GLG's Lagrange brings superstar culture to Man

Date: Tuesday, May 25, 2010
Author: Reuters

Long-haired art lover Pierre Lagrange is symbolic of the informal, star manager culture that Man Group (EMG.L) is seeking to acquire with a $1.6 billion purchase of GLG (GLG.N).

Hedge Funds

The softly-spoken Belgian, co-founder and senior managing director at GLG, is well known for running the firm's $1 billion European Long-Short fund, but will join a firm that has shied away from high-profile personalities in favour of the dominance of a so-called 'black box' trading system called AHL.

It is no surprise then that the planned deal is characterised as man versus machine. Lagrange will certainly bring something different to the table.

A supporter of London's Tate galleries and modern art project Artangel, the 48-year-old reflects the more creative side of Mayfair's hedge fund set.

Most recently he was among the backers of "Kick Ass" -- the independently-financed, comic book-based action film starring Nicholas Cage that premiered in March.

He also symbolises the super wealth of the industry, living in a 19 million pound house behind Kensington Palace, on what is rated Britain's most expensive street, according to property website Zoopla. Lakshmi Mittal, Britain's richest man, lives two doors down.

GLG will stay an independent unit within Man under the terms of the deal, with Lagrange staying focused on fund management. But the clash of cultures will be inescapable.

Co-CEO Emmanuel Roman, more commonly known as Manny, will work with Man chief executive Peter Clarke on the integration, while Man -- which reports full-year earnings this week -- will look for $50 million of cost savings and try to sell GLG's products across its huge global sales network.

GLG was an early mover in the hedge fund industry but its story echoes that of many firms: set up with backing from Lehman Brothers in 1995 by Goldman Sachs trio Lagrange, the other co-CEO Noam Gottesman and Jonathan Green, who left in 2003.

Man's journey has been longer, and more intriguing. It moved into alternatives in 1983, but was founded 200 years earlier, winning a contract to supply the British navy with rum, and evolved through commodities broking and hedging.

In recent years its fortunes have ebbed and flowed with those of its $21.1 billion AHL fund, a computer-driven strategy constantly being fine-tuned by an army of PhDs, while it also funds a quantitative finance institute in Oxford.

Lagrange, meanwhile, oversees the 120 casually-dressed traders at GLG's plush Mayfair offices, who share investment ideas in online chat rooms and fire off handwritten notes to colleagues using special notepads.

STAR CULTURE

For smartly-attired Man CEO Clarke, who stepped up from finance director three years ago, the GLG deal is a chance to emerge from the shadow of his predecessor, and industry 'godfather', Stanley Fink.

And for Lagrange and GLG, it may provide the security that the star culture has not always offered.

High-profile emerging markets manager Greg Coffey sparked a huge outflow of client money when he turned down a reported $250 million bonus in 2008 when he quit GLG. Eventually he joined Louis Bacon's Moore Capital.

And former GLG manager Philippe Jabre was fined a then-record 750,000 pounds by the Financial Services Authority for market abuse committed in 2003.

Lagrange, along with co-CEOs Roman and Gottesman, will bag $500 million in Man shares through the proposed deal, although this is well below the value of their holdings at GLG's flotation in 2007, when the firm was valued at $3.4 billion and they received $1 billion in cash between them.

It reflects a tough credit crisis for the London-based but New-York listed firm, which saw assets fall 39 percent in 2008.

Last year Lagrange told Reuters the industry needed a "mea culpa" after mistakes in 2008 and joined Roman and Gottesman in cutting his salary to $1 a year from April 2009, although their $1 million salaries were restored this year.

Lagrange -- ranked 306th in the latest Sunday Times Rich List with an estimated net worth of 207 million pounds -- also suffered during the industry's 2008 nightmare.

His fund lost 15.9 percent, albeit less than the average fund's 19 percent loss, according to HFR.

He takes a bottom-up approach to stockpicking, but also looks at macroeconomic factors like car sales, inventories and housing statistics in his investment process. His fund also invests in other GLG funds, like John White's UK fund.