Veritas – How the hedge fund universe loses another ‘star

You could not blame GLG Partners co-founder Noam Gottesman for feeling a little smug today.

News broke yesterday that Greg Coffey, the former GLG star emerging markets trader is now leaving rival Moore Capital Management, the firm he defected to from GLG in late 2008.

Some $1.3bn of client money flowed out of Coffey’s emerging markets / global macro hedge funds at GLG at the time – no doubt much to Moore, and to Gottesmann’s dismay.

It was a major event in a generally horrible year for GLG.

Sharp investment losses occurred on some funds, others were gated. Some GLG fund assets were caught by Lehman Brothers’ collapse. Assets overall fell by 39%. And GLG shares fell by 83%.

As Gottesman was already dealing with all this, he could not have welcomed also having to answer stock analyst questions – when his company was separately listed – about why Coffey was leaving, and how GLG could fail to keep such a high profile, skilful manager despite waving a $250m rentention package at him.

Coffey was responsible for a significant portion of GLG’s gross profits, and his EM hedge fund was a prized showpiece for his Mayfair-based employer.

Records showed Coffey ran three of the seven hedge funds at GLG that were still making money as the 2008 market crisis intensified.

As his departure in October 2008 approached, Gottesman revised predictions of redemptions from the strategies Coffey ran.

Constant questioning about redemptions destabilised GLG’s shares, and no doubt some of the harmony at the firm as well.

In the end, $1.3bn left – less than Gottesman’s predictions, but still he was forced to acknowledge “we lost a major team, and the lion’s share of assets they had managed”.

Shortly after Coffey’s departure, GLG co-founder Pierre Lagrange conceded no-one at GLG could manage money in the way Coffey did. (Indeed – as Coffey turned his $5bn flagship slowly into cash in 2008 for the handover, he still turned holdings over 56 times in one month.)

But luckily for GLG and its loyal EM fund clients, not having ‘another Greg Coffey’ did not matter.

Over the following 12 months, the emerging markets fund, in the hands of Bart Turtleboom and Karim Abdel-Motaal, outperformed Coffey’s nascent portfolio at Moore.

In November last year the Financial Times reported Coffey was stepping down from running the main EM fund of Moore Capital, but starting a new fund there.

The Moore Emerging Markets fund had lost about 7% over the preceding 10 months, and assets fell from $1.5bn at the start of the year to just “hundreds of millions”. It made 20% in 2009 then 5% in 2010.


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