Continuity is a big deal in the UK. Monarchy aside, Britain boasts a hedge fund business with a 240-year history. Robyn Grew is the latest boss to take charge at Man Group, once a rum supplier to the British Navy.
Grew is currently president of the world’s largest listed hedge fund manager. She will replace Luke Ellis as chief executive when he retires in September.
He has steadied the ship since he took the helm in 2016. He has also pushed heavily into AI-driven investment techniques, a natural move for a quant-based business.
Grew is therefore taking over at a critical moment. A couple of years ago, techniques such as natural language processing were an esoteric way for hedge funds to seek a competitive edge. Now Silicon Valley giants are investing billions in AI, they are becoming more widely available.
Grew needs to ensure that Man, best known for its momentum-driven AHL strategies, stays relevant.
Under Ellis’s tenure, assets under management have grown from $81bn to about $145bn. He has cemented Man’s business model as a manager that serves institutional investors. That means lower margins. But these clients are less fickle than hedge funds’ traditional wealthy retail clients.
Man acquired rival GLG for $1.6bn in 2010. The deal aimed to diversify profits by adding discretionary hedge fund strategies. The integration was rocky. A $1bn writedown ensued.
Man’s valuation has been hampered by heavy reliance on performance fees. These have averaged 20 per cent of revenues over ten years, estimates Citi. But the variation can be wide, ranging from 5-30 per cent per year.
That helps explain Man Group’s cheaper valuation compared to some UK fund managers. It trades at nearly eleven times forward earnings versus 17.8 times for Abrdn and 14 times for Schroders.
In theory, its focused offer should make it more valuable than struggling generalist Abrdn. Grew needs to project that to shareholders — and ensure the democratisation of AI and other big data techniques do not turn Man into a generalist too.
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