Ken deRegt, a Morgan Stanley veteran called on to revamp risk-management and the fixed-income trading business after returning in February 2008, is leaving again to join investment firm Canarsie Capital Group.
DeRegt, 57, will be succeeded by Michael Heaney, 49, and Robert Rooney as global co-heads of fixed-income sales and trading, according to a staff memo from Colm Kelleher, who oversees investment banking and trading for Morgan Stanley. Kelleher and Chief Executive Officer James Gorman sent a separate memo about deRegt’s departure.
He “proved invaluable in steering the firm through the financial crisis of 2008 and its aftermath,” Gorman and Kelleher wrote. “Our fixed-income business is more stable, focused and better aligned with the rest of the firm than it has been in some time, due in large part to Ken and his team.”
DeRegt will become a partner at Canarsie Capital, which will be a Morgan Stanley client, according to the memo from Gorman and Kelleher. DeRegt’s son works at Canarsie, a firm that was started in January, according to a person familiar with the matter who asked not to be identified because he wasn’t authorized to comment publicly. Attempts to contact Canarsie Capital’s office and employees weren’t successful.
Heaney, global head of credit sales and trading at Morgan Stanley, and Rooney, who runs fixed-income sales and trading in Europe, take over a business that’s paring risk-weighted assets and seeking to boost its share of revenue among the largest fixed-income traders to 8 percent, from 6 percent in 2010.
Progress toward that goal has stalled. Morgan Stanley’s market share of fixed-income trading revenue among the nine largest global investment banks exceeded 8 percent in the year ended March 2012, data compiled by Bloomberg show. In the next 12 months, that figure dropped to less than 6 percent, excluding accounting charges. The division’s risk-weighted assets fell to $253 billion in the first quarter from a peak of about $500 billion.
“Ken deRegt’s departure will certainly cause investors to wonder how much market share of fixed-income and commodities trading Morgan Stanley can recapture while simultaneously reducing the regulatory risk-weighted assets of the business,” said David Hilder, an analyst at Drexel Hamilton LLC in New York, who recommends buying Morgan Stanley stock.
Morgan Stanley’s bond-trading revenue fell 42 percent in the first quarter, contributing to the biggest drop in total trading revenue among the largest U.S. banks.
“Given that Michael and Rob worked closely under Ken, I am confident that they will continue to deliver on the rebuilding of our fixed-income franchise,” Kelleher said in the memo.
DeRegt, who first joined Morgan Stanley in 1981, had served as global head of fixed income for three years when he left in 2000 to work at an investment firm. He was called back in February 2008 by John Mack, Morgan Stanley’s then-CEO, to help the company recover from a $9.4 billion writedown and quarterly loss that Mack described as “embarrassing.” In January 2011, the firm tapped deRegt to replace Jack DiMaio as global head of fixed-income sales and trading.
Rooney, who has been global head of fixed-income client coverage in addition to running Europe fixed-income since 2009, joined Morgan Stanley in 1990 and relocated to London in 1993. Heaney, who also has run global credit since 2009, joined the firm in 1986 in credit research and moved into corporate bond trading in 1990, according to the memo.
Gorman, 54, who succeeded Mack as CEO in 2010 and added the chairman title last year, has vowed to raise profitability at the firm, owner of the world’s biggest brokerage. His plan to double return on equity from last year’s 5 percent includes cutting $1.6 billion of costs in the next two years, reducing capital used by the fixed-income trading business and boosting pretax margin at the wealth-management division.