The relationship between McKinsey and Company’s consulting work and the company’s hedge fund is under scrutiny following a report published in the New York Times.
The report alleges the investment arm had a stake in some companies that were also McKinsey consulting clients.
“That web of relationships underscores the unusual nature of McKinsey’s hedge fund, and the potential for undisclosed conflicts of interest between the fund’s investments and the advice the firm sells to clients,” the report states.
McKinsey has denied that the fund, McKinsey Investment Office (MIO), benefits from the advice given by the consulting company. It called the NYT report “fundamentally misleading” and said its investment division operates independently from the consulting division.
“The Times’ central assertion of a conflict of interest between our consulting activity and MIO is wrong,” McKinsey said in a statement.
The company said “90 per cent of MIO’s capital is managed by external third-party managers” and there is a “strict ‘information barrier’ which ensures no confidential information is shared from the firm’s consulting operation to MIO, or vice versa”.
The $12.3 billion hedge fund was established 30 years ago and manages retirement and after-tax funds for roughly 30,000 current and former McKinsey employees.
The NYT article notes any connections between McKinsey consulting work and the fund’s investments are hard to spot as McKinsey does not disclose its client list and MIO investments “are often secret, with a large part of its approximately $12.3 billion in holdings concealed behind a tangle of shell companies in an island tax haven in the English Channel”.