Money managers under the microscope
Hedge fund firm Man Group apparently pricey deal to buy GLG Partners gives Man – the world’s biggest listed hedge fund -- better access to the large and lucrative U.S. market. It also counts as a small win for the human race in its apocryphal war for investors' funds with cheaper, faster and -- many would argue -- far more dangerous algorithmic trading machines known as black boxes.
The $1.6 billion cash-and-shares deal represents a heady 55 percent premium to GLG's closing price on Friday. Clearly some investors are worried it's a little too rich. It has so far driven the shares of Man – which had already lost about a fifth of their value since mid-April -- down by a little more than 8 percent.
London-based Man has long been seen as needing more inroads into the U.S. market to take on industry leader JP Morgan. As Joel Dimmock and Laurence Fletcher report, the purchase would also dilute Man's reliance on its flagship black box fund AHL which badly lagged rivals last year. What do you do when the black box fails? Start investing in people again.
It is easy to see how the deal would have to be rich, since it pays up for talent that it needs to keep interested. A $500 million payout in shares, locked up for three years, ensures GLG principals Noam Gottesman, Pierre Lagrange and Emmanuel Roman don’t take the money and run. The message needs to be just as clear for the rest of GLG’s talent, which has numbers for super-rich clients and sovereign wealth funds.
News and views on the hedge fund industry from Reuters and elsewhere:
GLG pay day – FT
GLG Partners has confirmed positive client money flows are back on the agenda, reporting net sales of $2.2 billion in the second quarter in a trading statement which sparked a rise in the share price. The company also reckons strong performance among its funds has set the scene for more to come.
Barclays Capital last month predicted net inflows could reach as much as $50 billion in 2009, and GLG shows the numbers are starting to come through to support that theory. Of about 300 investors, BarCap found that some 80 percent were expecting to move back out of cash and into hedge funds this year.