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 fund
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
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
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 years.
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