Coffey’s Bitter: GLG Star to Leave Firm in October

Is the departure of Greg Coffey fully priced into GLG Partners (GLG-NYSE) stock?

That is what I will be mulling over the next few weeks as GLG looks for a successor to the star portfolio manager. The rumor mill had him running about $7 billion, roughly 30% of AUM at the shop. Various accounts has him generating for about half of GLG's incentive fees, thank to a hot hand in his emerging markets strategies. Did his contract prevent him from making a clean break from the firm? He had resigned, then relented, but now will be leaving the firm in October, staying on to ensure a "smooth transition".

Chances are GLG will be running less money by this time next year, but the decline in the stock might have already priced this in. The market cap, as a percent of assets, sure looks cheap compared with peer Och-Ziff. If the assets don't walk the stock might be a bargain, although GLG's historical compliance issues should give investors pause.

Although the banks have gotten the bulk of the attention, asset management stocks have been a minefield as well. For every Blackrock there is a Calamos (CLMS-NASDAQ), whose stock sold off over fears that the Auction Rate debacle will hurt their balance sheet and threatens their franchise value.

Of course, the alternative asset management stocks, including Blackstone, Och-Ziff and GLG have been disasters for public shareholders, as their valuations continue to converge with their less sexy vanilla peers.

Is Coffey’s departure priced in? GLG 3-month chart

GLG might want to consider some of its homegrown talent to replace Coffey; failing to massage the egos of those who remain might result in additional defections. Perhaps some of his lieutenants will prove to be even more capable than him. Mutual fund shops moved to the “team” approach a decade ago, and hedge funds firms might want to do the same, sidestepping the drama that high profile departures tend to generate.

Emphasizing the investment process and methodology should do the trick; lets face it, the clients already know you are blowing smoke up their rear end. Naive shareholders are quickly catching on as well.

GLG Loses Coffey, Manager of Firm’s Top-Performing Hedge Fund
Bloomberg

Star fund manager Coffey to quit GLG
FT
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