Morgan Stanley investors pushed for cost cuts

2015-12-02

Morgan Stanley’s decision to cut hundreds of jobs in its fixed-income division followed a series of meetings with shareholders in which they questioned why the firm hadn’t moved more aggressively to shed costs in the division, according to people familiar with the matter.

In one-on-one discussions and a series of group meetings arranged by analysts, money managers from firms such as Moore Capital Management LP, J.P. Morgan Chase & Co.’s JPM, +1.39%  asset-management arm and Epoch Investment Partners Inc. peppered Morgan Stanley MS, +2.83%  executives with questions starting in late October on why it hadn’t cut expenses despite few signs of a fixed-income revival, the people said.

Investors wanted the firm to reduce its exposure to the volatile business and were concerned about signs that it was planning to stay the course and potentially even expand, the people said. They have become frustrated that the fixed-income business has dragged down Morgan Stanley’s overall profits and overshadowed its successes in other units.

Morgan StanleyFeb 15Apr 15Jun 15Aug 15Oct 15Dec 15Source: MarketWatch
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Some shareholders had hoped the firm would have detailed its cost-cutting plans earlier this year, according to people familiar with their thinking.

Morgan Stanley is planning to shed as much as 25% of its fewer than 1,700 fixed-income employees, according to people familiar with the matter. The decision reflects Wall Street’s dimming hopes that the debt markets will spring to life soon, lifting revenue. The move also follows the arrival of a new boss for all trading, Edward Pick.