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July 22, 2020  

McKinsey-Funded Manager Slashes Roster

MIO Partners, a fund-of-funds operator that deploys capital for employees of consulting giant McKinsey & Co., is laying off more than 10% of its workforce.

One source pegged the cuts as affecting at least 20 people across the New York shop’s operations, trading, technology, finance and data-analysis departments. Several junior employees were among those let go.

MIO started the year with a staff of 194.

The source said the reductions reflect plans by MIO to outsource more of its functions. He added that McKinsey also could be seeking to save money in response to the May settlement of a class-action lawsuit led by a former employee.

The plaintiff, Tushar Bhatia, alleged that two McKinsey pension plans were charging excessive fees to beneficiaries while producing below-market returns. The action, filed in U.S. District Court in New York and later settled, accused McKinsey and MIO, in its role as manager of the retirement plans, of breaching their fiduciary duties.

Bhatia, currently in a business strategy role at Microsoft, worked at McKinsey from 2011 to 2018.

MIO formed in 1986 as an asset manager for McKinsey’s retirement plan and later expanded to serve as an alternatives-focused wealth manager for current and former employees — deploying a majority of its capital to hedge funds and private equity funds run by outside operators. It also manages alternative funds for McKinsey partners and pursues direct macro investments. Today, the $14.6 billion operation runs money for some 30,000 beneficiaries.

MIO can levy management fees equal to as much as 1% of assets but has waived those expenses for funds it oversees on behalf of partners. “A key element of our operating model is that we operate at-cost, generating no profit for either MIO or McKinsey,” the firm states on its website. “Our incentives are aligned with those of our investors due to significant management participation in the funds.”