Equities Boss Has Helped Lead Morgan Stanley's Turnaround Since Crisis
Edward 'Ted' Pick Refashions a Division Closely Tied to the Bank's Success
Standing before a roomful of clients in Morgan Stanley's MS -1.16% New York headquarters, Edward "Ted" Pick couldn't hold back tears.
His voice wavering, the investment bank's equities boss thanked money managers from firms such as Wellington Management Co. and Viking Global Investors during the June 2009 meeting for not abandoning Morgan Stanley even as it teetered near collapse during the financial crisis.
"The folks in this room stuck with us during the worst time in the history of this firm," he said, according to people familiar with the matter. "We're open for business."
Five years later, Morgan Stanley's success in the postcrisis era rests, in part, on how Mr. Pick and his business perform.
The equities division puts buyers and sellers together in the $60 trillion dollar global stock market, while also handling stock derivatives, big blocks of shares and hedge-fund relationships. Once overshadowed by flashier businesses at the New York bank, Mr. Pick's unit has emerged from the crisis as one of its biggest growth engines.
At a time when debt securities, currencies and commodities businesses muddle through a slump in client activity, and new regulations threaten to rein in fixed-income trading well beyond the current malaise, stock trading is taking on more importance across Wall Street.
The shift has played to Morgan Stanley's strengths and helped catapult Mr. Pick, an executive known for his fierce devotion to the firm where he has spent his entire career, into a leading role.
In the precrisis years, when fixed-income trading boomed, and for a brief stint in 2009 when demand for fixed-income products exploded after the crisis, Morgan Stanley was an also-ran to the likes of Goldman Sachs Group Inc. GS -1.62% and J.P. Morgan Chase JPM -0.87% & Co. But as debt trading subsided and the stock market began motoring, spurring a flurry of listings, Morgan Stanley's fortunes have changed.
The firm posted a 16% jump in stock-trading revenue in the first three months of the year, snatching the crown as revenue leader from Goldman for the second time in three quarters.
Morgan Stanley has repositioned itself since the crisis under Chief Executive James Gorman, moving away from riskier trading and toward steadier businesses such as wealth management and equities.
Mr. Pick, who declined to be interviewed for this article, was one of the people Mr. Gorman charged with executing that turnaround. A former capital-markets banker who spent most of his career taking clients public, the 45-year-old executive was reassigned in 2009 to lead an equities trading arm gravely wounded by the crisis.
Under the direction of his mentor, Colm Kelleher, who now heads the firm's securities business, Mr. Pick and his team remade the prime brokerage, which provides services and loans to hedge funds. They also invested heavily in electronic-trading platforms and led Morgan Stanley's traders back to the riskier corners of the business, including derivatives and block trades.
The revival, also engineered by top lieutenants such as top sales executive Richard Portogallo and head trader Sam Kellie-Smith, has put Mr. Pick's name in the mix for bigger jobs at the firm, executives said, even if no promotion is imminent. He remains very close to Mr. Kelleher, and in his former role was among the bankers who secured key capital infusions for the firm during the crisis.
Yet Mr. Pick's current mission is far from complete. Competitors such as J.P. Morgan and UBS AG UBSN.VX -1.43% also are charging hard in equities, and Goldman remains a formidable foe whose executives loathe finishing second to Morgan Stanley in anything. Morgan Stanley lags behind some of its peers, including Goldman, in derivatives and block trades.
There are also no assurances the stock-trading renaissance will continue. The debate over the role of high-frequency traders could lead to new rules that crimp profit. Stocks could fall out of favor. The market also remains at risk to technology glitches that have roiled investors in recent years.
Colleagues say Mr. Pick is up for the task. Described as passionate and intense, he is skilled at dissecting the possible outcomes of a decision and imposing his process onto those who work for him. "You better be on your game" during meetings, one colleague said. He isn't hard to read, and will destroy ill-formed arguments, the colleague said.
Five-foot-nine and trim, with light brown hair that frames a prominent brow, Mr. Pick was born in New York. At age three, he moved to Caracas, where his father ran a petrochemical business, before returning with his family five years later to live on Long Island.
In April 2009, Morgan Stanley tapped Mr. Pick to be co-head of stock sales and trading from his capital markets post.
Mr. Pick had started at the firm in 1990 as an investment-banking analyst, then returned after collecting a master's degree in business administration from Harvard. He spent most of the next 15 years in the equity capital-markets unit, which takes companies public and manages their stock sales. Mr. Pick helped manage some of the biggest stock sales of the era, including Google Inc. GOOGL -2.12% 's auction and China Construction Bank's 601939.SH +0.25% IPO.
When he took over the struggling equities division, Mr. Pick sought to shore up relationships with clients and extol the firm's virtues.
"He bleeds Morgan Stanley blue," said Roberto Mignone, a hedge-fund manager whose almost $2 billion firm, Bridger Management, continued to do business with Morgan Stanley in the wake of the crisis.
Hedge-fund clients pulled more than half their money from Morgan Stanley between October 2008 and March 2009, people familiar with the matter said.
Mr. Pick rolled out a strategy called the "nine boxes," a matrix of three businesses—trading in stocks and derivatives as well as prime brokerage—across three regions, the Americas, Europe and Asia. The goal: improve everywhere.
The firm also started its own electronic-trade order-entry system, called Passport, ahead of many of its rivals, allowing it to move some clients' trades onto a lower-cost platform, people familiar with the matter said.
"It's given them a huge advantage in the market," said Richard Prager, global head of trading and liquidity strategies at BlackRock Inc., BLK -1.04% the world's largest money manager.
By 2011, Morgan Stanley had overtaken Goldman and others to become the biggest trader of New York Stock Exchange and Nasdaq Stock Market NDAQ -0.61% -listed shares, according to an analysis of the exchanges' data by ModernIR, a data-analytics firm. That same year, Mr. Kelleher appointed Mr. Pick sole head of equities.
The unit's transformation was on full display on April 17, when Morgan Stanley reported first-quarter earnings that handily beat analysts' forecasts. During a conference call, Chief Financial Officer Ruth Porat called the prime brokerage "our gem franchise."
In a memo to senior staffers that day, Mr. Pick urged them to "be proud and be humble."