New Man Group CEO: Small and steady wins the race

Man Group's incoming CEO Luke Ellis

Photo: Micha Theiner

Man Group’s incoming CEO Luke Ellis

Ellis, a longtime friend of Roman, whom he has known since the pair ran equity derivative desks at JP Morgan and Goldman Sachs, respectively, has played a key role in Roman’s senior team and Man Group’s strategy since joining the firm in 2010.

As president of the company, Ellis has been responsible for managing its four investment units – computer-trading hedge fund manager Man AHL: institutional investment manager Man Numeric; discretionary manager Man GLG; and fund-of-hedge-fund manager Man FRM – and had been among the names tipped to replace Roman’s predecessor Peter Clarke in 2012.

In the first interview after his appointment as chief executive officer was announced on July 20, Ellis, who will officially take on his new role in September, told Financial News that despite his excitement at being offered the role, it took some time to sink in.

“There was a moment later that day when we were sitting in a conversation – Manny, the chairman and myself – when a particular subject came up and I voiced my opinion,” he recalled. “I suddenly realised that it was not just an opinion thrown in by a senior executive anymore, it was the opinion of the future chief executive officer. That was when it sank in.”

Ellis, who started his career at the Japanese bank Nomura and said he had learnt a lot about the art of “continuous improvement” from the Japanese, is not expected to deviate much from Man Group’s strategy under Roman in recent years.

This strategy has seen the company diversify product-wise and geographically through its recent acquisitions including leveraged loan manager Silvermine in the US, asset manager NewSmith in the UK and a fund-of-hedge-funds portfolio run by Bank of America Merrill Lynch.

“Life is not made up of very many radical jumps – it is made up of lots of little steps into the right direction,” he said. “I am certainly not planning on any radical change.”

It is a strategy that Ellis describes as “ours rather than just his”.

The continuity of strategic direction from Man Group’s top team has also been in evidence to the firm’s staff. Town halls held since the announcement of his promotion have been short, and one Man Group employee said there was already an internal understanding that there would have to be a good reason to have both Roman and Ellis in the same meeting.

One task that will confront Ellis that Roman has not had to face will be navigating Man Group through the aftermath of the UK’s June 23 vote to leave the EU, with official negotiations set to start in the months ahead but with the prospect that the process could stretch to several years.

Listed and headquartered in London but with a large, international workforce of 1,230, not least through its acquisition spree, Ellis and Man Group will face the same strategic headaches as leaders at other financial services firms in the City of London over the size, structure and staffing of their operations.

As for the finance sector’s role moving forward, Ellis said: “As the government begins the process of reshaping our relationship with the EU, the financial services sector needs to make its case more than ever. We need to better explain the value of the industry and the City of London, not least the £66.5 billion in tax revenues that it contributes to the UK economy, and to support the government in developing a regulatory regime that will sustain London’s preeminent position as Europe’s leading financial centre.”

Data from think tank Centre for Cities shows that the UK capital generates now 30% of the taxes paid in the UK, nearly as much as the next 37 cities combined between 2014 and 2015. But the prospect of financial services business, and firms, shifting to mainland Europe has spurred other financial centres to eye gains at London’s expense.

In its interim results for the first six months of 2016, released on July 20, Man Group said the outlook remained uncertain and that the risk appetite of its clients could affect flows. Analysts at RBC Capital Markets, though, said the result showed resiliency with neither flows nor outlook indicating an adverse impact from the uncertainties created by Brexit yet.

Brexit aside, Ellis expects to continue what he and Roman have started. “We had to do a lot of restructuring to get the firm into the right place and now it is about building and executing the business strategy that we believe in, that I believe in, and that is about growth and diversification, clients and performance.”

Acquisitions of firms or teams, Ellis said, would be weighed up rigorously to determine their worth in terms of shareholder returns rather than pursued simply to fill a “gap in a box chart”.

Ellis categorically ruled out expanding Man Group into passive management, and said he believed the value of active management to clients had “never been greater”.

He added that whatever company they chose would have to share a similar belief and values: “They have to believe that investing is a learnt skill, they have to believe that it is about hard work, hard practice and hard improvement, not that someone was born to greatness.”

More from Hedge Funds

Let’s block ads! (Why?)

Alternatives – Financial News Online

You May Also Like