Top story: McKinsey’s ~$45 billion hedge fund for partners

So McKinsey has a hedge fund…?

In addition to their core consulting business, McKinsey harbors a lesser-known giant: McKinsey Investment Office (MIO Partners). This $48 billion hedge fund started as a pension plan but has evolved into an exclusive investment juggernaut for McKinsey’s partners and alumni. The catch? Investors must be former consultants and independently wealthy—think $500,000 minimum investments locked for 13 years.

MIO operates behind the scenes, leveraging its 98-year-old network of corporate leaders trained in the “CEO factory.” McKinsey alumni-turned-executives at Citigroup, Disney, and beyond feed a pipeline of high-risk, high-reward opportunities. MIO’s fund offerings span hedge funds, real estate, distressed debt, and even direct macro trading strategies. A former partner estimates annual returns of 15%, a figure few investment firms can rival.

Success comes with scrutiny. In 2021, MIO was fined $18 million for potential conflicts of interest, including investments tied to McKinsey’s consulting clients. The firm denied wrongdoing but tightened its “separation wall” policies. Critics argue that balancing fiduciary duties to both investors and consulting clients creates unavoidable ethical dilemmas. One glaring example: McKinsey advised Puerto Rico on debt restructuring while MIO invested in its municipal bonds, raising questions about insider access. McKinsey insists MIO operates independently, a claim supported by external oversight from figures like Dame Helena Morrissey.

MIO’s roots trace back to the 1990s when McKinsey aimed to retain talent amid private equity raids. Today, it’s more than a hedge fund—it’s a one-stop wealth management shop, offering personal advisers, financial planning, and even services for partners’ children, all for a flat annual fee.

As MIO expands its influence, whispers of future structural changes loom. Would it still deliver stellar returns without McKinsey’s insider connections? For now, MIO enjoys its position as the largest and oldest of its kind, setting a high bar for competitors like Bain & Company’s Squam Lake funds. In the words of McKinsey legend Marvin Bowers: “Do you know when you’re making too much money? When you need someone else to manage it for you.” McKinsey clearly took that advice—and turned it into an empire.

Read more here.

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