Group profile: GLG’s Phillips on the return of a star manager

Richard Phillips

This year Man GLG celebrated its 20th anniversary having been borne out of Lehman Brothers in 1995. The group only began courting the retail market a comparatively short time ago in 2009, but with a dozen funds to its name and several more in the pipeline, it is a relationship that continues to blossom.

GLG, as it was then known, was a long-only equity business until 1997 when it ventured into hedge funds. In 2009 GLG bought SGAM, the asset management arm of Société Générale that had been set up by Nicola Horlick in 1998, marking GLG’s debut in the retail market. The following year, Man Group acquired the firm, giving GLG the reach it needed to distribute its products to a wider audience.

Man GLG is now the long and long/short discretionary management arm of the group, sitting alongside the hedge fund division Man FRM; Man Numeric, which runs long-only quantitative strategies; and Man AHL – the managed futures arm for which Man Group was originally known.

Man Group has £48bn in assets under management across these divisions, while Man GLG’s UK Oeic range has £4.5bn in assets. Richard Phillips, Man GLG’s head of UK retail, estimates this places it around 40th in the UK retail space.

“I don’t know but instinct would tell me that’s where we are,” Phillips says. “I don’t compare us to other groups. A number of our funds can only take a set number of assets. Henry Dixon’s Undervalued Assets fund has done very well but Henry doesn’t want more than £800m, and Rory Powe doesn’t want more than £1bn in the Continental Europe fund. So there is no point in having aspirations to be in the top 20. The question to ask is do we have funds that deliver?”

One fund that certainly has delivered is the £1.5bn Japan CoreAlpha fund, which has returned 64.5 per cent over three years, against the 42.6 per cent sector average, FE Data shows. The fund recently reopened to investors after the strategy was soft closed last year for the second time to protect investors from falling liquidity levels in the Japanese equity market.

“In the first half of this year the Japan CoreAlpha strategy saw $3.4bn (£2.2bn) in outflows, largely from a single investor,” Phillips says. “So there was an awful lot more capacity. Some money has come in and some investors have taken profits as there was the opportunity to do so. Now it is back to business as usual. Hopefully the fund will remain open for the foreseeable future.”

While Japan CoreAlpha is the group’s best-known offering, Undervalued Assets and Continental Europe have proved popular this year, Phillips says. Indeed, since Powe took over Continental Europe a year ago, the fund’s assets have more than trebled, rising from £60m to £200m.

“Rory has done ok,” Phillips says. “But he is 20 per cent ahead of the benchmark year to date which helps.”

Powe joined Man GLG in May 2014, having spent 12 years running his own hedge firm, Powe Capital Management. The PCM Europe hedge fund was merged into a Cayman-domiciled Man GLG strategy when Powe was recruited by the group. Before that, Powe was head of European equities at Invesco Perpetual and was a star manager of former colleague Neil Woodford’s calibre.

“Rory was the biggest name in fund management between 1998 and 2000,” Phillips says. “He joined GLG because the administration involved in running a smaller business became too much of a burden.”

In total there are 12 funds in Man GLG’s Oeic range. Other strategies of note include UK Income, UK Select, Strategic Bond and Technology Equity. There are several other areas the group is looking at, and Phillips says it plans to hire managers each year who specialise in asset classes it doesn’t yet have.

“[Fixed income manager] Jon Mawby joined in 2012, Henry Dixon joined in 2013, Rory Powe joined in 2014 and Simon Pickard and Edward Cole joined [from Carmignac Gestion] this year to run our first emerging markets fund.”

The GLG Unconstrained Emerging Equity Strategy launched last month in the group’s Ucits range and Phillips says it will launch a UK version if there is sufficient demand.

The long-only strategy uses value, quality, momentum and macro styles to build a portfolio of mispriced emerging market securities, with the aim of generating returns above the MSCI Emerging Markets Free index over the long term.

On the list of asset classes the group is mulling over are global high yield, global equity income, US equities, emerging market debt and long-only Asia equities.

“We have the opportunity to speak to a lot of managers in a lot of asset classes regularly,” Phillips says. “With an asset class such as global equities there are already a lot of good managers and it has been a massive asset class for over 10 years, so you either have to do it well or do it differently.”

The turnover of fund managers at GLG is “quite low,” Phillips says, which he partly attributes to there being “no prescriptive house rules”.

“We pick managers for their abilities,” he says. “Until recently Henry Dixon, who is a value manager, was sitting next to Rory Powe, a growth manager. I don’t think they will ever find a stock in common.”

The working environment at Man GLG is not what you might expect from a firm with a hedge fund background. Based in Mayfair, the offices feature some eye-catching modern art in the reception area while the sales and investment teams sit in glass-fronted open-plan offices on either side of a shared canteen. The effect is modern, animated and non-hierarchical. Indeed chief executive Teun Johnston sits in the throng with the European sales team.

“It means Teun doesn’t have to jump through hoops to find out information, he can just shout out,” Phillips explains. “We also have a chat system for the sales managers and the investment team. The way this place is set up, if you want to know something you can just ask. You can meet up with the fund managers in the middle canteen. It is all about communication. The fund managers can all see each others’ portfolios, which might trigger an idea or thought to help them in what they are doing.”

Phillips joined the group in 2009 with the acquisition of SGAM, where he had been head of sales for 11 years after a stint at Henderson Global Investors, but his links with Man GLG date back to the beginning of his career.

In 1988 Phillips joined Prudential’s sales team, where a part of his role was to promote one Stephen Harker, “the best-performing manager in our stable,” Phillips says. “We went our separate ways and found ourselves working in the same place again. I’ve spent 18 of the past 28 years working with Stephen.”

One of the main challenges for the group and across the industry is the “winner takes all environment,” Phillips says.

“It is very, very competitive,” he says. “In any sector there are one to three funds that accumulate all of the assets at one particular time. It is difficult to get people to look elsewhere. The frustration any manager has is to be producing the numbers but have difficulty raising the assets. We just have to strive to be the best. Collectively we are doing a decent job.”

Independent views

justinefearns

Justine Fearns, investment research manager, Chase de Vere

Man GLG is still relatively unknown despite its retail profile being raised in 2009 when it bought SocGen Asset Management’s UK business. This purchase included the Japan Core Alpha fund, which remains the most well known of its retail offerings. GLG has many strings to its bow including a strong alternatives heritage and a very credible “long only” book. There is growing strength in its UK equity funds, which have had some relatively recent management changes, but of particular note is its Strategic Bond fund. This has a flexible mandate that draws on the strength and breadth of the group and is managed by a very experienced team.

dariusmcdermott

Darius McDermott, managing director, Chelsea Financial Services

Its flagship fund is Man GLG Japan CoreAlpha, which is Elite Rated by FundCalibre, but it has hired a couple of new teams in recent years and a number of other funds are really starting to make their mark. For example, Henry Dixon and Jack Barrat, who joined from Matterley, and their Undervalued Assets fund, which is also Elite Rated. One to watch is the Income fund and we are also keeping our eye on the Continental European Fund. Rory Powe, who is a real blast from the past, recently returned to retail fund management to run this fund and, in just under a year under his stewardship, it is number one in the sector. He ran a European fund for Invesco in the 1990s and was a force to be reckoned with and it seems he hasn’t lost his touch. So they are diversifying nicely and not just across equities as their Strategic Bond fund is very good – it’s on the Chelsea Core Selection list.

ryanhughes

Ryan Hughes, fund manager, Apollo Multi Asset Management

GLG is a business that has quietly been producing a good set of core funds across a number of asset classes for a number of years. These funds are now beginning to appear on a lot more radars. They have very strong capabilities in Japanese equities with Stephen Harker and in UK equities with Henry Dixon, while the Technology fund is also a strong proposition. More experienced fund analysts may recall Rory Powe formerly of Invesco who is now running European equities for GLG. As a firm, the business is well placed to build on this solid set of core funds and warrants closer attention from fund selectors.

Company: Founded in 1995 and acquired by Man Group in 2010, Man GLG is a discretionary fund manager with funds under management of $33.3bn. Man GLG’s investment managers operate in a collaborative environment, unconstrained by a house view. The majority of Man GLG’s 120 investment professionals are based in London but it also has investment teams in New York, Hong Kong and Pfäffikon, Switzerland.

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