NEW YORK (HedgeWorld.com)– After a year of preparation, London-based Man Group plc* is on the verge of offering investment products in Canada and the United States. The world’s largest hedge fund business, with US$21 billion in assets, is applying to North America a model it successfully implemented in other parts of the world.
A key component of this approach is the training and support of a wide network of independent distributors who in turn educate individuals about structured notes and other investment options.
After thoroughly engineering the products, said John Kelly, the Man executive who spent the past 12 months developing the firm’s organization in North America, “We focus on making sure they are sold properly.” In particular, high-net-worth investors get information on what hedge fund and futures products can deliver and the diversifying role these play in a portfolio.
Every investor is emphatically told that a draw down will happen at some point, Mr. Kelly explained. That makes it easier for the person to stay with the investment through turbulent times. These funds and structured notes are long-term investments, not appropriate for someone who’s looking to put in money for just a year, for instance.
The firm has an established client base in Europe, Asia and the Middle East. Each offshore office supports a diverse set of distributors that can include large banks and brokers as well as independent financial advisers. Some of these may have no experience with alternative investments.
Mr. Kelly refers to a carmaker and its dealers in explaining this model. The dealers need not know the details of how the products are manufactured, but they do learn all about the features that are of interest to the customer. Besides providing training and support for the network, the regional Man staff sells directly to institutions in the country and in time may also arrange customized products for that market.
Strategic Alliance Approach
Man’s entry into Canada has taken the form of a strategic alliance with iPerform, a well-established hedge fund marketing operation in Toronto. (Previous HedgeWorld Story) This was the best way to approach the Canadian market, said Mr. Kelly. The first vehicle that is to be offered, Man’s standard mix of hedge funds and futures, comes with a lengthy track record.
There is some tailoring of the products to local market and regulatory conditions. For example, funds have a three-year lock-up in Germany but monthly or quarterly liquidity are the norm elsewhere. Allowing relatively frequent redemption is part of the plan for North America.
Man is not working with a single partner in the United States in contrast to Canada. Instead it has built an organization in Chicago and connected to many distributors. Glenwood Capital, which has for years provided hedge fund investments for Man and was acquired by the company, is located in Chicago. The group is registering a fund of funds with the Securities and Exchange Commission–the first Man-Glenwood fund for the U.S. market.
But will Man’s business model, honed as it is in environments that do not resemble America, work here? Judging by the commitment it is making, the firm is clearly convinced that it will. While regulatory requirements vary from country to country, investment issues are not that different, in Mr. Kelly’s experience. His concern is to provide the intensive support and training that new territories require.
Others markets were also said to be different at first but the reaction to structured notes has been broadly positive. Recent experience suggests this remains the case. A 120% capital guaranteed fund, the most recent in a Man series that invests in both Glenwood and futures manager AHL, just raised over US$670 million globally outside the U.S. The next version in the series is already open for investment. The firm shows no sign of scaling back its ambition on the retail front–on the contrary, it has upped the ante with the North America venture.
*Man Group plc is a minority investor in HedgeWorld.