December 10, 2012 11:04 pm

‘Manny’ must bring an ascent for Man Group

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Hedge funds are supposed to produce returns to investors that are uncorrelated to markets. But in the case of Man Group, which is parting company with chief executive Peter Clarke, the main lack of correlation has been between executive pay, which has remained healthy, and the performance of the shares, which has been dire. Thus, he was awarded almost $7m in 2011 when the stock fell 60 per cent.

There is some sympathy in the City for Mr Clarke. Supporters argue that it is hard to turn Man Group round when its woes are largely due to the underperformance of robo-trader AHL. But this defence begs tricky questions. Why pay a chief executive highly when his ability to change outcomes is limited? And why invest in a business that is quite so impervious to analysis?

It is up to Emmanuel Roman, who is stepping up from chief operating officer, to neutralise these objections by improving performance. At present AHL is more than 10 per cent below “high water”, the level at which it charges higher fees. Man has reported good results from tinkering with AHL’s momentum-driven trading style. But this needs to be sustained across the computer trader’s whole $16.3bn portfolio to revive the fortunes of Man, whose shares are 80 per cent below their post-financial crisis peak.

The ascent of “Manny”, as the new boss is familiarly known, has surely been helped by Pierre Lagrange and Noam Gottesman, who still hold large stakes. These are legacies of the merger of Man and GLG, a business they co-founded, where Mr Roman was managing director. Fellow hedgies Odey Asset Management and Lansdowne Partners have notable long and short positions too.

The unmistakable message is that investment in the meretricious hedge fund industry is best left to hedge fund managers themselves.

History repeating

Dan Gertler has a habit of winding up on the right side of mining deals in the Democratic Republic of Congo. He has just agreed to sell 49.5 per cent of Camrose, which co-owns Kolwezi, a copper and cobalt concession, to Eurasian Natural Resources Corp for $550m. This is a good price considering the Kazakhstan-based miner bought its original 50.5 per cent stake from Mr Gertler for $175m.

The first transaction hurt the reputation of ENRC, which is quoted in London. The purchase was made from companies associated with Mr Gertler, who is close to DRC president Joseph Kabila, after the government had expropriated rights to Kolwezi from First Quantum of Canada. Investor dismay contributed to a boardroom bust-up last year.

An analyst gloomily notes that ENRC has invested $4.7bn in Africa so far without generating positive earnings. However the move suggests that chairman Mehmet Dalman, an energetic ex-investment banker, is making some progress in drawing a line under ENRC’s past mistakes.

Demonstrating the circularity of history, the group might renew its acquaintance with Mr Gertler if Glenstrata absorbs ENRC. In one scenario envisaged by bankers, ENRC shareholders, who include the Kazakh government, would swap their stakes for equity in the miner and commodities trader. Glenstrata and Mr Gertler are partners in projects in the DRC even if ENRC no longer is.

Super pie guy

When it comes to tax, business people take the (Groucho) Marxist view that “whatever it is, I’m against it”. Chancellors usually ignore their complaints. There is something special about a man who forces the government to reverse a new tax within a couple of months, as Ken McMeikan, outgoing chief executive of Greggs, did this year.

The Treasury attempted to tweak VAT on takeaway food so it would apply to pies and pasties produced by the bakery chain when they were still hot from the oven. The consequent revolt, adeptly led by Mr McMeikan, was reminiscent of historic rebellions over salt taxes. This, however, was a “salt of the earth tax”, with the stalwart workers depending on Greggs for sustenance figuring as the victims.

The Scot had substance as well as spinning skills. Greggs has generated a total shareholder return of 70 per cent since 2008, the year he took over, according to S&P Capital IQ. Not bad, given the decline in high street retailing.

Mr McMeikan’s next job is to run Brakes, the food group owned by private equity group Bain. The appointment suggests an initial public offering is likely. Treasury officials should, meanwhile, can any plans to impose higher taxes on canteen fare of the kind supplied by Brakes. Once bitten, twice shy.


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