What’s so special about GLG Partners’ traders and portfolio managers that Man Group is working hard to keep them while cutting jobs elsewhere in the business? The firm wrote down an additional $837m in goodwill related to its 2010 GLG acquisition, yet it has largely kept headcount in its investment management function constant.
Man Group’s $1.6 billion acquisition of GLG was driven by a desire to bring hot shot prop traders into the fold, but many of those stars have now departed. Greg Coffey left before the deal, and retired with a fortune of £430m in October, while Karim Abdel-Motaal and Bart Turtelboom departed to start their own firm, APQ Partners, in January amid a senior management shake-up. Portfolio manager Wim Vandenhoeck also joined APQ, while Javier Velasquez, head of European industrial investments, Asad Abedi and Carl Philipp Sebastian Dickgiesser left to join Millennium Capital Partners late last year.
Nonetheless, the firm seems keen to both replace these high-paid high-flyers as well as cut costs by laying off lower-paid support staff in technology functions and elsewhere. Some 570 people have left the group since June 2011, Man Group’s results indicate, but investment management headcount has remained largely flat. Jonathan Sorrell, chief financial officer, said the firm will “continue to invest’ in talent at GLG. Kumaran Damodaran, Brian Pinto and Richard Bateson ajoined its macro and fixed income team in January, while Jon Mawby was hired for the global credit and convertibles team in October.
GLG staff are notoriously expensive – founders Noam Gottesman and Pierre Lagrande earned £200-250m in the hey-day of 2007, while traders Greg Coffey and Steven Roth, who now heads the credit team, earned £50-75m and £25-40m respectively.
Historically, Man Group spent 18-25% of its revenues on compensation, compared to 55-65% at GLG, and said that it expected this figure to be 30-40% going forward.
Year-on-year, at least, performance-related compensation has been hit at Man Group. In 2011, $336m was paid out in bonuses, a figure that has shrunk to $194m in 2012. However, average pay per head has only declined from $371.9k in 2011 to $326.9k in 2012 due to Man’s reluctance to cut front office staff.
The chart below taken from Man Group’s investor presentation today shows that nearly 40% of all job cuts have hit technology staff, 30% in group functions, 18% in sales and 13% in operations. Citi took over IT and administrative functions for Man Group late last year.