By Neil Wilson
been a difficult year for Gartmore Investment Management, the
London-listed asset management firm. But it still came as a
shock on November 8 when the company announced to the London
Stock Exchange that Roger Guy, for many years its leading
manager, would be leaving.
Guy had been with the firm for 17 years and had played a
leading role—alongside his former co-manager,
Guillaume Rambourg—in transforming Gartmore from a
traditional long-only asset management shop into a leading
player in European hedge funds with more than $6 billion in
hedge fund assets.
With Gartmore immediately thrown into a battle to stave off
mass redemptions and calling in Goldman Sachs to conduct a
strategic review, the impending departure of Guy has
highlighted more dramatically than ever the key man risk issue
in hedge funds.
Guy leaving Gartmore—where he had long been envied
by rivals who described him as "the franchise"—is just
the latest in a long series of high-profile departures over the
12 years that EuroHedge has been tracking the European hedge
Other high-profile exits that caused a similar sensation
included William von Mueffling’s abrupt departure
from Lazard Asset Management and Chris Hohn quitting Perry
Partners, which both occurred in 2003, as well as Greg Coffey
leaving GLG Partners in 2008.
These and other cases may have some superficial similarities
but also of course many specific differences from the latest
case involving Gartmore.
But in all of them, the departure of a key man highlighted
the vulnerability of a hedge fund firm’s
business—based on the loyalty of investors—to
the perceived abilities of a star fund manager.
In the case of Lazard, a cool $4 billion of assets walked
out the door with von Mueffling, who went on to found Cantillon
Capital Management. Similarly, Hohn managed a large chunk of
Perry’s assets before leaving to start The
Children’s Investment Fund.
And Coffey had become GLG’s star manager due to
the stellar performance of his Emerging Markets Fund; the firm
even put him forward to ring the closing bell at the New York
Stock Exchange on the day GLG was listed.
For many, such vulnerability to key man risk demonstrates
that hedge fund businesses are generally not well suited to
being listed on the public markets because too much of their
earning potential and value resides with key individuals who
can, and sometimes do, simply walk out the door.
That said, it should be noted that although they were hit
hard at the time, Lazard, Perry and GLG are all still in
business, with the latter recently completing a merger with Man
Group to create the largest listed alternative asset firm in
In the Gartmore case, trouble had been brewing for some
time. Its IPO, which seemed cleverly timed after a stellar year
for its hedge funds in 2009, did not go as well as many had
The share price quickly dropped well below the issue price
and has not recovered.
Then, to the surprise of many—and the apparent
frustration of Roger Guy—the firm announced an
internal investigation of Rambourg for allegedly directing
trades to favored brokers, an old practice now barred by the
firm’s internal rules.
Though this appeared to be perhaps a storm in a teacup, as
there was no suggestion he had broken regulatory rules in the
UK, Rambourg was suspended. And even though he was
substantially cleared by the firm, Rambourg subsequently
resigned anyway in order to try to fully clear his name against
a Financial Services Authority probe.
Most investors remained loyal despite the departure of
Rambourg. But it seems unlikely that they will be so sanguine
following the departure of Guy as well, despite the addition to
the team this year of John Bennett, a well-regarded manager
with many years of European equity experience at GAM.
Hence, in the immediate aftermath of the announcement,
speculation swirled about whether Hellmann & Friedman, the
private equity firm that has a big stake in Gartmore, will be
able to rescue the situation or what bidders might emerge to
take over the remnants of the business.
At the time of writing, it is much too early to tell how all
of this will play out. But one thing I would
suggest—based on the previous evidence of the Lazard,
Perry and GLG cases—is not to write off Gartmore too
soon. Yes, Guy has been the leading figure there for many
But he and Rambourg have been directly responsible for only
three out of the record nine EuroHedge awards that the firm has
won over the years, so there is clearly a lot of other talent
in the building. As long as it stays there, of course. AR