Morgan Stanley Loses Michigan Pension Mandates After Broker Leaves
Score another debating point for brokers who argue that clients belong to them, not their firms.
The Macomb County Employees’ Retirement System in Mount Clemens, Michigan, is moving its $1 billion-plus account from Morgan Stanley’s Graystone consulting group to AndCo Consulting following the move of its lead investment consultant to the smaller firm in August.
The decision, which has not been formally announced but was confirmed by a trustee and the plan’s outside lawyer, comes on the heels of a similar decision by Monroe County Employees Retirement System, another southeastern Michigan fund with about $204 million of assets.
Both plans were reviewing proposals for their advisory mandates before learning in late June that Morgan Stanley had dismissed Graystone’s Mike Holycross, who was based in Southfield. Both boards had worked closely with Brian Green, who left Holycross’ team in 2015 to join a predecessor of AndCo.
Officials of the retirement funds said personal ties played a role in their decisions to switch from Graystone, but Holycross’ departure did not influence Monroe, a board official said. It played a role in Macomb County’s decision.
“The actual consultant carries a certain amount of weight,” said Gary Cutler, an employee representative on the Macomb County board. He also cited AndCo’s strong penetration of public funds in the region (it advises 49 Michigan plans), its philosophy on passive versus active investing and the respect it showed by having the head of the Orlando, Florida-based consultant participate in its pitch to the plan board members.
“It speaks volumes that Mike Walker, its president and CEO came in front of us, in addition to the level of services that they offered,” Cutler said. “Even though, sizewise, they aren’t as large as Graystone with its backing by Morgan Stanley, AndCo’s implementation strategies, attention and implementation of other plans in the state made us feel comfortable.”
The trustee also said that Graystone’s presentation left his somewhat cold since it appeared to be directed at its skills in working with high net worth individuals rather than toward its institutional goals of getting the widest investment exposure at low fees for county employees.
Amy Cole, a former member of Holycross’s team who participated in the Graystone presentation along with three advisors from Graystone’s two other Michigan teams who she said would be shepherding the county’s accounts, did not respond to a request for comment.
In a presentation to the Macomb County Retirement Board in late June, Cole said Graystone expected that some of Holycross’s approximately 35 municipal clients would be soliciting requests for proposals following his departure. Holycross, who was dismissed over questions that the firm’s U5 separation firm concerned “adherence to firm sales guidelines” but that did not involve sales practice violations, did not respond to a call for comment.
A retirement board commissioner told Cole that the plans “have been left in the lurch because someone who has been, based on their returns, very successful for a long period of time is gone and now they are being given people to work with that have no track record,” according to minutes of the meeting. “He said that will be a factor as they move forward with the RFP process. Ms. Cole expressed that the day Mr. Holycross was dismissed was not an easy day for her.”
Graystone’s southeast Michigan practice works with more than 90 clients with assets of more $8.3 billion, including 17 public funds with assets of more than $1.3 billion, according to a June 2017 report made to the Monroe County Retiree Health Care Fund.
In a presentation to Monroe County’s trustees earlier this summer, Graystone said it employed 18 “professionals” in southeastern Michigan team servicing more than 90 corporate, endowment, foundation and public retirement plan clients with assets of over $8.3 billion. Its Morgan Stanley parentage gives it a local presence with a global reach to provide a “boutique experience (with a) national presence.”
The presentation also said that Graystone’s southeast Michigan practices were adding 40 new public funds to its existing roster of 17, bringing its total of advised assets in the region to more than $3.5 billion.
Morgan Stanley, through a spokeswoman, declined to comment on Cutler’s remarks and on Graystone’s business in Michigan.
“When a key advisor leaves, there is no one right answer, it varies from board to board,” Aaron Castle, whose Detroit firm VanOverbeke, Michaud & Timmony, is outside counsel to the Macomb County and Monroe County retirement systems. “There is some aspect of a personal relationship that is built over time with the rep, but there also is a professional relationship with the institution.”