Morgan stanley interview question: How to Answer Common Interview Questions

How to Answer Common Interview Questions

• Firm Leadership
• Aug 11, 2017

If you think the most common interview questions are often the most difficult to answer, then you’re not alone. More people trip up on things like “tell us about yourself” and “what is your biggest weakness?” than questions about their skills.

That’s because the most common interview questions all have a subtext, explains Carla Harris, Vice Chairwoman at Morgan Stanley. “What an interviewer is really trying to find out by asking common questions is what kind of personality you have; are you a leader or a good pair of hands and will you fit in? They already know you have the qualifications because they’ve seen your resume.”

Harris has coached hundreds of people on their careers during her 30 years at Morgan Stanley, and is the author of “Expect to Win” and “Strategize to Win”.  We asked her to demystify some of the most common interview questions — here’s what she said: 

1. Tell Me about Yourself

“This is the first question you’re likely to get in an interview and it’s the one that people most often struggle with,” says Harris. “This isn’t an invitation to recite your life story or go through your resume. Instead the interviewer is trying to find out if you’re a good fit for the job, so talk about experience that’s relevant to it. It’s important to show you understand the key success factors for the job, so tell your story with those descriptors in mind.”

Tip: “Try to hit the qualities in the job description. The interviewer wants information that is pertinent to the job you’re interviewing for.”

2. Describe Yourself in Three Words

“This is a question designed to see if you’ve paid attention to the job specs and if you have qualities that best match the role,” Harris explains. “For example, if you’re going for an internship on Wall Street, you might say: “analytical, detail-oriented, quantitative. ” If it’s for a sales job, then maybe “commercial, competitive, connector.” That’s assuming, of course, that these words do really describe you!”

Tip: “Be sure you have examples to back up each word, in case the interviewer asks you to elaborate. It also helps to read up on the company’s core values.”

3. What’s Your Biggest Weakness?

“This question trips a lot of people up, but it comes up frequently in interviews, so it’s one well worth prepping for,” notes Harris. “Pick a weakness that’s not a key competency for the job and, most importantly, show self-awareness by explaining what you’ve done or are continuing to do to overcome this weakness.” 

Tip: “Don’t say you’re a perfectionist. It’s so clichéd and won’t come across as genuine. You may want to offer something that would be helpful in your new role, like: ‘I am working on public speaking skills’.”

4. Why Should We Hire You?

“What an interviewer is looking for here is an answer that explains why you think you’re the best candidate for this role — what you have that differentiates you from others. ”

Tip: “Think of yourself as a product and the interviewer a customer. The things you want to talk about are similar to what you would put in a cover letter. You can talk about your exceptional skills; your passion for the industry or profession — anything that you feel would lure the ‘customer.’ ”

5. Describe a Time You Failed

“Everyone makes mistakes or fails at some time or another, so that’s not the issue here,” says Harris. “Instead, this question helps to reveal whether you have the self-awareness to admit failure and the maturity to learn from it.”

Tip: It’s important to outline the steps you took to improve. If you underdelivered because you didn’t completely understand what you were asked to do, for example, it’s likely you learned to have people repeat their requests to ensure you have the exact details.”

6. Why Are You Interested in Us?

“Here, an interviewer wants to see just how much you know about the company and the industry and whether you’ve done your research,” Harris explains.   “It’s also a question that will reveal if you’re talking to competitors, or whether you’ve specifically targeted the company because of its reputation and values.”

Tip: “Show how your strengths and personality traits align with the job position and the company’s culture. The people who are interviewing you are proud of their company’s values and will be pleased to see that you have taken the time to appreciate the culture.”

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Interview Preparation | Morgan Stanley Careers

So you’re getting ready for your interview with Morgan Stanley? This is an exciting time. First of all, enjoy the process. It’s fun to meet new people at the top of their game and experience an iconic firm first hand.

Remind yourself why we conduct interviews in the first place. This will help you focus on your relevant skills and determine the impression you want to make. Remember, we use interviews to find out who you are and what motivates you. We want to see if you understand our business and what the job entails. This is an opportunity to show us what you could bring to the team at Morgan Stanley.

Every interview is different. Your discussion will depend on what the job requires and who you are. Anticipate the questions you might be asked by reading through the application materials and the job description. If you were meeting yourself for the first time, what would you ask?

Enjoy the conversation, be honest, and don’t be afraid to show the real you. We’re looking for exceptional individuals.

Your Story

Think about how to best tell your story.

It starts with knowing your resume. Be able to articulate everything you’ve listed without reading or referring to it. Have confidence. Be yourself. Know your strengths and be able to articulate the areas you want to develop.

Answer each question the best you can. We don’t always expect candidates to have the right answer during an interview—we’re just as interested in seeing how you work through a scenario. Interviews could be competency, strengths based, skills based or technical. You may be asked about situations when you have used particular skills or asked to demonstrate your problem-solving skills.

Be prepared to talk about past experiences that demonstrate why you would be an ideal candidate. Present a diverse background of experiences by highlighting relevant jobs, projects, coursework, and extracurricular activities. Tell us why you’re the right person for the job.

When you learn how to tell your story in an engaging way, you’ll make us want to become a part of it.

Your Personal Brand

We all have a personal brand. What makes you unique? Envision the impression you want to make. Your interviewers are meeting several candidates. How do you want to differentiate yourself and be remembered?

Present yourself professionally. Be conscious of your body language, maintain eye contact, and let the interviewer finish their thought before you respond.

We know you may be nervous, so try to collect your thoughts before you speak. Take your time to answer questions, and communicate concisely. Remember, we want you to succeed.

It may seem excessive, but it helps to practice interviewing, whether in front of a mirror or with another person. Get comfortable speaking about yourself, but avoid sounding too rehearsed. It’s important to be genuine, enthusiastic and stay true to who you really are.

Your Interests

Have a compelling reason for why you want to work in this industry, our firm, and the division you’re interested in. Passion is imperative — it’s what sets Morgan Stanley apart from others in the industry. We genuinely want to make a difference in the world.

Show how the position you are interviewing for aligns with your goals and expertise. Express your interest by asking the interviewer questions. Be sure the questions are relevant and specific. Enhance your understanding of what we do and who we are so you avoid generic questions like, “What is the culture like at Morgan Stanley?”

Do more than state your interests. Express your knowledge gained from experience and education and how you can use that in the role.

At Morgan Stanley, we believe that diversity and inclusiveness make us stronger. How will you enrich our culture

Our Firm and Industry

Familiarize yourself with our history, principles and core values. Learn how we are organized. Research our management and key senior leaders. Stay up-to-date on the latest financial news and Morgan Stanley’s positioning in the marketplace. Understand the basics of how government regulation affects the financial industry. Learn about the financial crisis: what happened and why? Research the program and division you have applied to and keep up to date with its current affairs, trends, and innovations.

We don’t expect candidates to understand all spheres of the markets, finance, and economics. But it’s a good idea to choose one or two areas of the industry that you can discuss with knowledge and enthusiasm. Make an effort to understand what professionals at your level do in the industry and at Morgan Stanley.

Be sure to use all the resources available to you—refer to our online resources and publications. Also, take a moment and explore our Recommended Reading list. It can be a great starting point for discovering more about our culture.

Enjoy your time preparing for the interview. Life-changing opportunities only come around once in a while—this is one of them.

Morgan Stanley interview questions, the definitive list

We’ve looked at the interview questions at Goldman Sachs. We’ve looked at the interview questions of J.P. Morgan. And we’ve looked at how body language in an interview might kill your chances of landing a job. 

But what if you’re interviewing with Morgan Stanley? Based upon questions Morgan Stanley interviewees have been asked in 2022, the below list include the kinds of things you can expect across IBD, sales and trading and technology roles. Remember, don’t forget the soft skill questoins are as important as the technical. 

Fit / Competency questions from Morgan Stanley interviews

Walk me through you resume.

Tell me about yourself.

What are Morgan Stanley’s corporate values?

Why are you a good fit for Morgan Stanley?

Why did you apply to Morgan Stanley?

What can you add to Morgan Stanley?

Tell us about your qualifications.

What are your future goals?

Why are you the best person for this position?

Give an example of how you handled a difficult situation and the outcome.

When was a time you worked well in a group? Describe it.

What is your biggest professional accomplishment?        

Tell me about your work history.

Have you ever dealt with difficult people? How did you do it.

What made you interested in Morgan Stanley?

Tell me about a struggle at school that you overcame.

What do you like about your current position?

Where do you see yourself in 5 years?

Tell me about a time when you solved a conflict.

Tell us something unusual about yourself.

What do you think about working with people from different backgrounds?

Describe yourself in three words.

Give me an example of a challenge you had to overcome.

How would you bring new ideas and perspective to Morgan Stanley?

Why did you leave your previous job?

How would you sell Morgan Stanley?

Give me an example of a time you’ve been wrong about something.

What is your greatest accomplishment.

How do you manage your workload when you are faced with several projects and deadlines?

Tell me about your strengths and weaknesses.

Describe a time when you have been able to demonstrate flexibility?

Tell me about a time you were able to keep a friendly demeanour with someone who was upset or angry. Describe the situation, your actions, and the outcome.

Tell me about a time that you used technology to make a decision

What would you say is your greatest leadership quality?

Tell me about a time you’ve been innovative.

What’s unique about Morgan Stanley?

What is one thing not on your resume that you would like us to know?

What are your long term career goals.

Describe a time when you had to make a big decision with limited information.

If you could describe yourself in one word, what would it be?

Use 3 adjectives to describe yourself and explain why you used these 3 adjectives.

What would you do if another team was trying to push more work onto your team?

One of our values is giving back. How does that principle apply to you?

Describe a time when you made a decision based on limited information.

What can you bring to this company?

IBD questions from Morgan Stanley interviews 

What is a DCF valuation?

Why investment banking?

What deals in the space have you been following?

What is the common debt-to-equity ratio?

What is balance sheet equity?

Walk me through a LBO.

What are some common valuation methods?

How would you value a coffee shop

Describe some trends in M&A deals recently.

Explain the revenue structure of the last company you worked at.

Explain WACC.

Explain levered and unlevered beta.

Tell me about an industry that is impacted by Covid.

Markets questions from Morgan Stanley interviews

How do you keep track of the market?

What are the Greeks and what are second order Greeks?

Explain a credit default swap and an interest rate swap.

Why markets at Morgan Stanley?

How would an increase in the price of coffee effect the price of gold?

Pitch us a trade idea.

Why do you want to pursue a career in trading?

Whats the difference between GO bonds and revenue bonds?

What is VaR?

Talk about a recent market news headline in detail.

Explain the difference between contango and forwardation.

What do you know about bonds?

Explain how bond maturities work.

Describe main types of financial derivative instruments.

What are futures, forward and options and how do they differ?

What is the difference between bonds and stocks?

If you had a million dollars, what would you invest in?

Tell me about the current market environment.

How might future trends in the field of sustainability affect company revenues?

Tech / Quantitative questions from Morgan Stanley interviews

Explain a design pattern.

What is the smallest path in a m*n matrix from top left to bottom right?

What are the responsibilities of the Operating system?

What is dependency injection in angular? What are the benefits?

What is the Monty Hall problem? Explain how you would solve it.

How do you create a service now dashboard?

What is your preferred database?

Write a function that converts a string to an integer.

Tell us why you are interested in Morgan Stanley Technology and what unique perspective you can bring to the program?

Tell us about a tech trend that will be important in the next year.

How would you place locks to be threadsafe?

Write a chess player program.

What are the data structures in R?

How would you debug code?

How do you implement a hit counter that increments every time some accesses a page?

Given a file with multiple records, write a program to read, process and aggregate the records.

What is object-orientated programming?

Given a list of strings [“text”, “tet”, “xtet”, “tte”, “ttex”] group all the anagrams together and return it.

Given 2 arrays, find common numbers in them and return in the form of an arrayList.

Start from a blank edit and write a function hat given a depth, calculates how many direct friends someone has. If depth is 2 – you have to return the direct friends of the person plus the direct friends of all of his direct friends. You don’t have to run it, so don’t worry about implementing anything outside of what you use.

From a blank editor write a function that calculates all possible multiplications between a List of Positions and a List of Scenarios – we do not care about what these are and how the calculation works.

What is CLR?

What is dispose?

What are SOLID principles?

Describe the 5 essential necessities for developing a test automation framework.

Write a multi-threading c++ code to print numbers in a given range by two threads in increasing order with condition that first thread should print odd number and second should print even number.

Write a runtime efficient loop in Java. 

What is a domain name server?

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Morgan Stanley interview questions

FinExecutive

Russia
FinExecutive.com

2018-06-08

#interview at an investment bank

Major investment banks carefully choose their future employees. If your goal is to work at Morgan Stanley, then be prepared for the fact that at the very first interview not only your personal qualities and knowledge will be tested, but also your reaction speed, quick wit and stress resistance. To make things easier for you, we’ve put together a list of real-world questions that candidates have faced that you’ll probably need to answer as well.

Questions about you

• What do you think you will do in this position?
• Why do you want this position?
• Why did you choose Morgan Stanley?
• Have you ever interacted with Morgan Stanley employees? How did this influence your decision to work here?

  • Interviews at the Big Four Companies: Most Common Questions

  • 8 tips to help you succeed in an interview

  • 10 questions you should ask in an interview

• What will you do if you don’t get a job at Morgan Stanley?
• If several banks make you an offer at the same time, how will you be guided in your choice?
• What comes first: integrity or authority?
• What is most important: money, reputation or knowledge?
• If, after completing a job, you realize that you won’t have enough time to finish it, what will you do?
• Give an example that shows the effectiveness of your leadership skills.
• Can you give an example of how you had to refuse a request?
• Tell us about a time you had to let someone down. What have you done to remedy the situation?
• What makes you stand out from other candidates? Why should we prioritize you?
• How would your best friend describe you?
• How would your worst enemy describe you?
• What determines your success: good preparation or perseverance in work?
• Describe a situation in which you were able to find a simple solution to a complex problem.
• What would you call the most serious act in your life at the moment?
• Tell us about how you managed to change someone’s mind during a dialogue.
• What would you call the most inventive act of yours?

Banking questions

• What methods of company valuation exist?
• Which of the three valuation methods gives the highest total value? Why is this happening?
• Describe the process of acquiring a company.
• Briefly describe the process of discounting cash flows.
• What is the weighted average cost of capital (WACC)?
• What is the Capital Asset Pricing Model (CAPM)?
• What does the formula for calculating the value of an enterprise look like? What is a minority stake and why is it included in this formula?
• If the depreciation rate of the company’s funds changes, how will this be reflected in the balance sheet, income statement and cash flow statement?
• On December 31st, a company purchases $100 worth of equipment in cash, how will this and next year’s reports show up?
• What can you tell us about Morgan Stanley clients?
• Can you tell us about the latest deals we’ve been working on?
• How would you rate Uber?
• How would you approach the evaluation of a bank? What indicators would you omit when evaluating?
• How would you rate a Starbucks outlet?
• You need to compare the cost of Apple and Samsung – how will you solve this problem?

Market questions

• What is quantitative easing and how does it affect the markets?
• What would you invest $1 million in?
• What do you know about the Black-Scholes option pricing model?
• Give the Black-Scholes formula.
• How do options work?
• How would you approach valuing an option?
• What are your current market ideas?
• Sell me a share.
• Stocks or bonds? Justify your answer.
• Should the UK adopt the euro?
• What are the main trends in local and international markets at the moment?
• What is happening in the bond market now?
• Which country would you invest in and why?

Technical

• What are the three fundamental principles of object-oriented programming?
• What are the benefits of object-oriented programming?
• Define encapsulation/polymorphism/abstraction.
• Tell me about protocol
• What are the main differences between Java and Scala.
• You are given a block in Java that should contain 200 values, but you only find 198 – what’s the problem?
• How does quick sort/merge sort/bubble sort work? What are the disadvantages of each method?
• How would you write a sorting algorithm?

Other questions

• Define independent events (probability theory).
• Why do financial companies need external regulation? Name three regulators.
• Tell about game theory so that your grandmother can understand you.
• What is the GDP of the Russian Federation?
• Decipher the abbreviation
• Which is more: 45% of 19 or 19% of 45?
• There are 200 fish in the aquarium – 198 blue and 2 red. How many blue fish do you need to remove to make 98% blue?
• If a large 10x10x10 cube is made from sugar cubes, how many cubes can be seen from the outside?
• How many tennis balls can fit in this office?
• How many cats are there in the UK?
• 18% off 83 — how much is it?
• Express 17/18 as a decimal.

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Morgan Stanley Bank will surrender its banking, brokerage and custody licenses and liquidate these business units, Morgan Stanley’s subsidiary said in a 2018 report. It will transfer the remaining business to a new company that is not subject to licensing requirements: it will provide consulting services in the field of investment and real estate – this plan was announced and brought to the attention of the Central Bank, the report says. Morgan Stanley plans to file an application for the termination of banking activities with the Central Bank in the first quarter of 2020. The Central Bank does not comment on operating companies.

1998: To be or not to be?

Morgan Stanley opened a representative office in Russia in 1994, and in 2005 received licenses: banking, dealership, brokerage and depository. “Ryre, we’re taking you. Don’t worry about revenue: our main goal is to become No. 1 in this market in 3-5 years. Russia is strategically important to us” – this is how Rair Simonyan, who managed the Russian business of Morgan Stanley for many years, recalled the offer to head the division in an interview with RBC in the summer of 2016.

“I joined the bank in April 1998, and in the autumn there was a crisis when the market burst and the country was on the verge of collapse. We had one strategic question: stay in Russia, despite the situation, or leave? Then, depending on the choice made by different banks, it was possible to talk about certain strategies for working in Russia. But in 1998 the question was very simple: to be or not to be?” he said. The first deal that the Russian Morgan Stanley did after 1998 was the privatization of Lukoil in the fall of 2002, he recalls: “For four years there was no business at all. After that, the market began to take off like a rocket. Up until the 2008 crisis, Morgan Stanley was No. 1 in just about every product.”

“For the last 2–3 years there has been no investment business in Russia. There is practically nothing for foreign banks to do here. They face the question again: to stay or not to stay? Everyone answers it in their own way.”
in an interview with RBC in the summer of 2016

The best time for the investment business was 2002-2008, Simonyan estimated. Morgan Stanley was involved in many major deals, including Rosneft’s $10.4 billion IPO in 2006.

fell into the second ten, he recalled. “For the last 2-3 years there has been no investment business in Russia. There is practically nothing for foreign banks to do here. They face the question again: to stay or not to stay? Everyone answers it in their own way,” Simonyan said in 2016.

Even today, there is no real business for foreign banks in Russia, Simonyan repeated to Vedomosti yesterday: “This has nothing to do with Morgan Stanley’s desire to be or not to be in the country. This is a problem for all foreign investment banks, without exception, because due to sanctions, it is practically impossible to carry out any transactions in the capital market or in the mergers and acquisitions market, so banks simply adapt to the conditions.” This time they behave much more gently towards Russia than, for example, after the crisis 1998, when many banks left (for example, Goldman Sachs, Merrill Lynch and Lehman Brothers. – Vedomosti), he notes: now banks retain at least a minimal presence.

In its 2018 report, Morgan Stanley wrote in the Operating Environment section that changes in economic conditions could significantly affect a bank’s financial position and future results. In this section, he noted that the sanctions imposed in 2014 made it difficult for Russian businesses to access international capital markets. In addition, the markets of developing countries, including Russia, are subject to economic, political, social, judicial and legislative risks. Laws and regulations governing doing business in Russia can change rapidly and may be subject to varying interpretations, Morgan Stanley describes.

Citi has no plans to shut down any business and is committed to the Russian market, a spokesman said. But Citi’s retail business here is winding down: it has been closing branches since 2014, this year it plans to close eight branches, after which there will be only 14. Deutsche Bank in 2015 announced an optimization and began to wind down the investment banking business in Russia.

Representatives of UBS, Deutsche Bank, JPMorgan did not have time to respond to Vedomosti’s queries sent on Monday evening.

2019: Decided to be the first to leave

Morgan Stanley’s decision is quite logical, says a top manager of a global bank in Russia: the number of such transactions has significantly decreased, and this market has shrunk to the limit.”

The income of investment bankers operating in the Russian market has fallen significantly in recent years. According to Refinitiv, in the first quarter of this year, commissions for investment bankers amounted to $32.5 million – they have not earned so little since the beginning of 2015. capital is quite volatile, and there have been fewer transactions on it in recent years, ”said Dmitry Sedov, co-head of Goldman Sachs in Russia, commenting on the decline in income of investment bankers.

“This has nothing to do with Morgan Stanley’s desire to be in the country or not. This is a problem for all foreign investment banks, without exception, because due to the fact that sanctions remain, it is practically impossible to carry out any transactions in the capital market or in the mergers and acquisitions market, so banks simply adapt to the conditions. ”
Vedomosti, May 6, 2019

In the short term, revenue growth is not expected, says the head of a foreign investment bank operating in the Russian market. “It is easier for a bank to optimize its business, leaving its presence in the form of consulting, and to carry out brokerage business in Russia through other offices,” he explains. “Of course, it’s bad that a bank with that name, especially an American one, is leaving, but the income from the stock trading business is declining year after year, and the cost base and regulatory requirements are growing,” he says. It is unlikely that all Russian subsidiaries of foreign investment banks will start refusing licenses without exception, but there is already a trend towards business optimization and it can be expressed, for example, in reducing staff to the maximum, says Vedomosti’s interlocutor.

“Licensing is an issue that is and has been faced by the majority of foreign, mainly investment, banks in Russia. Interestingly, Morgan Stanley was the first to take this step,” points out a former Morgan Stanley employee. Everyone looked at each other and thought about who would be the first to decide: after all, there is an understanding that refusing a license is not very correct in terms of reputation and opening the next new business. “With a high degree of probability, others will decide to take the same step as Morgan Stanley: to keep staff here to service the license, you still don’t need to create quite specific reporting,” he concludes.

“We cannot say that we have a completely dead market: stocks are traded, companies conduct secondary and primary offerings, but in comparison with the 2000s. the volume of business is declining, and it is also difficult to work with a large number of clients due to sanctions,” says the head of a large Russian investment fund.

“We do not think that the withdrawal of licenses will lead to a significant decrease in the bank’s trading operations in the Russian market,” hopes Igor Marich, Managing Director for Money and Derivatives Markets of the Moscow Exchange. “In addition, Morgan Stanley funds remain significant long-term investors in Russian securities.”

Anna Tretyak, Alexandra Astapenko, Danis Yumabaev contributed to the article

Interview on the commercial real estate market. commercial real estate.

-Morgan Stanley provides investment banking services to its real estate clients worldwide. What do you do in the Russian market?
– The strategy of the Russian office is built taking into account and understanding what is happening in the world as a whole. Real estate for Morgan Stanley is one of the strategic directions.
Our real estate business can be divided into three parts: real estate investment banking, real estate investing and real estate lending.

Real estate investment banking is a core business for us as Morgan Stanley is a leading global investment bank with a long presence in Russia. We provide investment banking, equity and debt financing, M&A, derivatives trading and structuring of various joint ventures and funds. Depending on the situation in the capital markets, we focus on different products. For example, 2007 was a good year for IPO development companies, and then we organized initial public offerings for the largest European companies, including such Russian companies as PIK Group, AFI Development, RGI. And in 2008–2009In recent years, we have paid more attention to M&A deals and restructurings. The direction of real estate lending in Russia is not developing very actively, however, we managed to provide loans to Russian development companies, which we considered successful.
Real estate investing is part of our investment management business. Morgan Stanley manages real estate funds totaling more than 50 billion euros, and our company also acts as an investor in these funds. In Russia, our Special Situations Fund has acquired stakes in several existing successful development companies such as RGI, RBI and RosEvroDevelopment.
It is important to note that in order to avoid conflicts of interest, real estate investment banking and real estate investing are managed separately.

In Russia, all these three types of business are present to one degree or another. We invest in real estate, we lend to various companies in this industry. We also have quite a lot of success in the investment banking business.

– What areas of your real estate business are in demand on the Russian market today?
– All three areas of our real estate business are in demand today. At the same time, we focus on the investment banking business, where there is a sharp increase in the activity of our clients and where a lot depends on competent advice from investment banking and capital markets specialists for development companies. As part of real estate investment, we are mainly focused on managing our portfolio. As for the real estate lending business, here Russia is not yet a priority region for us, but the risk assessment is now changing.

– How interesting, in your opinion, is the Russian real estate market from an investment point of view?

– It is important to note that while operating in the Russian real estate market, we are also operating in the global and pan-European market, and our Russian division is part of the pan-European, so we are focused on working with global investors operating in various industries and regions.
The Russian economy is recovering faster than many others. The state invests a lot of money in the economy. For example, in 2009a number of industries in Russia began to recover rapidly after the crisis. These include oil, metals, retail and transportation, all of which have already completed deals in the capital markets, with Morgan Stanley acting as global facilitator. Among such transactions are the placement of NC Alliance, GC Integra, Evraz Group, Magnit and GlobalTrans. We also had a major Gazprom bond placement last year and most recently a TMK convertible bond. This is me listing the deals for the last six to eight months.

At the beginning of 2009, no one expected the market to recover so quickly. We now expect that, following the oil industry, demand will return to other sectors of the Russian economy, including the real estate sector, which is gradually becoming more attractive to investors.
Even today, the growth of interest is very easy to trace in the Russian companies of the real estate sector, traded on the stock exchange. The activity on the stock exchange clearly shows that the economy is starting to recover. The financial results announced by the companies turn out to be better than analysts’ expectations, so share prices have been growing for the last 7-8 months. But, of course, at the end of 2008 they fell very strongly – after all, everyone considered the bankruptcy of many companies as a very likely scenario.
I’m talking about companies with assets in Russia – LSR Group, PIK Group, AFI Development, Mirland, RGI, etc. On average, their shares have grown by about 400-500% over the past 8-9 months. There is an example of LSR, whose shares have grown by 900% compared to the beginning of 2009.

This trend shows that there is interest in these securities. Previously, during an IPO, these shares were mainly acquired by special real estate investors – professional funds that were created in order to invest in real estate. Today, they are acquired mainly by funds specializing in emerging markets. These funds are more willing to take risks. and usually start investing earlier than industry funds. There is a danger that this money could leave as quickly as it came in, but the better the fundamentals of the market become, the less likely it is.
In any case, this is a positive signal. I would like to note that over the past 9 months we have seen the highest growth of emerging market indices in almost the entire period of their existence.

– What do you think, how interesting is the market for foreign capital?
– Of course, the Russian real estate market was of interest to Western capital. We saw quite a large influx of money in 2007 and up to mid-2008.
To date, foreign direct investment has not yet returned to the Russian real estate market in significant volumes. This is because for investors who specialize in asset purchases (such as office buildings or shopping malls), the risk/return ratio in Russia is not as attractive as in other European cities such as London or Paris. In these markets, debt financing is also more readily available, and investors can increase returns on capital through leverage. In addition, Moscow has traditionally lacked high-quality investment-grade projects, but this situation is gradually changing, and we will soon see more asset sales involving foreign investors.

On the other hand, we are seeing an increase in foreign investors’ interest in shares of Russian developers, so optimism is returning again, although now investors prefer to own relatively highly liquid securities.
Personally, I think that today the picture in Russia is attractive. Here, usually, all processes take place much faster than in other markets. Rental rates in the office and retail segments have fallen sharply, and housing prices have also dropped significantly compared to mid-2008. However, Russian consumers do not have such volumes of debt as in America or Europe, so the recovery is much faster. This is exactly what we have been seeing lately, especially in the residential segment – ​​there is a great demand for completed properties and properties under completion. Demand for retail space is also returning, and in the office segment, a revival will have to wait longer, given the large volume of supply. As a rule, the office segment begins to recover 12-18 months after the start of the economic recovery. Improvement in market fundamentals usually leads to increased demand from investors.

– How is foreign capital present on the commercial real estate market today? Who is investing in the Russian real estate market today?
– After the financial crisis, those with money prefer liquid investments over long-term closed-end funds, typically 7-10 years. Therefore, we see demand for shares of Russian developers against the backdrop of a generally positive attitude towards public Russian companies. Stocks are easy to buy and fairly easy to sell. As noted earlier, the main buyers, as a rule, are global emerging market funds. As for direct acquisitions, here is the whole of 2009year was active local capital – Russian companies, holdings, which managed to use the market opportunities. Western funds are also slowly re-entering the market, so we should see more asset-level transactions in 2010, especially as the divergence between sellers’ and buyers’ price expectations narrows.

– How do you assess the risks of this market today?
– Morgan Stanley analyzes risks to better understand the situation. Since the rental market is still relatively weak, the key to mitigating risk is to find the right “entry price” for the project, taking into account the level of market rental rates, buying medium-sized assets that are more liquid, and finding long-term debt financing. This is the ideal scenario. In practice, the situation may differ, but taking into account the risks in determining the entry price is essential to achieve the desired return. The success of real estate investments largely depends on what phase of the cycle we are in. The next step is to choose a quality object with a good location, transport accessibility and market rental rates and wait for the market to pick up. From a business cycle perspective, now is the time to look at the market. The exit time is also important – many property owners in Russia have had problems with this. Until mid-2008, most market players seemed to believe that prices could only move in one direction. Everyone should understand that not selling an object at any given moment is the same as buying it. In other words, if you are not inclined to buy something, considering the prices too high, then you should consider selling what you have.

– Which market sectors might be of interest to investors then?
– Today we see that the demand for the mass housing segment is reappearing. In the segment of business-class housing, everything depends on the stage of construction. Retail in Russia is always in demand. Of course, it all depends on the location and quality of the project. After all, new shopping centers are opening today. They may not be 100% complete, but they work quite well. With offices in Moscow, the situation is more complicated. We think that demand will appear, but we have to wait. The hotel segment in Moscow, it seems to me, is also a successful niche.

– There is practically no project financing on the market today. Why? When will banks be able to resume this type of lending?
– Project finance is starting to come back. Some Russian banks and several foreign banks are considering and discussing the possibility of providing this type of financing. After all, a lot of money has been accumulated in state banks today, and they need to be invested somewhere. Of course, first of all, banks will start lending to housing developers, because this is a state priority.

– How developed is the real estate M&A market in Russia today?
– Oddly enough, 2009 was an active year in terms of M&A transactions. But the main reason for these deals was debt restructuring. As a rule, these transactions took place under pressure from banks. If you look at the entire real estate sector over the past 12 months, out of the 5-6 largest development companies, at least 3-4 have had significant changes in the ownership structure. Such companies include Sistema-Hals, Don-Stroy, PIK Group. And this process is not over yet. At the project level, there have also been many instances of forced transitions of control. In 2010, I expect the same activity, but caused not by the pressure of banks, but by the consolidation of the sector. In general, development companies are now inexpensive, many are several times cheaper than before the crisis, and capital markets tend to “fly” both on the way up and on the way down, so now is the time to think about buying companies and projects .

– In June 2009, Morgan Stanley and Marshall Capital Partners formed the Mayak Corporate Real Estate (“Mayak”) joint venture to provide services to owners of large portfolios of non-core real estate assets. What stage is the project at now? What do you think is the potential of this market?
– Mayak is a company that will provide asset and portfolio management services in the real estate sector. The company will focus on non-core assets of large corporations, as well as large property owners. In Russia, we see a large demand market for asset management services and opportunities for providing high value-added services, which should lead to an increase in the value of real estate portfolios and increased transparency.
Morgan Stanley has a track record of building similar asset management platforms. In Germany, we created a joint venture that became widely known and managed real estate assets of third parties totaling more than 8-10 billion euros.
In Russia, we see that this kind of service should be in demand. And we believe that, taking into account our experience in other countries, we will bring a qualitatively new level of service provision to this market.

– There are practically no investment transactions on the Russian market today. Do you agree with this? Why?
– There are few transactions, but the situation on the market is improving, the discrepancy between the price expectations of sellers and buyers is decreasing. In the second half of 2008 and in 2009, everyone was looking for problematic projects that could be bought at a profit. I remember when I was at the Expo Real 2008 exhibition, the word “distressed” was the most popular among all market participants: “We want to acquire distressed projects, loans, etc.”, “We want to create a distressed fund”. In the end, although the crisis was very serious, the market was not flooded with such projects. Looking at the Russian real estate market, there have been several “distressed” transactions, mostly for projects under construction, where the developer was unable to finance the completion of the property. However, there were few distressed transactions with objects that were already completed and fully leased out, since buyers were willing to pay only distressed prices. In addition, due to the limited opportunities for obtaining debt financing, it is difficult for foreign opportunistic funds operating in Russia to achieve the expected return on investment at the level of 20-25%.

It is also worth noting that the banks that have taken over some properties are not ready to sell them cheaply. Having received support and funds from the state, they do not experience liquidity problems. Yes, they understand that the value of the asset could fall by 30–40%, but they still do not plan to sell them now and are waiting for the market to recover. As the availability of debt financing for investment transactions increases, there should be more. I am confident that more and more investment deals will be made in 2010, especially in the second half of the year, given that new capital is now being actively raised for real estate funds operating in emerging markets.

– Sochi – how interesting are the projects within the framework of the Olympic construction for your company?
– I have been to Sochi many times and I love this city, its landscapes and climate. But it seems to me that the main part of the financing of the Olympic projects should be taken over by the Russian government. The clients of this resort are mainly Russians and residents of the CIS countries, and this is a fairly large market – about 250 million people with high purchasing power. Investors must also be local. I personally do not see Western investors investing money there. Foreigners do not understand this market.

– How would you assess the situation on the real estate market in Russia today, and what awaits it in the near future?
– We are definitely in a recovery phase in Russia at the moment and we are already seeing a slight increase in residential property prices. Soon, the improvement in fundamentals should be reflected in the assessment of the net asset value (NAV) of real estate companies and the level of interest from investors. After all, real estate is a great way to invest and save capital, especially in countries with certain demographic dynamics. Russia may not have the best long-term demographic profile, but in the medium term, especially in large cities, there will be a shortage of quality properties in all market segments, which creates excellent prospects for dynamic growth for developers and real estate investors.