Institutional Investor's Alpha Magazine - May 2008 - (Page 5)

Longs Over and Out G LG Partners must be having some serious second thoughts these days about having gone public last summer. Its stock was trading at about $8 in midMay, down 45 percent from its near-opening high of $14.97. The London-based ﬁrm, which has about $25 billion in assets under management, reported a $236.3 million quarterly loss on May 7. And in a regulatory ﬁ ling, GLG just revised its ﬁ nancial statements for 2006 and 2007 to correct accounting errors. In that same ﬁling the ﬁrm announced that its star trader, Greg Coffey, will be leaving to set up his own shop in a move that doesn’t exactly seem to help GLG. “The stock won’t hold up if the guy making the most money is going out the door,” says Donald Morken, president of Genesee Investments, a Bellevue, Washington, fund-of-funds ﬁrm. He says the very act of going public made GLG vulnerable to such a defection. The ﬁrm is expecting to lose at least $4 billion in assets by the time Coffey leaves in October, as investors follow him. “Ninety-ﬁve times out of a hundred, in a situation like this, you leave, you go with the guy,” says James Berens, managing director of Irvine, California–based Paciﬁc Alternative Asset Management Co., which manages funds of hedge funds. Coffey, who recently turned 37 and is perhaps GLG’s most valuable asset, oversees more than $7 billion for the ﬁ rm. Since signing on at GLG in November 2003 (after working at a George Soros–run hedge fund), he has been its best-performing manager by far. Last year his GLG Emerging Markets Fund was up 50 percent, double the return of the average emerging-markets hedge fund, according to Chicago-based Hedge Fund Research. It surged 60 percent in 2006 and 100 percent in both 2005 and 2004. Coffey’s departure, which normally might have been played down, was openly acknowledged because of GLG’s new status as a public company. On April 15, in a Securities and Exchange Commission ﬁling, GLG disclosed at the bottom of an unrelated form that Coffey had resigned the previous day but had withdrawn his resignation. It added that Coffey and the ﬁrm were in discussions “concerning a range of options for the future.” One week later GLG issued a press release announcing that Coffey would be leaving but would stay on until October. On a conference call with investors to discuss the company’s first-quarter earnings, GLG co-founder, chairman and co-CEO Noam Gottesman sounded irked: “Greg delivered his letter [of resignation] without any prior notice to management. Illustration by Joshua Gorchov for Alpha & Shorts “I would never have imagined that a few hundred million dollars was an insufﬁcient amount to retain somebody, but this was the case here,” Gottesman added. Last year Coffey made almost $600 million, much of it in deferred compensation. By leaving, he forfeits an estimated $275 million in unvested stock and cash, most of which was tied to the company’s going public as part of a program that was supposed to attract and retain top talent. “Obviously, in this case it didn’t work,” Gottesman said. — Stephen Taub Greg Coffey, perhaps GLG Partners’ single most valuable asset, is leaving the ﬁrm to start his own company. Group Think L urking deep within the pages of two new U.S. federal government reports on the habits of hedge fund investors and managers are passages that are not only readable but — dare we say? — candid: It seems that not all hedge fund managers are as forthright as they could be and not all investors are as savvy as they should be. MAY 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 5

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - May 2008

Institutional Investor's Alpha Magazine - May 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Send in the Clones The Good Guys: Outside the Box Cover Story: Welcome to Oz Interview: The Tipping Point Regulation: When Sentinels Go Astray Strategies: Taking Credit Research Center: The Hedge Fund 100 Book Excerpt: Shoot the Messenger Alpha Bytes: VaR Enough? Unhedged: Commentary: Not Your Father's Activist

Institutional Investor's Alpha Magazine - May 2008

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