GLG Loses Coffey, Manager of Its Largest Hedge Fund

Date: Tuesday, April 22, 2008
Author: Tom Cahill, Bloomberg

Greg Coffey, the manager of more than a quarter of GLG Partners Inc.'s $24 billion in hedge-fund assets, quit amid speculation that he will start his own firm.

Coffey, based in London, will run GLG funds until October and help ``in the succession process,'' GLG said today in an e- mailed statement. He manages about $7 billion through four GLG emerging-market funds that returned an average of 29 percent in 2007, according to data compiled by Bloomberg.

GLG, whose shares fell 15 percent last week after the company said it was negotiating to keep Coffey, hired the Australian native in 2003, initially giving him $250 million to oversee. Coffey, who turned 37 this week, may eventually start his own fund, two people familiar with the situation said last week. He would have no trouble finding backers even as hedge funds have had their worst start to a year in almost two decades and are gathering cash at a slower pace, industry executives said.

``If you're Greg Coffey it's easy to launch right now,'' said John Godden, managing partner of IGS Group, a London-based hedge-fund consultant. ``If you're anybody else it's a lot more difficult.''

Coffey's GLG Emerging Markets Fund was the company's largest and best-performing last year with a 51 percent gain, following a 62 percent increase in 2006. It has dropped 5.5 percent this year.

The manager will forfeit all of his unvested GLG shares and cash awarded to him, the company said in the statement.

Negotiating His Future

Coffey quit April 14, then withdrew the resignation the next day, GLG said in an April 15 U.S. Securities and Exchange Commission filing. The firm said it was talking with the manager about ``a range of options for the future,'' according to the April 15 document.

``The best interests of our fund investors has been and will continue to be the primary concern of both GLG and Greg throughout this process,'' GLG said today.

GLG rose 11 cents, or 1.2 percent, to $9.15 at 4:01 a.m. in New York Stock Exchange composite trading. The stock has dropped 33 percent this year, compared with the 11 percent decline by the Russell 1000 Financial Index.

Hedge funds typically charge a 2 percent management fee and keep 20 percent of profit. Such fees generated revenue of $1.04 billion in 2007.

GLG didn't have ``key man'' clauses that would require it to return cash without penalties to investors if Coffey left, said an investor in Coffey's funds who asked not to be identified. GLG hadn't said if it would levy penalties on investors pulling cash after Coffey left, the investor said.

Other Departures

Neither GLG, which is managed from London by Noam Gottesman and Emmanuel Roman, nor Coffey could be reached for comment.

Other GLG managers have moved on to set up their own firms. GLG co-founder Philippe Jabre, who left in 2006 while fighting a U.K. Financial Services Authority inquiry, raised $1.9 billion last year for Jabre Capital Partners, Europe's largest fund opening of 2007.

Jabre hired Coffey at GLG in November 2003.

Coffey graduated with a degree in actuarial studies from Sydney's Macquarie University and started trading emerging- market equity derivatives in 1994 at Bankers Trust Corp., which was bought by Deutsche Bank AG in 1999. He later became a partner in a George Soros-backed fund and also headed global equity proprietary trading for Bank Austria, according to a biography prepared by EuroHedge magazine for a conference he had been slated to attend last week.

Advice Not Heeded

Coffey once struggled to raise money for his own hedge fund, a tale he relayed when collecting EuroHedge's 2007 fund of the year award on Jan. 24 in London. Coffey said that after a grueling day he discouraged a fellow would-be hedge fund manager, Alan Howard, when he was thinking about going out on his own. Howard went on to found Brevan Howard Asset Management, which oversees $23 billion.

Coffey's emerging-market fund made money in 2007 with bets against the U.S. dollar, subprime debt and loans, and investments in Asian equities.

Compensation may not be an issue for Coffey. He made about $300 million in 2007, compared with $350 million for GLG co- chiefs Gottesman and Roman, according to a survey by Institutional Investor's Alpha Magazine.

``He's probably got a number of people whispering in his ear that he should start his own firm with his own name on the door,'' said Godden.

GLG was founded in 1995 as a division of Lehman Brothers Holdings Inc. and became independent in 2000. The firm went public in November 2007 through a reverse merger with New York- based Freedom Acquisition, a special-purpose company formed to pursue takeovers.

To contact the reporters on this story: Tom Cahill in London at tcahill@bloomberg.net