As a former M&A banker, Man Group CEO Peter Clarke knows the importance of integrating operations thoroughly after a merger. So following Mans blockbuster purchase of GLG Partners last year which created the worlds largest hedge fund manager, with more than $69 billion in assets Clarke was determined to bridge the yawning gap between GLGs brash entrepreneurial culture, which gives free rein to its star portfolio managers and lets staff dress casually at its office in Londons swank Mayfair district, and the buttoned-down corporate atmosphere at Man, whose core business relies on finely honed computer systems rather than individual personalities and whose City of London office brims with suits.
One of the biggest cultural questions we faced as a result of the merger with GLG was whether or not jeans should be allowed in our offices, Clarke says in a recent interview in Mans boardroom, sporting a well-cut dark gray suit and a crisp white shirt with no tie. So he put the matter to a vote in the management committee, and now people are allowed to wear jeans in Mans Sugar Quay building as well as in GLGs Curzon Street office, he says. The change has yet to filter down to the shop floor, though. Formal business attire still predominates at Mans headquarters, while many of GLGs staff including principal Pierre Lagrange, whose scruffy goatee and shoulder-length hair make him look more like a rock star than a fund manager appear to regard jeans as part of their uniform.
The sartorial contrast may seem trivial, but its symbolic of deeper differences in style and business practices at the two outfits. Over two decades beginning in the mid-1980s, Man transformed itself from a commodities trading firm into the worlds largest hedge fund manager by acquiring managed-futures traders and fund-of-funds operations and then selling their products aggressively through a high-powered marketing network, mostly to retail clients in Europe and Asia. Its main unit, $23.6 billion-in-assets AHL, is a virtual black box, relying on quantitative formulas refined by armies of Ph.D.s to follow and profit from price trends in everything from currencies and commodities to stocks and bonds. In an industry defined by larger-than-life personalities such as Steven Cohen, John Paulson and George Soros, Man is an anomaly. Cognoscenti in the City and on Wall Street would be hard-pressed to identify a single one of its fund managers. The names that come to mind Clarke and his predecessor Stanley Fink are both lawyers by training.
GLG, on the other hand, is a hedge fund managers hedge fund. Founded by a trio of former Goldman Sachs Group private client bankers, the firm fostered a star culture by attracting elite proprietary traders from leading investment banks and giving them the freedom to follow their own strategies. The formula was both wildly successful institutional investors enamored of GLGs trading gurus have swelled the firms assets to more than $30 billion and inherently unstable: The departure of one star trader, Greg Coffey, three years ago triggered outflows of several billion dollars.
Rather than try to meld these differences, Clarke hopes to exploit them. A lack of internal investment management expertise was inhibiting Mans growth potential, he contends. It was increasingly apparent that clients, especially those in Asia, wanted direct exposure to a discretionary single manager, he says. Clarke plans to feed that appetite by marketing GLGs suite of funds through Mans distribution network. He is also teaming Mans quants with GLG managers to come up with an array of new products designed to appeal to institutional investors. He believes that combining the very different business models of Man and GLG will jump-start growth that, in effect, one plus one will equal more than two.
Actually, Clarke has a far bigger number in mind. He is confident that the newly fortified Man Group can become not only the worlds first $100 billion hedge fund but the first to surpass $200 billion. Not that he comes out and says it directly, but its implicit in his outlook. I anticipate the hedge fund industry in five to ten years will be three to five times the size it is now, and I expect Man to grow commensurately, he tells Institutional Investor.