LONDON (HedgeWorld.com)--Man Group plc* sold US$5.8 billion in funds in the six months through Sept. 30, 2003, compared to US$2 billion over the same period in 2002. The firm's assets under management are estimated at US$32.5 billion as of Oct. 31.
Net management fee income was up 53% for the past two quarters. Performance fee income, however, was slightly down. Man chief executive Stanley Fink said the main reason for stagnating performance fee income was the managed futures program AHL catching up with its high watermark after losing ground the previous period.
Managers who have agreed to a high watermark do not charge for performance while they get back to a past high NAV .
RMF, Man's Swiss-based fund of funds operation, did fairly well in these six months, earning 5.4% for institutional investors. Its assets grew to US$12.8 billion.
But Chicago-based fund of funds Glenwood, with US$5 billion in assets, had lackluster performance during this time, returning 2.7% to institutional investors. Mr. Fink said that the impending transition at Glenwood, which is losing the top executives who started the business, was partly to blame for this underperformance.
"One of the reasons we bought RMF was that we felt Glenwood did have a difficult transition to make," explained Mr. Fink. "It was a bit of a mom-and-pop store when we bought it."
Glenwood Founder Frank Meyer and Vice President David Gordon are leaving the firm at the end of this year. Some members of the original team have already left, such as Ross Laser, who departed some six months ago. John Rowsell is taking over the reins, assisted by Glenwood Chief Operating Officer Bob Tucker, Mr. Fink said.
He added, however, that most of the underperformance at Glenwood in the recent past was due to the manager's particular investment style, favoring bottom-up stock pickers. It always has tried to avoid strategies with large risk, such as global macro, in which it has no expertise, he said. The approach also avoids credit spread risk, which came to haunt the industry in 1998.
Given the recent performance of various strategies, this asset allocation perspective probably accounts for 60% or 70% of Glenwood's underperformance, Mr. Fink said. He added that while it may be possible to do better within this style, Glenwood has outperformed the industry over a 10-year time frame because its approach provides protection against certain events.
New Glenwood head Mr. Rowsell managed an internal hedge fund at McKinsey & Company from mid-1998. Before that, he was a managing director at Carr Global Advisors' alternative asset unit. He joined Man in 2001. Mr. Fink said institutional investors in Glenwood by and large intend to stay.
Glenwood's current investment committee also includes Steve Freed, who joined in 2001 and was formerly a director at William M. Mercer; Mustafa Jama, who joined in 2002 from Deutsche Bank's absolute return program; Michael Jawor, who joined in 2001 from fund of funds Sirius Partners LP; and David Kim, who joined in 2002 from SNS Partners Inc.
Man did not sell its funds in the United States until about two years ago. U.S. sales during the past two quarters were at US$200 million, up from a negligible amount last year. "One day we believe it will become a torrent," said Mr. Fink about Man's growing presence in the United States.
This was held back by doubts raised by the Securities and Exchange Commission investigation into hedge funds, but sales have risen since the outcome of that probe turns out to be mostly positive, he says. Man's U.S arm recently registered products for this market with the SEC .
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