
The Story McKinsey Didn’t Want Written - hhs
https://www.institutionalinvestor.com/article/b1g5zjdcr97k2y/The-Story-McKinsey-Didn-t-Want-Written
======
SanchoPanda
This is not original reporting, more of a summary of the other in depth and
brutal coverage from the FT, NYT, BB, and WSJ over the last two and half
years. Not a particularly clear summary either. I would recommend those if you
are interested, and have linked some below.

[https://www.ft.com/content/7c6700bc-2976-11e6-8b18-91555f2f4...](https://www.ft.com/content/7c6700bc-2976-11e6-8b18-91555f2f4fde)

[https://www.nytimes.com/2019/02/19/business/mckinsey-
hedge-f...](https://www.nytimes.com/2019/02/19/business/mckinsey-hedge-
fund.html)

[https://www.bloomberg.com/news/articles/2018-07-08/mckinsey-...](https://www.bloomberg.com/news/articles/2018-07-08/mckinsey-
s-sneader-says-south-africa-s-eskom-was-overcharged)

[https://www.nytimes.com/2019/02/19/reader-center/mckinsey-
he...](https://www.nytimes.com/2019/02/19/reader-center/mckinsey-hedge-fund-
reporting-investigation.html)

[https://www.nytimes.com/2018/06/26/world/africa/mckinsey-
sou...](https://www.nytimes.com/2018/06/26/world/africa/mckinsey-south-africa-
eskom.html)

[https://www.bloomberg.com/news/articles/2018-10-21/mckinsey-...](https://www.bloomberg.com/news/articles/2018-10-21/mckinsey-
horrified-saudi-arabia-report-may-have-been-misused)

[https://www.nytimes.com/2019/01/09/business/mckinsey-
bankrup...](https://www.nytimes.com/2019/01/09/business/mckinsey-bankruptcy-
investments.html)

edit: A couple of people pinged me on the FT article, which was
groundbreaking, and a one-week copy can now be found here:

[https://pastebin.com/jqkAytZp](https://pastebin.com/jqkAytZp)

~~~
davidivadavid
This article specifically seems to cover the conflict of interest that arises
from McKinsey also running a hedge fund (MIO).

The NYT article (your second link) covers the same topic more clearly indeed.

(Can't read the paywalled FT article).

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elamje
I believe, to some extent, outsiders want to see prestigious organizations
fail, as it will make us feel better about our lot somehow. Journalism
certainly plays on this as we see the most prestigious firms across
consulting, tech, and finance get flame pieces written about relatively small
scale issues internally quite often.

While I enjoy the scrutiny organizations draw when due, I can't help but think
that most of the news and journalism that gets written about companies like
McKinsey is really insignificant in the scheme of their company. 100's of
millions of dollars is pretty small in McKinseys organization, and there
really is no evidence of a systemic problem here, just a small anomaly/mistake
that a few partners called the shot on.

I believe these type of pieces can really bring serious harm to brands that
don't necessarily deserve it, but I'm open to hear others opinions. It just
seems that traditional news media is becoming the worlds best click baiters,
while the importance of what the report on diminishes beneath them.

~~~
daltonlp
This isn't a flame piece. This is what journalism looks like. This sort of
elbow-throwing happens at every level of reporting, from local ordinances on
garbage collection to international politics.

> 100's of millions of dollars is pretty small in McKinseys organization, and
> there really is no evidence of a systemic problem here, just a small
> anomaly/mistake that a few partners called the shot on.

Take a moment and think about what you wrote here.

If you were a partner at McKinsey, is this what you'd tell yourself?

If you were a non-partner employee at McKinsey, how would you feel about your
own retirement funds being invested in MIO, given its performance?

~~~
throwaway999775
Non-partner employee here. Same poster as elsewhere on a different throwaway.

The benefits are very strong. I had not heard of this issue previously, and
don’t especially care. I’m not clear on if you mean the performance is too
high or too low because the article kind of implied both. I don’t think the
amount was particularly material nor do I think it’s especially bad if the
firm gives preferential treatment to partners because... it’s a privately
owned firm... by the partners... and in general it treats its employees very
well.

I’m not sure I’m communicating this well because the underlying facts feel
vague. But I would give my employer an A+ based on my experience so far. The
possibility that a percentage point of returns was lost on my 401k is bottom
of the barrel priority. I can’t tell from the article what happened, but it
would be really hard to outweigh the visible, conscious investment in its
people that the firm does.

I recognize this sounds like I’m drinking the Kool Aid here, but frankly, very
few companies invest much into their employees. The best case scenario is
often lame office perks for tech workers. But tech workers get shitty non
competes. McKinsey, for example, gives you weeks of fully compensated time off
to find your next job elsewhere. I think it’s a remarkably healthy culture.

------
throwaway99807
Low level McK emp. Don’t care to get too involved here, and will only share
personal opinions.

This article seems to be mostly anger fluff. A lot of it seems to reference
someone’s lawsuit over a 401k deal with overly dramatic wording. Maybe someone
can clarify but I don’t actually see anything illegal or even particularly
unethical. As the article states, it’s not entirely unreasonable for a private
company to offer better options to senior officials. Low level employee
benefits are significantly above average and I don’t believe anyone seriously
feels sleighted.

As for whether there is insider trading involved with the MIO, I think it is
unlikely. The opportunity for fraud exists, but not moreso than the personal
risk for committing fraud. I have no comment on the specifics of individuals
behaviors. Might bad actors exist? Certainly. Although it would seem strange
for them to try and commit fraud through a massive diluted operation like
this. The culture of internal controls and communications is frankly very
strong in my opinion.

People will be able to find examples of bad actors. I don’t feel it disproves
any particular points. I do see active decisions about firm and personal
ethics. And people are actively encouraged to not work on things they oppose.

There was a NYT article about a study looking at improving marketing for
Opioids. No doubt, that was not good. The Chinese thing was distasteful. Does
it represent the firm culture? Personally I don’t think so.

The media, the NYT in particular, has been painting the firm as an evil shadow
organization. They released an article that basically said they’re going to
continue to write attack articles against it because it’s secretive. Well it’s
secretive because it protects client confidentiality.

~~~
andreilys
_It has made money in 24 out of the past 25 years — a period that includes the
dotcom bust and the global financial crisis of 2008-09 — earning hundreds of
millions of dollars for McKinsey partners and alumni, according to an investor
in Compass. Over the same period, the average fund of hedge funds has lost
money in five years, according to data provider Hedge Fund Research._

"Think about it...McKinsey is the foremost management consultancy with better
links/knowledge and influence over the World's leading companies. Its partners
are very smart. Yet they can operate and compete in the highly competitive
world of investment - not a management consultancy's core area of expertise -
better than large, established professional money managers - without the
competitive advantages coming from their insight as management consultants!
Really! If that were true, they would spin off MIO and run it 'for profit'
becoming one of the leading global money managers. Or does an opaque structure
work better for them?"

\-
[https://www.ft.com/content/7c6700bc-2976-11e6-8b18-91555f2f4...](https://www.ft.com/content/7c6700bc-2976-11e6-8b18-91555f2f4fde)

~~~
throwaway999775
(Same account, lost original login)

This quote is misleading. It implies that McKinsey consulting partners are the
ones making the investment strategies which is false. The large investment
unit is run by... surprise surprise... finance professionals. Furthermore 90%
of the MIO’s investments are in externally managed funds, the investment
decisions of which the MIO does not control.

Spinning off the MIO as a for profit firm would frankly be misaligned with the
firm values. It’s also not especially opaque, as it’s fully registered and
files documents on its structure and what not. Journalists have simultaneously
been using those filings and claiming the structure is opaque.

Again. It’s possible that McKinsey partners engage in insider trading
(although it is very difficult as all trades in the firm are required to be
approved by compliance). But I really don’t think there’s a logical thread by
which partners take enormous risks to circumvent internal controls and provide
tips to the MIO just to boost the fund performance. That’s a very high risk,
low payoff idea, because even if your secret info is super profitable, it’s
diluted across thousands of other partners before benefiting you personally.
Claiming that it happens on a massive scale to offset that is just silly and
is frankly a huge accusation with no basis. It’s fully possible that the fund
was just well managed.

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theodorewiles
My pet theory is that McK is re-orging the NYT to be more commercial and the
writing staff is rebelling, while Jay Alix is more than willing to help out.

------
green-eclipse
Would anyone mind posting a tl;dr?

~~~
adolph
_[McKinsey’s internal investment company] first came under scrutiny because of
the investments it holds in the clients of the firm’s bankruptcy consultancy
work. For years, McKinsey did not disclose those investments to the court when
applying to be a bankruptcy adviser — and still has disclosed very few. Under
bankruptcy law, advisers are required to be “disinterested persons,” and
cannot own the debtor company’s debt or equity, directly or indirectly._

My impression is that McKinsey is kind of like Arthur Anderson and Enron
balled into one international criminal organization. AA had the undisclosed
conflicts of interest part and E had the screwing over your employees’
retirement funds part. Top that with helping Saudi Arabia track down
dissidents under the guise of “public opinion research.”

