GLG and Lehman - a lucky break? Friday, September 19, 2008

TOKYO - SEPTEMBER 16: A man walks past the si...Image by Getty Images via DaylifeIn seeking to distance itself from Lehman Brothers, with whom it was closely connected, GLG has announced that last week it transferred substantially all of the positions of its funds still with Lehman to other prime brokers. It claimed that the majority of these transfers have already settled and the firm expect the remainder to settle shortly. It says it believes the funds' residual exposure to Lehman will not be material.

Gosh - the timing of those transfers is remarkably lucky. A few more days and they would have been caught up in the mayhem, probably losing access to those assets.

GLG also confirmed that all its funds have at least two prime brokers and in nearly all cases, at least one prime broker is a commercial bank, a point I had been making in a recent post here.
Reblog this post [with Zemanta]

Labels: ,

posted by John Wilson @ 8:28 AM Permanent Link ,

newsvine reddit



When Stars implode [your business] Thursday, May 08, 2008

The ramifications of Greg Coffey's departure from GLG will be reflected upon by many other CEOs in the hedge fund and fund management arena. At minimum, it should have forced a review of key personnel risk within their own organisations, if only because they are likely to be asked about it by their own company investors.

Greg, who managed $7bn out of GLG's $24bn of funds under management announced last month that he was leaving the firm to set up his own firm. This initially caused a sharp fall in GLGs share price, which then recovered most of those losses. In leaving, Greg is foregoing $250m of stock options and $300m ish of annual compensation.

Today was GLG's results briefing at which, according to the FT, GLG boss Noam Gottesman spent most of his time fending off questions about the impact on the firm.

Mr Gottesman said in the worst case scenario, he expected about $4bn of the $6bn Mr Coffey managed would leave GLG when he exited in October, adding that he wouldn't be surprised to lose most of Mr Coffey's team also.

Mr Gottesman, who had "spent the last month dealing with the ramifications of Greg's departure", said he "would never have imagined that a few $100m was an insufficient amount to retain somebody".

Asked how much each of GLG's remaining portfolio managers individually controlled, Mr Gottesman acknowledged that in hindsight it was a "risk to the business" for one person to manage as much as Mr Coffey did.

The star culture that permeates through the hedge fund and fund management sectors is actually one encouraged by the employers, who seek to crow about how fantastic their latest hire is or the performance record of particular managers. Intended to encourage new business it specifically sets the firm up to fail when that Star a) under-performs or b) demands higher pay/equity and/or c) elects to leave. Obviously the employees are more than happy to play along since its ups their bargaining power in negotiating for higher compensation.

Having worked with many fund management companies in my career, I've seen instances when it has also created an undercurrent of resentment and bitterness amongst colleagues/teams, which is another key reason why some firms insist on downplaying the importance of any one individual.

Related articles

Labels: , ,

posted by John Wilson @ 5:28 PM Permanent Link ,

newsvine reddit



"Am I worth $250m+ ? I think so." Wednesday, April 23, 2008

Greg Coffey is leaving approximately $250m in stock options behind as a consequence of resigning from GLG to set up his own firm. He currently manages about US$7bn of GLG's US$24bn of funds under management, reportedly generating about 60 per cent of its performance fees last year.

Mr Coffey, a 36-year-old Australian, took home $300m (£150m) in pay last year but was reportedly unable to agree a new compensation package. Many articles on the matter can be found here.

The news of his departure initially knocked about $375m off the value of GLG, but the share price has since rebounded.

When I chat with folks outside of capital markets they often challenge me about the spectacular sums paid to individuals in the City. In this case, it's relatively easy to point to the worth the market attached to his value at GLG. Moreover, as a major contributor to the bottom line, his abilities were evidently a major appeal to GLG clients and validated by the performance of his funds.

As for the headline of this piece it was unrelated to me [unsurprisingly] but to Greg who obviously thinks he is, otherwise he wouldn't be leaving behind $250m of stock and a probable $300m of compensation per year to run his own firm. Will his bosses be bitter - perhaps initially but a) they left their employers to set up GLG and b) will probably seed his new fund and thereby continue to benefit from his skills.

Labels: , ,

posted by John Wilson @ 5:26 PM Permanent Link ,

newsvine reddit