Morgan Stanley (MS) Earnings Call Transcript & Summary

Thanks, everyone, for coming to this session with our very own Dan Simkowitz, Co-President of Morgan Stanley. Thanks for being here, Dan, in our 20th anniversary of the European Financials Conference. Before we start with the Q&A, I've got to read a disclaimer. The discussions may include forward-looking statements which reflect Morgan Stanley management's current estimates and subject to risks and uncertainties that may cause actual results to differ materially. Morgan Stanley does not undertake to update the forward-looking statements. This discussion, which is copyrighted by Morgan Stanley and may not be duplicated or reproduced without their concern, is not an offer to buy any security.

With that Dan, again, thanks for coming, and congratulations as well on your recent new responsibilities in the firm. With that, there has been a change of leadership and change of roles at the top this year. How should investors think about these changes and the implications for the strategy for the firm?

Well, first of all, thanks, everybody, for being here. I guess to a degree in the new responsibilities, I'm the host as well as the presenter. And I just came from our technology conference in San Francisco last week, this is setting records. I think you heard us along the way last week, we had 1,500 investors, 300 companies. So in the last week, 2,000 discrete investors, 500 companies. This is what our firm is all about, and we really thank all of you for being here. I've been at Morgan Stanley 34 years. And without question, I'm as excited and positive on what we have going today than I ever have been. We're extremely, I think, well positioned, and we'll talk a bit more about it strategically. I think the ability to go and execute that strategy from a talent and culture perspective, and James and Ted are hugely responsible for that. And then for the first time in 2 or 3 years, we actually have the market at our back. And so when you put all that together, it's pretty exciting times. We sort of made an announcement on James' chairmanship tenure, which is -- will take us through the end of '24, I guess, at some point in November. And I think as we came out of that, Ted and Andy and I, we talked about it that there's a leadership transition, but there's not a strategy change or a strategy transition. Let's see, 3 months in, I think we got to actually change that, which is we have a James transition. The leadership is actually the same. The leadership is consistent. And to a degree, James deserves enormous amount of credit for that because he put together a team and a strategy and a cultural dynamic that allows us to really go after that. And I'll talk a little bit about the strategy piece of that. But for example, Andy, Ted and I have attended 50 straight Board meetings. The Board has never met, not in an executive session without the 3 of us in the room in the last 8 years. So there's a huge amount of consistency. And the collaborative nature of not just us, but the teams that descend down throughout the organization is both cultural. But I think James, to a degree, created an unfair advantage for him to execute on this because the strategy is so tight. And the tightness on the strategy allows us to be really intensely familiar and collaborative in what we do. And to rephrase, we think it's really straightforward and powerful. All we do is we help clients allocate capital and get market access. And to a degree, that wasn't always the case. We used to own the Discover card. It was a sort of an anonymous client's spending. So it wasn't really high-end clients investing, and we don't have it today. But today, it's all around clients allocating their capital, getting advice from us, getting market access. And that could be -- and I'm going to name names. And if you're not named, I'll get you on the next conference. But that could be BlackRock or Blackstone or Citadel or Sequioa, and all the other asset managers, and spin-off that want to be those or want to aspire to be successful and large, it's corporations. I was in France the last 48 hours, we had start-ups. We have one of the largest companies in Europe, if not a world. We are one of the largest asset managers, we're dealing with the corporate world. We're dealing with sovereign wealth funds and pension funds. And then obviously, we're the largest wealth manager in the United States, and we've extended that reach pretty dramatically over the last 5 years. But that's not all we do. And the language that James created and the ability for Ted and Andy and I worked so closely in the last 8 years, has created this ability to, not just have strategy consistency, we've got leadership consistency. And I think that's pretty powerful. I think what you will see is we're in a different phase, right? We, over the last -- really, intensely in the last 5 years, but it got instigated by the acquisition of Smith Barney, for the last 5 years, we've been assembling elements in the business, whether it's Eaton Vance or E*TRADE or Parametric or a company -- a software company called Solium, where we've increased sort of the client set that we can go after and the capabilities to deliver, and then we have to go integrate it. But today, we have the ability to really go execute. And I don't think there's anybody better suited in the world than Ted to help lead this next phase, which is we got, to integrate all these toys, all these tools, to go execute against the client base. And that is really exciting.

Taking the discussion on the strategy a little further. Ted has talked about the integrated firm in the earnings calls and many times before as well. Can you maybe flesh out a bit for us, with some examples, what he means by that? And what areas that make Morgan Stanley unique in this strategy?

Great. Again, Ted and I, in succession, ran the capital markets business at Morgan Stanley. And I think it was our dream even back then, because we sat in the middle to really get the firm integrated and getting it worked. But what I have found coming in, because I'm -- with Andy, I'm one of the 2 presidents, but I'm also leading the Institutional Securities business, is that Ted set up an incredible dynamic around the integrated, what we would call, Investment Bank. So that's our markets business, as well as our investment bank and research and M&A. But I think right now, we're really poised to go integrated at the firm level, and to a degree rather than have segments think about client opportunities. And to a degree that strategic sort of platform I just mentioned earlier, we're really going against corporations, asset managers and asset owners. And clearly, with the private equity ecosystem, it bleeds a little bit into the corporate sector and then wealth management individuals. Those are our 3 client segments. And what we are finding is, to a degree, the historical organization of Morgan Stanley can deliver immense incremental value to those segments, if we think about the client holistically and across all of "historical operating segments." And I'll just give you 2, what I would argue, really big, really powerful examples that we're really going after a period bluntly where we had to do Smith Barney, fix the balance sheet, restructure it and reposition fixed income, stay strong and #1-ish in both M&A, capital markets and equities and then build Asset Management, which went from $400 billion, I guess, to $1.5 trillion of assets. But now we can turn our attention to beyond that and beyond integration to delivering real value to those client segments. So I would say the first one, probably the big exciting one is -- and I talked about at dinner with some wealth management players here in the U.K. In the United States, people invest at their work, at their employer, with their employer. They don't do it at a bank branch. They don't do it on their own. The facilities are set up to invest at the employer. It used to be defined benefit pension plans, but now it's a combination of retirement and stock vesting is where your wealth gets accumulated. We are now -- we have 50% market share on the administration of stock plans in the S&P 500 in the United States. We have 120 private companies where we're doing their stock plan administration that are worth more than $1 billion, so-called unicorns. And so we are there. And there's only one other firm in scale in the United States, which is this massive wealth management opportunity, that is also there. We are the only firm, though, that combines the ability to have a product and have a relationship with all those employees that also has a relationship with the CEO and the C-suite. And so we're moving forward to not just have a product that we're delivering, we're moving forward, where we're teaming up with the C-suite to be their partner and with their talent, to help them with financial wellness, all the way through their employee base, financial literacy. So that now we are an advisory, in essence, partner with the C-suite to help them retain and attract talent. And that's driven off both the product that came out of Wealth Management, but also the relationship that comes out of the Investment Banking relationship, which from time to time would include a revolving credit line as an example, our one other scale player doesn't have any of that, and go after it. And the back end of that is all those employees, 12 million employees today now have a relationship with us that we can go, in essence, service and monetize for a very long time. And maybe we will get to it. My daughter is one of those employees at another company, so I'm seeing a little real time. She would have been a Morgan Stanley client no matter what. But I'm watching the cohorts as an example. So that sort of synergy around our Investment Banking relationships, this product, which is probably the most exciting thing we've got going at Morgan Stanley, Morgan Stanley at work, as a service that will eventually let us capture an immense Wealth Management opportunity. So that's one. The second one is the asset management industry -- and I did a little bit of research in the last few days, it's grown up so much versus when I started at Morgan Stanley, BlackRock, Blackstone, Millennium, Citadel, none of them existed when I started in this industry; 15 years ago, almost nothing traded. I was lucky, I got to work on the IPO of Blackstone. I did all the big deals for BlackRock in my old job. None of that traded. I think we had T.Rowe Price trade like $1 million a day, and that was a big day in asset management. Asset Management now is a big business. I think a lot of people in this room are the practitioners of the craft, but there's a huge business behind that and we are in a very unique spot across all of Morgan Stanley, to be one of the best partners to the asset management industry. We're going to help them, the lifeblood a little bit, is raising assets. We're the largest allocator to asset managers in the world through Morgan Stanley Wealth Management. We have $5 trillion in assets. We are in constant communication because we have insights through that and this business, the business that all of you are here a part of, around what they should buy or what they should do strategically. And then we're in the -- hopefully, you'll see it, this conference being a great example, we're in the ability to help them source opportunities, deliver more alpha, deliver trading alpha in the systems that we can do to get market access. To finance, whether it's in prime brokerage or credit in other ways. And if you think about it, that range is all the way from Wealth Management helping raise those assets through the securities, trading, research, and Investment Banking elements, to source, asset and generate alpha. And the fact that we actually have an asset manager, I found in the last 8 weeks or I guess since the announcement in early November, it's a pretty valuable for my last 8 years to sit in the seat that a lot of our Asset Management clients. That unique ability to be an asset management partner is pretty amazing. And then you think about it, we probably have one of the greatest corporate franchises out there. It's helped dramatically by conferences like this. And then we have the wealth management opportunity in the United States. So the client segmentation -- for thinking rather than a product thinking or even a business segment thinking, that is going. And I said, Ted is really focused on it, and it's been a passion of mine. And Andy and I are intensely focused on bringing just those 2 examples to bear on the client segments.

If we talk about ISG a bit more, what are you seeing in the current environment? And how is the quarter progressing?

Well, it's pretty cool that we're at record attendance. I think the other thing we're seeing is we're a little bit at record attendance from U.S. investors here, but we also had a big contingent in San Fran with non-U.S. investors. So there's a sort of a global engagement that's pretty dramatic. I will say last year at the tech conference we had Silicon Valley Bank going straight into the ground, so we put [Indiscernible]. This year was -- there was a fair amount of enthusiasm. I think on the capital markets side, we exited the fourth quarter with a sense that there was real healing in particular in the credit markets. And so there was, in late November, December, credit market started to heal and then they entered the new issue market in credit really took off in the first quarter. So we -- for example, one of our clients, Procter & Gamble, I think issued a bond at the tightest spread that any issuers hit in 25 years. We're in the market today, right now, with the largest LBO financing in 2 years. It happens to be an asset coming out of a bank, Truist Bank in the United States, and so both the leveraged finance markets as well as the investment-grade credit markets, albeit off of a higher base rate, but are really, really efficient and really, really deep. And I think what that has then led to is a little bit of action starting in the private equity community that they got to sell. And they don't have to sell just out of their own sort of we want to go hit a gain, the limited partner community in private equity is pushing private equity firms to sell. They understand there's a lot of dry powder, they understand that will get deployed, but you better start selling. And if you're a private equity firm right now and you're not selling, and you're seeing your peers selling, you will get a call. Not just from one limited partner, you'll call from multiple partners. So there's a little bit of peer missing out. And in the context of really deep -- really efficient credit markets that is getting facilitated. And so we're starting to see mandates out in the M&A market really pick up in the marketplace. And I'll give you one stat that we track. In the U.S. alone, there's $4 trillion of private equity owned assets. That's the value of the assets that are worth over $1 billion. So that's sort of our TAM on an M&A perspective. And they're all going to have to get sold in the next 5 or 7 years. So you can see that. Now I think many people here, and you certainly are very aware, the sort of idiosyncratic nature of M&A mandates, M&A announcements and M&A completed business is what drives revenue. So it's pretty interesting right now. The closed business, which generates revenue in this first quarter is down pretty significantly. And in fact, if you look back and this is just the vagaries of how long it takes to close M&A, if you go back a year ago, we were still closing M&A from the euphoria of the COVID period. And then we hit -- so we had a pretty big M&A quarter a year ago because it was actually monetizing things that have been announced a year before that. But the reality, I think everybody knows, is we've had, through the fourth quarter last year, 7 straight really ugly quarters in both the capital markets business and in the M&A business once we hit Ukraine and inflation. The capital markets business is inflecting right now and revenue is happening right now. The M&A mandate business is inflecting, and therefore, the revenue will show up later this year and next year, but on that M&A comment, what I would say is I think we got a multiyear play here in terms of an M&A rebound. Certainly, there are going to be places, we're going to consider idiosyncratic elements, and probably the most obvious one is China. In China, capital markets and M&A, both in and out, and we see it also in our Investment Management business, is really subdued. But I think broadly speaking, corporates -- when private equity starts to sell, the corporate management teams need to pay attention. As they pay attention, they think about the fact that they also haven't transacted in the last 2 years. They, I think, are reasonably well of a view that the rate hiking cycle is over. That at some point we'll have -- reducing interest rates. And in that context, the confidence level at the CEO, CFO level, at the Board level is up so that they will be a participant, as I said, sort of multiyear in this transition of assets, which is starting out of the private equity ecosystem.

As a top-tier player, where do you see wallet share opportunities? And do you think the trading wallet has room to grow?

Yes. Look, I think our -- hopefully, you're seeing this. Both the -- to a degree, the American crew made the trip over and recognizing that's really interesting opportunities in the European financial institution sector, your peers who made it over to San Francisco. Being global is part of our DNA. And I think there are not many firms -- I don't think there's anybody who can really create what we have today, and we being the several of us, who are really global, truly multi-asset, multi-liquidity, we deal in the private market and the public market. And in fact, what we've seen is actually we've had a couple of instances where consolidation has taken competitors away. And we're also seeing some competitors pull back from segments. So I would say if I think back over a 20-year lens, we feel as good about the competitive landscape as we have in a long time. What we are finding, whether it's in the corporate or certainly -- and this is an ISG response, corporate or asset-manager, asset owner, to be really relevant in the markets as well as really relevant at the CEO's office and to be able to think about it holistically across those is extraordinarily valuable. I think you used the word trading. I really would like to try to rephrase the language. When we think about our business away from, let's call it, M&A, it's really markets business. It's a markets business, some of which will be trading, and the market making and the intermediation of liquid markets. But a huge amount of what we are seeing, and it's not just prime brokerage, but that's one obvious place is the sourcing of assets for Asset Management clients, the structuring of those assets to fulfill a specific risk or client demand, and that could be tranching in let's say the credit markets, but it could be derivatives in the equity markets, it could be the financing of those assets. And again, classically in prime brokerage what we are seeing an enormous business in financing the credit ecosystem. And again, I'm of a view -- so back to one of your questions we get asked from time to time, is the wallet, let's say, in what we call our equity business and our fixed income business, was '23 wallet at the top? And the answer -- our answer is no. To a degree in fixed income, and we can debate whether this is good or bad policy, raising debt at the government level, let's call it, is still a growth business everywhere in the world. And it probably is in either of the 2 U.S. administrations. It's certainly the case around defense spending. It's certainly the case around green transition. So there's debt there. And in the corporate world, and I'll get to this in a little bit later, I think, is the -- we're moving credit a little bit out of the banking system into the Asset Management system. And we're moving credit that used to be done by insurance companies themselves, it's still sitting on an insurance balance sheet, but it's also being done by asset managers, all of that is pretty bullish for us. And when you combine that with a private equity ecosystem that I told you, which is a transactional-based ecosystem, they buy things, but within a decade after they buy it, they sell it. And each time it rotates, we're in the middle of that process. And we're in the middle of that process, not just with M&A, not just with financing, but also increasingly in risk management. And so I think that's the other theme. And Ted has been on this for now a couple of years, and it's really helped us thematically and strategically. The end of financial repression means that, a, it's not a bad time to be the lender. And so all that credit, there's a lot more demand among asset owners for credit, it's going to show up at asset managers. We're the intermediary and the partner of choice of credit asset managers. But the second thing is you're going to have a little bit more volatility in macro. And if you're a corporation going to do M&A business, you're worried more -- and this holds for private equity as well, you're going to be more worried about FX risk, interest rate risk, commodity risk than you ever have been before. And so that market opportunity is going to grow. And I would say our share has not been fully where it should be, and we've got all these great corporate relationships, and we got risk management capability, bluntly, let's not just do it for asset managers, let's do it for corporations, that's also a growth opportunity for us in the ecosystem. So to a degree, don't call it trading, call it markets. And don't think it's -- don't think we've hit peak in 2023. It's both a market perspective, but also a Morgan Stanley share perspective.

If we turn to Wealth Management, what are you seeing among retail clients? Are the trends moving favorably?

I thought this was just a U.S. thing, but I had dinner last night with a couple of firms that are in the U.K. Wealth Management business. I just got done saying credit markets are really robust. M&A is coming, but we're seeing it in the mandates, if not in the announcements, if not in the revenue, all those over the next, let's call it, 1.5 years. But Wealth Management clients are still really subdued. And certainly, I saw that with our peers and ourselves in the United States, but I heard it's also a U.K. phenomenon. I think it's driven by a couple of things. You can't open up some gigantic Wealth Management account because you mandated a bank to sell your company. You can't even open up that account when you announce that you sold the company. You only open up that account when you close the deal. Same is true with the IPO. And so there's a lack of events that's creating some level of velocity in Wealth Management. But the overriding thing beyond that is at 5% Fed funds, people are in either the wait and see in cash mode still or they're in the delevering mode. And so our cash levels, cash and cash-related levels in Wealth Management are still at the highest we've seen in the last decade. So even with the S&P 500 at 50, 100 or whatever it is right now, Wealth Management hasn't really, in the U.S. -- and I think the same is true, what's said in the U.K. have not yet engaged. And so in that context, whether it's transactional revenue or in our case NNA, so net new assets, there's no doubt that, that subdued market environment, deleveraging event is a headwind that we're seeing. Again, I think what we've seen is those that those market conditions at some point will relieve, right? We're already starting to see it in the M&A context. And so once we see, let's say, a rate cut or closed M&A or IPO market, maybe the retail investor gets reengaged either in the marketplace or deploying new assets into new accounts. But right now, whether it's in our transactional levels or our NNA, and I think it's us and our peers, and it sounds like it's our U.K. peers, there is some subdued element. I don't want to make a market prediction, but obviously, there is a lot of cash embedded in that in the sidelines that's still out there in this market context. So I would say subdued activity, sort of new account AUM, yet things are healing.

The integration of E*TRADE was completed last year. Can you talk a little bit about what's next in Wealth and what are the teams focused on post the integration?

Yes. And I sort of talked -- maybe I touched on it a little bit earlier on this workplace thing. But again, it wasn't that long ago, we had 3 million household relationships, and now we're at 18 million. And Ted and I co-headed strategy for a few years and I was running Asset Management. So I spent a lot of time -- so it's good to see so many familiar, I guess, friends in the hotel today with financial institutions around the world. And I would always do the survey and the sort of most exciting, scaled opportunity, I believe, and a lot of our peers agreed in financial services is Morgan Stanley Wealth Management in the U.S. So in that sense, we've gone from 3 million household client relationships to 18 million, and we're in the very earliest days of starting to monetize that into revenue streams and advice streams. And so to a degree, we assembled all of that together in a really sort of cohesive strategic vision. We had to integrate the technology that got done really well with E*TRADE last year without a lot of hitches. And now, especially now if markets start to -- some of the headwinds I mentioned start to relieve, it's about going after that. And that's around taking sort of our ability to be with the client base earlier, but you can't just be there earlier. We can now be there digitally and do so in a really smart way driven by technology. So E*TRADE gives us the ability to engage with that client -- I'll just use my 28-year-old daughter as an example. But engage with them in the way they want to, in a digital way, in the early part. But wealth compounds and then complexity compounds. So as that happens, the ability to transition them from, let's say, just pure digital, powered by E*TRADE, but helped by our partnership with OpenAI, which we were early on, Andy was really early on in the marketplace, and Parametric, which was part of our Eaton Vance acquisition. And eventually, that complexity rises. Eventually, that wealth compounds. And we already have the client embedded through workplace. That is probably sort of the most exciting thing. And we're already -- again, the play is enormous, right? We're going to power through $10 trillion in AUM combined in Wealth Management and Investment Management over a period of time. But some of the evidence around our ability to transition from, let's say, a digital or self-directed client to an advice-based, more higher-touch client, we're using technology to understand what are the right algorithms, who is the right adviser, what's the right adviser profile to be in touch with them. And we test that and then we revise that algorithmic model to success. I think we've been averaging last 3 years, $50 billion of assets moving out of sort of workplace generated referrals into the advice stage. And last year it was 25% higher than the year before. So just to a degree, grinding out a technology-driven life cycle path off of an access point or what we would call a funnel, that is sort of world beating is a big part of what we're doing. And again, for the first time in a while, we don't have to be occupied by technical integration. And then hopefully -- we're already seeing in the corporate and institutional world. But hopefully, in the next year or so, we're also backed up by a little bit of a market backdrop. It's pretty exciting times.

This is, of course, a European conference, so I have to ask you how you see Europe, and more broadly, the global opportunity outside the U.S.

Well, look, part of it is reading the room over the last 2 days and who's showing up. But I think what Europe has a little bit in the investing markets is it's got dispersion, and it's got value. And it has that in both the equity market and a bit in the credit market. And so I think there's no doubt that the U.S. has been the safe, very powerful place to be. But on the investing side, purely on the liquid investing side, we're seeing real interest level. And we're not standing still, to a degree, in what we would refer to as EMEA. And our leader of EMEA is right here in the front row with me, Clare Woodman. So we opened in Copenhagen because we had this great Nordic franchise, but we knew it could grow. But the way it was really going to grow is by being there. Clare and some of the leadership team just got back from Abu Dhabi. So we had a big presence in Dubai. We have a pretty big presence in Riyadh. And Abu Dhabi is only 45 minutes away, but now we have a big office or about to be a big office, small now, but it's going to be big, in Abu Dhabi. We hosted last week, the inaugural, in essence, one of these financial services conference in Abu Dhabi. And Steve Cohen from Point72, Andreas Halvorsen from Viking, Alan Howard from Brevan Howard, all showed up to be keynotes. We had 100 asset owners in the room, which I think had tens of trillions of dollars. We already are sold out and people wanting to present next year. And bluntly, we'll probably extend it not just from the liquid side, we'll include the private side. So we're excited about some of these things. But as I said earlier, a huge element of the value proposition we have, not just to everybody in this room, but also corporations is connecting the world. And I would say it's my third trip to Europe this year, which is, I guess, indicative of how we think about global markets, European corporates, the balance sheets are in pretty good shape. So buybacks are up, so that's a reflection. But they need to grow. And China was a huge source of growth for the last 15 years, and it's not a place they can go right now. And so then as they turn their attention, the U.S. is at the top of the list. And bluntly, if European corporates who we've known well for decades want to go to the U.S., we're getting a lot of cost. And so in that context, we're right at the top of sort of the strategic engagement. And we wouldn't be there if we hadn't stayed really committed, 10,000 people committed, to Europe and staying engaged. I would say the last thing is we've got a very cool Investment Management business in Europe. So we're a top 3 asset manager in Italy. In Italy, for those of you who don't know, a lot of your money comes from Italy. And so Italy -- and by the way, I was completely surprised 8 years ago when I showed an investment management, and I saw the revenue and the market share in Italy. It's a big, big market. But Germany is going to have to transition. It's going to have to go from a savings market and an austerity market and a bank-driven market to an investing market. It's going to take time. But our hope, and we've got partners with Deutsche Bank and Allianz, and so we're all ready to after this, is that the German sort of investing market, equitization as well as investing, is in front of it. So we've got micro opportunities around the world. But it's worth saying that if you take that European corporate, U.S. is at the top of their list, but there are a number of other growth areas that they're intensely focused on. And we're sort of, by being incredibly global, well positioned. So hopefully, if you're running a global financial institutions portfolio, you know that we're about to be the largest securities firm in Japan. So we merged our securities business in Japan with MUFG, and we're on a path. We're on a mission and a path to be the largest securities firm in Japan. I don't compete with some other big financial institutions in the U.K., but we have 10,000-plus employees in India. So we have a view on India. India is happening. So if you're a corporate or if you're an asset manager and you want to get the right meetings and the right access, whether it's M&A or investing, you can come call us, because at 10,000, we are long understanding India. We have, in essence, information and guidance to give. The same is true, it's not a place people may be going, but they want to know what to do is in China, right? 3,000 people in Greater China. And we have a good trading business. I already mentioned the Investment Banking business is quite slow, and Investment Management is slower as well. And then lastly, as I mentioned already, the Middle East, people are focused and we've got a great presence. So even in a world where, let's say, China banking, China Asset Management is slow, we have pockets of regional capabilities that both generate revenue and generate a reason to be with some of you, as you think about your investments or a CEO or a CFO as they think about strategy anywhere around the world. And what we love is then you think about how many firms can do that in all of those regions at the corporate level, at the asset manager level, on the equity side and the fixed income side and the M&A side, and we get to a competitive set that is pretty manageable, I guess, because there are not many people who can do that in scale and at the capability set that we can.

There's been a lot of focus on private markets and private credit in the U.S. How are you positioned there?

Look, there's no denying. This is a huge, huge theme when you think about it. When I started, there was like KKR, there was no Blackstone, and there was very little private equity going on. I think there is now close to $2.5 trillion equity, which means there's about $7.5 trillion of buying powder -- power through dry powder in the private market ecosystem, and there are an enormous parts of the economy that can get consolidated by that crew and drive value, and they've got a good model. So we are a huge player in that. So in our Asset and Wealth Management business, we have close to $500 billion. So close to $0.5 trillion of alternative assets. So in our Wealth Management business, I think we are the largest allocator to private markets in the world. In our Securities business, private equity, in the investment bank, private credit, all the way around, all big partners to us. I think private credit has been getting a lot of attention in the press and all the rest. To a degree, I would say the bullish play here is credit. And the bullish play for us, I guess, is credit. Meaning, in the old days, when a bank would make loan, and when a bank would make a loan, our connection to that loan was helping that bank maybe raise a bond deal once a year to help fund the leverage to go make that loan. And if they got in trouble, maybe we would do an equity offering once a decade. If an insurance company made a loan, same thing. We'd raise a bond deal for them and maybe, once in a while, we'd raise an equity for them. To the degree banks aren't lending because of sort of policy, and you guys had policy people here yesterday, nearly as much. So asset managers are stepping in, whether it's in the public market or in the private market. And insurance companies are still taking on credit, but they're outsourcing it in dramatically greater amounts to asset managers who want just a different service offering. And so in the private credit world -- but it extends into some elements of COOs and others in the public credit world, we're going to help all those asset managers source the assets. They don't have the same sourcing mechanism that an old school commercial bank would have. So we're going to source the assets. Bluntly, they're a lot more sophisticated in setting up the return profile and the risk profile than a plain vanilla bank or let's say, insurance company. And again, I'm using a U.S. midsized bank as an example. So they want structuring. They're going to pay us for that sourcing. They're going to pay us for structuring. And then they set up day 1 with no leverage, right? A bank is 8 or 9x leverage, there's no leverage. So they want some level of financing, and we're in that secured financing business, both in credit and in prime brokerage. And so the velocity of engagement with that credit ecosystem is a lot more intense than it used to be when we would just raise a bond deal once a year for a bank or an insurance company. And again, as I said, Ted was on this. Financial repression takes rates and a little bit of volatility higher, which means it's a better time to be a lender period. Would be also for a bank, so note to the Federal Reserve and to all the other regulators around the world. I know there was some regulator bashing, let's say, earlier in some of the session. That's the extent of mine. But if it's out there, we're going to be a participant in helping them do it. And you get paid more now for it. And because you're getting paid for it, every sovereign wealth fund in the Middle East wants to get credit. Every big Japanese bank and other pension -- or pension fund, wants to get credit. All these sources of big pools of capital who in the past sort of ignored credit, because you didn't get paid for credit, now they're getting paid for credit, and by the way, the competition from a bank is less. So it's a pretty good world to be an intermediary structure or sourcer, financer of credit in the marketplace. And we and a few other firms are really well set up to do that.

So I got to ask you about Basel end game. We saw the proposal, we went through the commentary period, and it's all kind of quiet and down. What are your latest thoughts on how this could affect the business in the competitive landscape?

So Ted and Andy and I are really lucky. We have the 2 greatest players in this ecosystem. One is James at a real macro level. He came out from the very beginning and saying, this thing is not going to end anywhere near where it started. And then no one in the world is better at assessing what's going on and being called on to give real constructive feedback and advice to the whole ecosystem than our CFO, Sharon Yeshaya. So we're in a good place. To a degree, how on the -- within hours in last summer when it came out, noted that he wasn't sure he believed. And then last week, he was a lot more definitive and detailed in his testimony around the fact that things have got to change. We've been not as loud as some, but quite constructively critical in a good way around what that -- where it started was not good for the economy, not good for the banking sector, not good for consumers. And it feels like we're on a better path. It's too early to tell. We're still, in essence, in a cautious sense around how do we -- what do we actually do with this, because we got to watch it play out. But I think James and Sharon have been really spot on throughout this. So I would continue to follow their commentary closely. But obviously, if it comes out much different than the way it was originally proposed. As you've heard from what I said, we've got a lot of things to do on the back of that. We're waiting, but we're hopeful and we were sort of continuously hopeful/constructive in our feedback. But intense, like big letters, back to the Fed and the team on this.

Conscious of time, if there is -- we might have to one -- time to squeeze one question, if there's anything? If not, we'll leave it here. Is there anyone that wants to ask a question? We're already over time. So I guess we can leave it here. Thanks very much, Dan.

And what I would say, again -- because now I'm going to turn from presenter to the host. Thank you again. This is Morgan Stanley. We aren't here without all the partnership with everybody in the room, and we really appreciate it. Thank you.

Thank you very much.