Morgan Stanley, the largest securities firm in the world market, has offered its staff millions of dollars in incentives to keep and retain new employees, as Lehman Brothers and Goldman Sachs present tough competition and pay 10 to 20% more
Under the new incentive structure, employees who earn at least $500,000 will be able to invest part of their annual bonus in Morgan Stanley funds of hedge funds and private equity funds.
Morgan Stanley will also lend qualified employees $2 for every $1 invested in the funds. The loans are forgivable if the investments decline to the point where employees would have no equity remaining after paying the money back.
Employees can begin taking part in the scheme starting with bonuses to be paid later this year. Anyone who leaves before three years forfeits the investments and any gains.
Morgan Stanley will offer low-interest loans so employees can triple the size of their investments in hedge funds and buyout funds. The new pay scheme comes after executives Vikam Pandit, John Havens and Guru Ramakrishnan left to launch their own hedge fund and merger bankers Joseph Perella and Terry Meguid departed to start a boutique bank.