INVESTMENT Golfers with more clubs are more likely to win
John Andrews talks to Stanley Fink, who turned Man Group from a commodities trader into a hedge-fund pioneer you know Kipling's words, about meeting triumph and disaster? Well, imagine this. You're in your mid-forties, chief executive of one of Britain's fastest-growing public companies. Your personal fortune is in nine figures; you are fast becoming one of the Britain's top philanthropists; you own a luxury hotel in France. You're on holiday with your family in Botswana, enjoying the fruits of success; you're right in the middle of a sentence when suddenly, categorically, you cannot say another word ... and you have no idea what's happening to you. You're rushed to hospital in South Africa, where a stroke is diagnosed. Back in London, however, a large and benign but potentially lifethreatening tumour is discovered, lodged in your brain. There's a flaw in the diamond, and you face your own mortality. Welcome to the world of Stanley Fink, who experienced such a shock just three years ago, when he was chief executive of Man Group, the listed hedge-fund manager for which I once worked.
Recently, Stanley and I sipped coffee in his modest office at Sugar Quay, overlooking the Thames. Permanently moored on the opposite bank is HMS Belfast, a reminder of days gone by when Man was the supplier to the Royal Navy of its daily rum tot. 'You must have been absolutely terrified,' I said. He nodded, adding: 'But of course it was much worse for my family.'
Anyone who knows Stanley won't be surprised at that remark. Many years ago, at our first meeting, I learnt the importance of his family to him We were in a Swiss village called Steckborn, on the shores of Lake Constance. At the time he was finance director of the then privately owned E. D. & F. Man Ltd, in those days principally a collection of commodity businesses within which the comparatively new 'Funds Division' was the odd man out. The handful of us who ran the division had taken ourselves off to the backwoods for a strategy pow-wow. Clear-aired Switzerland is a good place for clear thinking. Davos, famously, has the annual World Economic Forum. Steckborn has ... well, it has the lake, stuffed with tasty fish, and early in 1994 it had us. Sat next to me on the first morning, in the role of observer, commentator and counsellor, was Stanley Fink. He turned to me and reached for his wallet — always a promising move from someone in his position. `I'm Stanley Fink,' he said. 'Let me show you a picture of my family.'
In those days, Man was little known outside the commodities industry, although the firm had been around for over 200 years and was possibly the world's largest sugar trader. What I don't think any of us sitting around the table in Steckborn could have foreseen was that, over the next decade, Fink would transform Man into the world's largest hedge-fund provider, taking it from a closely held private business into the upper reaches of the FTSE-100. Thirteen years later, much has changed in the investment world. Indeed, the success of Man's own products — mixed with a corporate professionalism that set them apart from many competitors in an industry that once had elements of what Fink described as `the Wild West' — helped pave the way for the growth of the non-traditional investment community. In shaping itself, Man under Fink's leadership played no small part in shaping the industry as a whole.
He hadn't intended to take this role. Trained as a lawyer, he moved into corporate finance and found himself at Citigroup. One of their clients, E. D. & F. Man, offered him a job; he joined the board at the age of 29 and became finance director. Not long afterwards a debate began among Man's shareholders about the possibility of a listing on the London Stock Exchange. Many executives in the Funds Division were in favour; belonging to an obscure private British company was no help when it came to competing with the likes of UBS and Merrill Lynch. Throughout the group, there was debate over the issue of public versus private. While a listing would bring undoubted benefits such as improved access to capital, and PLC status would heighten the profile, the downside was that outside investors naturally have a tendency to want to influence the company's strategy. In the end the ayes had it, led by Stanley, and Man was floated in 1994. Two years later he moved to Switzerland to take over at what had become Man Investments; four years on it was back to Sugar Quay as chief executive of Man Group itself. When the commodity businesses were split off to revert to private status, Man became a purely financial-services engine. Rapid growth — organically and by acquisition — saw its funds mushroom in size, and the company entered the FTSE-100.
Building a business like this requires world-class investment savvy as well as business acumen. I quizzed Stanley about his approach to both. His investment philosophy? 'Diversification, always,' he said. 'And it's vital to take a mediumto long-term view.' Diversification means not just across asset classes, but also across investment styles. It's at the heart of why hedge funds have, in principle, an advantage over conventional funds 'Imagine there are two people playing golf' said Stanley. 'Their level of skill is identical. One of them has 14 clubs in his bag, but the other has just one. Who do you think is most likely to win?' On the subject of recent criticisms of the hedge fund industry he is philosophical, seeing it as something that will decrease as alternative investments move towards the mainstream — a shift that is noticeably under way. In the past few years several countries have allowed the launching of onshore hedge funds, or funds of funds, a trend that is set to continue. But dealing with the day-to-day complexities of such issues is now a matter for the in-trays of Stanley's successors. As deputy chairman, he remains an active force on some of Man's committees. But the move frees up time for other activities, which have included chairing the fundraising committee of the Evelina Children's Hospital and giving his support to various other charities. Philanthropy and the environment increasingly take up his time.
As he sends the career lift downwards for others to step into, I asked him if he had any advice for those looking up. 'Find partners who are expert in the skills you yourself lack,' he said, 'and in doing so, be prepared to give up equity in your company.' An architect of change, Stanley Fink has reinvented the business for which he's worked these past 20 years; I suspect he's now setting out to reinvent himself. The beneficiaries of his charities will, I have no doubt, eagerly await his next moves.
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