GLG star manager set to forfeit $250m to quit job

Date: Wednesday, April 23, 2008
Author: James Mackintosh, Financial Times

Greg Coffey, the star emerging markets fund manager at GLG Partners, will forfeit about $250m (£125m) of shares and bonus payments in order to leave the London-based, New York-listed hedge fund and start his own fund.

Mr Coffey will stay until October under a hastily structured plan after his unexpected resignation a week ago, a move that prompted GLG's shares to plummet. The shares initially fell sharply yesterday to recover to $9.12 in late afternoon trading, up 8 cents, leaving them down 17 per cent since he first quit.

The loss of Mr Coffey, an Australian who runs $7bn of GLG's $24.6bn funds under management, is a serious blow to the hedge fund, with many investors likely to leave with him.

It also puts one of the justifications for listing hedge funds under the spotlight, as share-based compensation was designed to tie in star fund managers - but has not worked in this case.

Mr Coffey's desire to start his own hedge fund manager, free of the constraints of operating within another firm, appears to have over-ridden the value of his unvested shares and bonus, put at about $250m by people familiar with his earnings.

Mr Coffey was the bestperforming manager at GLG and one of the top performing hedge fund managers in the world in the past two years, with his main GLG Emerging Markets fund up almost 51 per cent last year and 60 per cent in 2006.

It has had a tough time this year, though, dropping 5.5 per cent by the end of March and another 9 per cent so far this month.

GLG is now trying to recruit a replacement to take over Mr Coffey's portfolios, although it is expected to offer investors the opportunity to redeem their holdings if they do not wish to stay.

The funds Mr Coffey runs have long lock-ups or "gates" restricting how much can be taken out each month, in common with many hedge funds, which would slow redemptions unless GLG waives them.

GLG said in a statement that Mr Coffey would keep running the funds until he left and "will also assist in the succession process.

"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," it said.

GLG declined to comment on changing redemption terms.

One fund that might prove controversial is the GLG Emerging Markets Special Situations fund, which has a two year lock-up remaining and invests in hard-to-sell positions including private equity.

This fund will now be run by other managers at GLG, as it is fully invested and investors are not expected to be given the opportunity to redeem early.