Retaining Talent
Top funds sometimes pay portfolio managers a third or more of the incentive fee, an arrangement that can translate into tens of millions of dollars in a great year. At Man, the average compensation per employee is about $310,00, less than at Goldman Sachs Group Inc. Ellis was paid $3.15 million plus a long-term bonus in 2020.
“Can I attract, retain, empower smart, interesting people who can run the money and do the creativity for clients?” he said. “We do a pretty good job of that.”
Two areas of focus at Man are natural-language processing, in which computers read and digest vast amounts of text, and adapting the firm’s quantitative processes to markets beyond stocks and bonds. The firm was actively trading U.S. electricity during the February power outages in Texas, Ellis said. It also trades Bitcoin.
Another priority for Ellis is expanding its small footprint in private markets, where it manages $2.4 billion of assets, though doing so may require making an acquisition. Valuations in private equity, credit and real estate, he said, are “fantastically high” at the moment.
‘Unreasonable Fee’
The objective is to give investors an easy choice: market performance in an index or exchange-traded product from someone else, or alpha from Man. So long as his technologists keep designing new models and developing new ideas that generate excess return, Ellis isn’t worried about demand for Man funds. But he doesn’t see much hope for firms that can’t.
“There are too many active managers in the world,” he said. “The fee load that you used to be able to get five, 10 years ago for running a pretty ordinary fund that outperformed one year out of four—you could still charge 50 to 100 basis points of fees—that’s an unreasonable fee load and I think those business models won’t survive.”
This article was provided by Bloomberg News.