GLG Hedge Fund Braced For $5bn Exodus$

GLG Partners, the London-based hedge fund reeling from the departure of Greg Coffey, is bracing itself for a mass exodus of as much as $5 billion in investment assets as disillusioned investors follow their star Australian fund manager out of the door.

Noam Gottesman, GLGs chairman and chief executive, told the funds shareholders today that the hedge fund had suffered $1.7 billion of investor redemptions since late April, when Mr Coffey sensationally quit the firm to set up on his own.

Mr Coffey, a highly praised specialist emerging markets investor, managed about $7 billion out of GLGs total funds under management of $24.6 billion.

His departure, despite the efforts of GLG executives, including Mr Gottesman, was seen as a body blow to the firm. Mr Coffey shunned a cash and shares payout worth about $250 million in order to quit GLG to pursue his own business interests.

He collected about $300 million in management and performance fees last year, according to Alpha, a US hedge fund magazine.

Today, Mr Gottesman acknowledged that Mr Coffeys fund would most likely be decimated by October, when he leaves at the end of an agreed handover period during which he unwinds many of his positions.

The fund, which has suffered a performance slump since March, could be left with as little as $2 billion of assets once he formally quits, Mr Gottesman said. This would mean investors would have redeemed around $5 billion in the wake of his decision to go.

Mr Gottesman said that GLG was resigned to losing the rest of Mr Coffeys team of analysts and investors as well.

Mr Gottesman said: Clearly, he managed $6.3 billion as at the end of April and I would expect the bulk to remain until October. Once Greg goes I would expect to retain at the very least $2 billion of that money and hopefully more.

We would not be surprised to lose most of the members of his emerging markets team, he added.

Greg delivered his letter [of resignation] without any prior notice to management. Regardless of what the motivations were, once we had accepted that Greg wanted to leave, we moved to ensure that investors in the emerging markets fund would not suffer from the likely redemptions, Mr Gottesman said.

Mr Gottesman said the total potential loss of assets represented a worst-case scenario. GLG sources stressed that the fund was confident investors could be retained and that the valuation was also a reflection of market conditions and performance.

Market turbulence in March and April has left the funds performance in tatters.

For the year to date including Mr Coffeys fund, GLG funds are down 7 per cent, with its alternatives assets including hedge funds down 7.6 per cent.

Mr Coffeys funds, which drew on high net worth individual investors, middle eastern and sovereign wealth funds, are down just over 19 per cent for the year to date, Mr Gottesman said.

Nevertheless, he said, GLG was performing very well at other of its funds. It is actively interviewing potential replacements for Mr Coffey and has an attractive pool of cash and shares to attract talented porftolio managers, he said.

It is business as usual until he departs and there is no risk of another Coffey-type event, he said.

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