Morgan Stanley Investment Management's international business chief has his sights set on doubling the assets under management of the unit in five years, building on a turnaround from the loss of assets and key staff.
Navtej Nandra, London-based managing director and head of international at MSIM, has spearheaded the turnaround in his first two years on the job. From July 1, 2010 to Dec. 31, 2011, MSIM added a net $18 billion from international clients; and in the first half of 2012, AUM rose another $13 billion to $113 billion. At that rate, AUM would double in less than five years.
“AUM in our business is an outcome,” Mr. Nandra said, adding that profit margins have also improved. “All those things are outcomes of good business practice.”
Mr. Nandra said MSIM's investment strategies were strong when he arrived, with many longstanding investment teams, a wide array of investment offerings, performance and a strong brand. However, “one of the things we were missing was good sales leadership,” he explained.
Most of the hiring he has done since taking the helm has been in sales, including bringing in Paul Price to oversee sales in September 2010.
The firm has also made changes that Mr. Nandra characterizes as basic, “Sales 101”, such as keeping a closer eye on salesmen.
“People had gotten comfortable over the years. Now we look at how often (each salesman) is calling on contacts” and what they talk about, Mr. Nandra said. “The fact that we're paying attention makes changes to behavior and motivation.” And it links compensation with effort, if not results.
The turnaround of MSIM's international business can't be divorced from that of the overall business, led by Gregory J. Fleming. AUM across all regions slumped to $207.4 billion at year-end 2009 from $582.4 billion two years earlier, according to data from eVestment Alliance, Marietta, Ga. Overall AUM had grown to $256.6 billion as of June 30.
International strategies are four of the firm's five largest, according to eVestment Alliance: The firm runs more than $10 billion in each international, global franchise and global emerging markets equities. Three-year annualized returns in those strategies have topped relevant benchmarks by 201 basis points, 880 basis points and 181 basis points, respectively, according to eVestment Alliance.
The money manager also is benefiting from another kind of return. Key investment staff who left MSIM years ago are coming back to the firm's global strategies. Among them:
c Paul Vosper, who left for AllianceBernstein LP's real estate unit in 2010 and later spent a year at RREEF Real Estate before returning in May as managing director, co-head and chief operating officer of Morgan Stanley Alternative Investment Partners Real Estate;
c Ashutosh Sinha, who left in 2006 to start hedge fund Amoeba Capital Partners Pte. Ltd., returned as managing director and senior portfolio manager in February 2011;
c Shirish Godbole, who left in 2007 for Goldman Sachs' Real Estate Principal Investments group, returned in November as India head of Morgan Stanley Real Estate Investing; and
c Cyril Moulle-Berteaux who left in 2003 with Barton Biggs to form hedge fund Traxis Partners, returned to MSIM in June 2011 as managing director and head of global asset allocation.
“They're all coming back because they're seeing we've embraced the original values of this firm,” said Mr. Price, London-based managing director and head of international distribution and client relations.
Some question whether MSIM's international growth is sustainable. Although its Alternative Investment Partners business and its global franchise equity strategy are seen by many as key strengths, “I'm still not sure I'm clear about what they do and who they are,” said one industry observer who requested anonymity.
Mr. Price said MSIM is not trying to provide every strategy imaginable across equities and fixed income, but instead is focusing on its strengths and, in bonds, gearing for future demand, promoting capabilities in customized, credit and opportunistic strategies rather than traditional government bond strategies.
Mr. Nandra believes MSIM has capacity to grow within existing strategies and that the firm is underrepresented in the market. “There's a huge opportunity for us to gain market share,” he said.