Stanley Fink - October 2006

TAs Stanley Fink announces the forthcoming resignation of his CEO seat at Man Group in 2007, those who have seen the industry grow with him reflect on his achievements, and assess his legacy both for Man Group, and for the broader hedge fund industry.

Stanley Fink has become something of an industry icon.

His peers watch his every move with great intent, while journalists hang on his every word just as carefully. 48-year-old Fink last month announced he would swap the CEO’s chair at Man Group for a back seat from 1 April 2007, to concentrate on his philanthropic work, including current commitments to Absolute Return for Kids (ARK).

“Stanley has put an enormous amount of energy into his charitable work for many, many years,” says Anthony Todd, Aspect Capital’s CEO. “Anyone who witnessed his swim across Lake Zurich for charity in 1997 will realise how seriously he takes them,” he added.

Fink will continue with some important duties at Man Group, but is leaving behind a considerable legacy of success at Man, having presided over a period of growth at Man Group that took asset under its management from $4.7bn to $54.7bn, a shareprice under his CEO-ship up 423%, and Man become the world’s largest publicly traded hedge fund manager. Fink was with the firm for that flotation, in 1994, which raised £463m. Just 12 years later, and Man Group is worth about £8.3bn.

Man’s 29 September pre-close trading update on six-month figures to 30 September did not reverse the upward trend. Net performance fee income: “up around 25%.” Brokerage net income: “up over 40%”. Sales for the first half: “estimated to be $10.4bn.” Fink will continue as non-executive deputy chairman of the group and will retain his role as chairman of Man Investments’ strategic investment committee.

FINK THINKS DIFFERENT
Back in May 2005 the hedge fund industry was basking in the golden glow of its asset growth, having just reached $1trn, according to Hedge Fund Research. “So, Mr Fink,” asked the eager reporter, how does it feel to be a major part of a $1trn industry?” In his typically relaxed manner, and after a pause for thought, the CEO of Man Group Plc showed he thought differently – and was ahead of the industry.

“A lot of hedge fund strategies are being done inside Wall Street banks, and the market is probably $2trn–$3trn.”

Also typical for the man who has been with Man Group (or then ED&F Man Group) since 1987, and CEO since 2000, is a willingness to admit when he does not know. What will the hedge fund industry look like in 10 years’ time? “Hedge fund managers will be doing things you and I cannot even dream of today. I see the hedge fund industry looking for absolute returns not dependent on stock market returns and that is an extremely wide playing field to choose from.”

GLOBAL REACH
Fink’s humility has not stopped him, and Man Group, riding at the forefront of industry innovation. The first protected fund of hedge funds products, the first exchange-listed hedge fund group, and the first hedge fund group with a truly global distribution network.

To the Man distribution strateg Fink ascribes the firm’s astounding ability to raise billions in fund launches. This was shown in spades under Fink’s stewardship by Man IP 220 May 2006. “We simply set about a seven- or eight-year project on contacting all those people in all those markets available to sell, persuading them to stock our product. All things being equal...as the number of intermediaries continues to grow we would expect to sell more retail product.” All things were clearly equal, and equalled slightly more than $2.3bn raised for Man IP220.

As Fink spoke at Man Group’s yearly report on 1 June 2006, he placed Man again at the forefront – this time of retail markets as they open up to funds of hedge funds (FoHFs) in the UK and elsewhere as they already have in Germany, for example. “You should expect Man Group to capitalise on that,” he said.

In hedge fund strategies also Fink has ensured Man Group and its institutional arm, RMF, has been in the vanguard.  His understanding 50% of all human activity is in some way tied to the weather saw Man Group active on many levels in emerging strategies. RMF, for example, helped seed Climate Change Capital in July 2005.

Man Financial planned to buy tree plantations earlier in 2006, presumably partly to earn carbon credits the broking house could offer to its clients. Man is also aiming to be carbon-neutral as a firm and it is rumoured Stanley Fink owns his own carbon credit-earning vehicle.

stricter oversight
As underlying markets have evolved, Stanley Fink has also pushed for regulation of an industry with a good reputation. He was reported to have castigated The Children’s Investment Fund’s (TCI) manager Christopher Hohn after TCI’s increasingly public spat with the Deutsche Borse over its attempt to buy the LSE.

While cynics could suggest Fink’s interest in tight regulation is self-interest – raising the barriers to new entrants– it also heads the industry toward broader acceptance by the institutional market few doubt will come to dominate hedge funds’ main investor base.

“We operate in 100 countries,” Fink told Hedge Funds Review in October 2003, “so regulatory issues in any one don’t really affect us. The regulatory wind is generally blowing in our direction.

Rather than being a blanket ‘no’ most regulators are coming up with a qualified ‘yes’. Regulation that is permissive but painful is actually a competitive advantage to us.”

Since 2003, regulators’ moves from qualified yes’s to more embracing affirmatives have also blown in Man Group’s sails. One envious peer told Hedge Funds Review, “If I had as much as Stanley, I’d resign, too.” Admittedly Fink’s pay was raised 57% on 13 June to £6m. What went unmentioned was Fink’s comment to the Financial Times in mid-2003, after he earned £3.3m, less than Man’s top money managers: “I don’t think there is anything that says the CEO should be the highest paid.” Also un-remarked was the fact Fink ranked ninth in The Sunday Times’ Giving List of UK philanthropists in 2005.

“Most commentators have focused on Stanley’s role in creating several billion pounds in shareholder value for Man, and have not paid enough attention to his remarkable charitable activities,” Anthony Todd says.

The discovery of a later-successfully-removed tumour after a turn while on family holiday in Botswana in October 2005 is believed to have prompted Fink’s move to concentrate more on his charitable work, and spend more time with his family.

However, 2007 will not be a full farewell from Man. “I look forward to continuing to add value to the business, particularly regarding strategic investment decisions on the part of Man Investments’ main investment units,” he said on announcing his decision