretive insider trading happening here. It would be a HUGE risk for practically no gain, distributed across many individuals, committed by primarily people who wouldn’t stand to benefit. The firm should probably switch to vanguard or whatever... but the existence of this hedge fund does not mean the firm is using its insider knowledge maliciously. Most consultants won’t…

> a HUGE risk for practically no gain

Eh? A few dropped words during a social dinner, or even a knowing glance, you call that a huge risk? And a hedge fund getting (even only 1 bit of) information from some well-informed people, allowing them to adjust their position on a firm, can lead to substantial gains, obviously.

> Most consultants won’t even know what other people on their team is working on, and most are in and out after 2 years.

This is not about junior guys.

> Hedge fund managers don’t coordinate with consultants.

Well, yeah, officially, of course. But that's precisely what the article is about.

Re: As McKinsey Sells Advice, Its Hedge Fund May Have a Stake in the Outcome

#36

Post by FabHK »

leroy_masochist wrote: post #31
staticautomatic wrote: post #21

Earlier quoted context omitted.

Unless you count Goldman taking the other side of those same IB deals against their own clients...

That wasn't banking, it was sales and trading. While Birnbaum and the other individuals involved in Abacus acted especially douchey in front of Congress, the point that was apparently lost on many people was that when a market maker sells something off their prop books, they are inherently short that thing

Plus, when they make a big deal, the trading desk will naturally hedge themselves (that's their job!), so they'll "take the opposite position of what they recommended their client". Sounds bad, but is normal and appropriate business practice.

Re: As McKinsey Sells Advice, Its Hedge Fund May Have a Stake in the Outcome

#37

Post by paganel »

FabHK wrote: post #33
b_tterc_p wrote: post #30

Seems highly unlikely that there’s any actual secretive insider trading happening here. It would be a HUGE risk for practically no gain, distributed across many individuals, committed by primarily people who wouldn’t stand to benefit. The firm should probably switch to vanguard or whatever... but the existence of this hedge fund does not mean the firm is using its insider knowledge maliciously. Most consultants won’t…

> a HUGE risk for practically no gain Eh? A few dropped words during a social dinner, or even a knowing glance, you call that a huge risk? And a hedge fund getting (even only 1 bit of) information from some well-informed people, allowing them to adjust their position on a firm, can lead to substantial gains, obviously. > Most consultants won’t even know what other people on their team is working on, and most are in a…

> a HUGE risk for practically no gain

The same thing happened in the Libor scandal, those involved took a very big risk for not such a big gain and look what that caused: a market worth hundreds of billions of dollars (if not more) being manipulated in exchange for stuff like Champaigne bottles and some fancy dinners out (all of the latter worth at most $10,000).

Re: As McKinsey Sells Advice, Its Hedge Fund May Have a Stake in the Outcome

#38

Post by JumpCrisscross »

JaakkoP wrote: post #2

As giving and receiving advice is fundamentally based on trust, it strikes me as odd why anyone wants to do business with the likes of McKinsey or Goldman Sachs who have repeatedly shown a pattern of screwing over their clients. This is not a generic "all I-banks or management consultants are evil" - there are still plenty of specialized firms out there without these anti-patterns.

> the likes of McKinsey or Goldman Sachs who have repeatedly shown a pattern of screwing over their clients

Goldman has a history of doing terrifically by their clients. They aren’t the best counterparty to trade against, however, in the same way that one would rather play poker against a bad player than a great one. (McKinsey, on the other hand, is a consistent dumpster fire.)

Re: As McKinsey Sells Advice, Its Hedge Fund May Have a Stake in the Outcome

#39

Post by gricardo99 »

b_tterc_p wrote: post #30

Seems highly unlikely that there’s any actual secretive insider trading happening here. It would be a HUGE risk for practically no gain, distributed across many individuals, committed by primarily people who wouldn’t stand to benefit. The firm should probably switch to vanguard or whatever... but the existence of this hedge fund does not mean the firm is using its insider knowledge maliciously. Most consultants won’t…

Yes, it always seems like only a stupid or crazy person would do it, yet here's a fairly recent case of a McKinsey Managing director doing just that: https://en.wikipedia.org/wiki/Rajat_Gupta

Re: As McKinsey Sells Advice, Its Hedge Fund May Have a Stake in the Outcome

#40

Post by code4tee »

The New York Times has been running a whole series now on McKinsey with a new article about once a month or so highlighting example after example of alleged serious ethical lapses at the firm. Have things really gone downhill or do some journalists just have an ax to grind with McKinsey?
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