McKinsey statement on New York Times article on MIO

February 19, 2019 —Today’s New York Times article about MIO Partners, Inc. – which manages retirement and after-tax funds for roughly 30,000 current and former McKinsey employees – is fundamentally misleading. Readers deserve the facts.

The Times’ central assertion of a conflict of interest between our consulting activity and MIO is wrong. Tellingly, many of the examples described in the story include a line noting that McKinsey had no control over the relevant investments. Unable to find any actual evidence, The Times instead strings together innuendo-laden terms like “web of relationships” and “deep ties” to imply the existence of a conflict where none exists.

Consider the stark contrast between The Times’ reporting today and the findings – issued yesterday – of a comprehensive and independent third-party report (PDF–1MB) into MIO that was commissioned by the Financial Oversight & Management Board of Puerto Rico. That report (PDF–1MB) confirmed what we told The Times, concluding that, “McKinsey’s consulting work and MIO’s investment management work were and are separate and that there is no information sharing between them.” The report directly addresses the central points raised by The Times, noting that McKinsey:

“is acutely aware of the confidential nature of its work. It has organized itself and adopted policies and procedures, which it has enforced and continues to enforce, that are designed to, and in fact do, maintain client confidences, ensure that information does not leak between the consulting side and the investing side of McKinsey’s business, and minimize the likelihood of conflicts.”

Here are the facts about MIO:

  • MIO is a separate subsidiary that was established 30 years ago to manage firm-sponsored retirement funds and to provide investment opportunities and advice to our Partners. Today, MIO manages retirement and after-tax funds for roughly 30,000 current and former colleagues. MIO’s operations do not generate profit for McKinsey; indeed, McKinsey subsidizes a portion of MIO’s operations.
  • Approximately 90 percent of MIO’s capital is managed by external third-party managers who make all decisions regarding the individual underlying investments.
  • The independent report notes that “McKinsey and MIO have multiple complementary and overlapping policies designed to avoid conflicts of interest.” These policies include a strict “information barrier,” which ensures no confidential information is shared from the firm’s consulting operation to MIO, or vice versa.

The Times nevertheless advances a narrative built on examples that have either nothing to do with MIO or misrepresent how it operates.

  • The article’s lead paragraphs seek to imply that McKinsey provided MIO with non-public information gleaned from our client service to Valeant for the purpose of benefitting MIO’s investments, even as the journalists themselves acknowledge later in the piece that the relevant investments were made by outside funds. One of the third-party funds making the investments underscored the same point, telling The Times that “MIO had no investment discretion in respect to these assets.” No McKinsey employee played any role in the investments described by The Times, and MIO itself had no direct influence over the relevant investments connected to Valeant.
  • The Times insinuates that the presence of former and current McKinsey colleagues on the board of MIO must create a conflict. As we explained to the authors, the MIO board does not make investment decisions and does not choose investment managers. The board only reviews after the fact which third-party managers MIO’s professional staff have chosen to invest with.
  • The article implies that MIO lacks transparency. Yet MIO is regulated by the U.S. Securities and Exchange Commission, and its London-based affiliate is regulated by the Financial Conduct Authority. MIO routinely files public disclosures that describe its structure and general investment strategy. In fact, it is these public disclosures which the journalists seem to have used to gather much of the information in their article.
  • The Times uses a loan issued by a third party to associate the firm with “China’s most prominent fugitive.” Even as they dedicate nearly three paragraphs, an infographic, and a photograph to a discussion of this individual, the authors note that there is “no evidence that McKinsey knew its investment would find its way to Mr. Guo, with whom the firm said it had no direct dealings.” As we explained to The Times, MIO had no control over the loan in question, which was made by a fund that makes its investment decisions independently. This attempt to use guilt-by-association to malign our firm is highly disingenuous.

We welcome scrutiny and justified criticism, and we are committed to learning from any mistakes we have made. However, today’s article advanced a misleading picture that left out key facts contrary to The Times’ narrative and used innuendo to leave an impression that is at odds with reality. It is for this reason that we feel obliged to set the record straight.