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Tuesday, May 22, 2018

Active Will Be Back Says Gorman

Reported by Sean Hanna, Editor in Chief

Despite the rise of passive and hype of the robo, active asset management still has a role says James Gorman. The Morgan Stanley [profile] CEO shared his views during his kick off address at the annual ICI General Membership Meeting. The ICI GMM runs through Thursday at the Washington Hilton in Washington, D.C. Gorman told the 1,500 attendees at the meeting that strong positive markets and a very large expense gap between active and passive funds have been two things that fueled the growth of passive. But he believes that active will be back.

More transparancy and competitive fees are the two things active managers need to be succesful against passive, he said. "We have seen that in our own business."

Gorman said that he expects Morgan Stanley's proprietary asset management business to double from $500 billion in AUM today to $1 trillion during his watch (though he did not name a specific date he expects to reach that target by). He also expressed confidence in Dan Simkowitz's ability to build the asset management business to that level. To reach the $1 trillion AUM goal, Gorman said that Simkowitz has done a number of fill ins and is launching a number of funds in areas where Morgan Stanley is strong.

"I wanted a product guy to run it [Morgan Stanley Investment Management]," said Gorman. "It's a great business. It is our highest ROE business."

Gorman dismissed robos as a threat and pointed out that customers that wish to use that type of service have an option at Morgan Stanley. He added that Morgan Stanley will spend $4 billion on technology this year.

"I have no idea why someone would go to a no-name robo advisor when they could go to Morgan Stanley and have our resources behind them," said Gorman. 

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