A man on the move says it’s good to talk

COPYING AND DISTRIBUTING ARE PROHIBITED WITHOUT PERMISSION OF THE PUBLISHER: SContreras@Euromoney.com

By:
Published on:

After trying to be in four places at once, Morgan Stanley’s chief investment officer, Joseph McAlinden, is looking forward to moving to a permanent base, on the Avenue of the Americas.

Joseph McAlinden
Joseph McAlinden wears the look of someone who has spent a lot of the last year on the move.

This impression is strengthened by the fact that on the day of this interview, every piece of furniture in his office is covered in tags, awaiting the removal men. The office is actually one of four among which MSDW's chief investment officer has divided his working life over the past 12 months. Two are in Manhattan, downtown and midtown, one is in West Conshohocken, Pennsylvania, the Miller Anderson&Sherrerd base, and the fourth is in Houston, at Van Kampen's headquarters.

McAlinden has tried to be in four places at once in the course of bringing together the different strands of Morgan Stanley's investment operation. Given the obvious demands of such a task, it is little surprise he is looking forward to moving to a permanent base, on the Avenue of the Americas.

"One of the things that can get confusing is where you are and where you left your briefcase," he says with a wry smile.

In some respects, McAlinden was handed an impossible task: trying to unify four investment divisions and keep Morgan Stanley's 600 investment professionals happy.

He feels the results speak for themselves. "It has been an awful lot of work," he says. "There has always been some anxiety about the fact that this is a business of intellectual capital. We're only as good as the people that work here. We had to come up with a plan that everyone would still benefit from, otherwise we might have been faced with a mass exodus."

Six months on from announcing the new structure, that feared exodus has not happened. "I think we have achieved an integration, he says. "A lot of people thought it wouldn't happen."

McAlinden draws a parallel between his job and that of the producer of a Hollywood blockbuster. Just as investment operations have star managers, so a big film production needs its film stars. And keeping those stars happy means giving them star treatment.

However, it is important that everyone works together or the whole thing will fall apart.

Another parallel he draws is with the problem facing the coach of the New York Yankees who have been enjoying huge success in recent seasons. How do you motivate highly paid baseball stars who have already won everything there is to win?

So what is his trick with his fund managers? "You have to work hard at it but you won't ever keep them all because the temptation to go out and become the next George Soros is always going to be there for any money manager," says McAlinden. "What an organization like ours has to provide is an intellectual environment that makes them want to come to work every day and work for us."

Where MSDW has the advantage, he argues, is in being able to take away all the administrative headaches and free up the portfolio managers to concentrate on investing. "I want to create an environment where they have nothing to do but manage the money," he says.

There is another way to keep people happy - hard cash. "You have to be competitive on compensation, which we are," he says.

However, giving people the administrative back-up and paying them well will not always be enough. "We have to be prepared for the fact that no matter what we do, somebody is going to be tempted by the hedge fund opportunity.

We have to have a deep enough bench that we could weather half a dozen defections in a short period of time, which hasn't happened yet and I hope it won't, but you never know."

As part of its efforts at team building, last month all the senior managers met in Naples, Florida, for an off-site. After several hours of presentations, the cream of the company's investment talent were sent to the beach to bond.

"I was told we had guys that were loners, who didn't want anything to do with anyone else, didn't want to be part of a big company and there they were on the beach playing volleyball with the others," says McAlinden. "Everyone is beginning to see that smart money managers are smart money managers, even if they only run institutional money all their lives or only run retail fund money all their lives. If they know how to do it well, these people are finding that there are peers and that they can benefit from exchanging information while still maintaining their separate identities and their independent approaches."

If communication is the key to the successful integration of the investment process, then McAlinden has a large headache to deal with in bringing his teams together across the time zones from the US to Tokyo.

"Because we're not putting everyone in one giant complex, we need people to be able to talk across the time zones and Asia is difficult for us," he admits. "So we are looking to use technology to create a single universal campus."

To this end the company has developed an intranet system - Rappa (research and portfolio performance attribution) to give fund managers access to the whole group's data. It is also linking up all its trading rooms to introduce round-the-clock trading.

With global investing now very much sector-based, rather than country-based, communication between the offices is increasingly important, he says. "Once upon a time we would have diversified by having a certain amount of money here and a certain amount there. Now sectors are more important and that's particularly true in down markets."

Above all, he is determined to get his managers to talk to each other. "As an example, it's particularly important that our telecoms experts in Singapore and Mumbai can talk to their colleagues in London, Tokyo and New York because they all have information which is relevant to each other because sectors move together around the world now."

If he succeeds in getting this message home to a group comprised, lest it be forgotten, of people who may have been used to doing things their own way for many years, he will have achieved his aim of building a truly global team.

McAlinden is convinced that his year on the road has gone a long way to doing that. "Of course we have had to move one or two people around and move some funds around, particularly in US equities but generally I think we have succeeded," he says, adding that a combination of "the old fashioned telephone, the internet and an awful lot of travelling" has made Morgan Stanley better than any of its competitors at communicating.

"The only way our integration will really work is if all the different groups talk to each other," he says. "Some of the big firms haven't figured out how to integrate and are going off at cross purposes."