As the highest-paid financial director in the FTSE350, Man Group finance head
Peter Clarke is no stranger to the hot glare of publicity. But even he would
have been at least a bit uncomfortable over the past week as news emerged that
his company was facing a probe into its alleged involvement in the collapse of a
US fund manager.
Man Financial, a brokerage owned by Man Group, has been accused of setting up
unauthorised bank accounts in the Cayman Islands that allowed collapsed hedge
fund Philadelphia Alternative Asset Management (PAAM) to hide losses from its
investors. The alleged fraud is believed to be in the region of $175m (£100m).
The US Commodity Futures Trading Commission has since seized the collapsed
fund’s assets and is now demanding answers. Man Financial has maintained that it
disagrees with the claims and has co-operated fully with PAAM’s receiver, but
nevertheless shares in its FTSE100 parent have fallen from 1,655p to 1,549p on
the back of the news.
The investigation into the goings on across the Atlantic suggests that Clarke
is in for an onerous few months. Man Group is the largest listed hedge fund
manager in the UK and the PAAM developments are bound to increase the public
scrutiny of the internal and governance controls for which Clarke is
Clarke earns £2.3m a year, and if one takes a look at the lengthy, complex
list of governance procedures in place at Man Group, his large pay package is
Hedge fund investing methods are extremely complicated and constantly
evolving, making it very difficult to keep track of what techniques star
managers are using and implement the necessary assurance on the behalf of
As hedge funds have become a more important part of market activities (Ernst
& Young estimates that the industry is now worth around £500bn globally)
investor interest into how they are governed has intensified.
The aftermath of the PAAM means that attention on Clarke and Man Group – one
of the few hedge fund groups with a public profile – will be ramped up even
further. Not only will Clarke be involved in dealing with the Man Financial
probe, he is also likely to be kept very busy with a fresh round of queries on
the internal control structures he manages.
The Man Group FD, who has also worked as a solicitor in the investment
banking industry for Morgan Grenfell and Citicorp, will be earning every penny
of his sizeable salary over the next few weeks.
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