Such timing. As capitalism teeters, Stanley Fink, doyen of the hedge-fund
managers, is back. Just two months after retiring from Man Group, the
world’s biggest listed hedge-fund firm, he has re-emerged as chief executive
of International Standard Asset Management (Isam), a much smaller hedge-fund
firm. Has he scented an opportunity?
“Oh, the timing is just coincidental,” he says, in his gently avuncular
manner, sitting in his new office in London’s Kensington.
“I had known the principals of Isam for a long time through my charity work. I
had been approached by a lot of hedge funds offering me roles, but I
remembered how much I enjoyed transforming a small business, the buzz of
knowing all the people . . .”
There are no short responses from Fink. Careful and deliberate, he worries
away at answers with the same analytical persistence that helped transform
Man from a faceless commodities trader into a hedge-fund leviathan.
It’s the underlying style of his philanthropy, too. Fink, 51, is as well known
for what he gives away as what he makes. He donates a fifth of what he earns
— £16m from Man in 2006 — and since he suffered a close brush with death
from a brain tumour four years ago, he seems to have ramped up his giving.
But he also likes to manage carefully where it all goes, whether that’s
funding a children’s hospital, building an academy school, or backing Boris
Johnson’s campaign to be London mayor. Not for nothing is he known as the
godfather of hedge funds.
Ironic, then, that some think the current financial crisis has been
precipitated by the hedge-fund techniques he helped to champion. For
Manchester-born Fink, that’s an accusation too far.
“I think hedge funds are easy scapegoats,” he says slowly. “There were
doubtless traders who behaved unethically, but that happens in bull and bear
markets, and is down to maverick individuals. You have to look at the heart
of the problem.”
That, he explains, stemmed from an overheated economy and too many people
believing that normal business cycles had ceased. There followed lax lending
from banks, poor fiscal policies from governments, too many assets sliced
and diced into complex financial instruments, then the squeeze from high oil
and commodity prices, together with the sub-prime crisis.
“In that kind of environment there was going to be a contraction of liquidity.
Were there people in hedge funds who were going to take advantage of that?
Yes, but there were other people at banks who did that too.”
And without hedge funds, which add variety and increase demand, the market
would have imploded much earlier. “This crisis did not originate in the
hedge-fund world, it originated in the banking world.”
He pauses. Medium-height and chubby, with a boyish face that masks a sharp
intellect, Fink presents himself like a kindly physics teacher, always happy
to take you through something slowly.
Colleagues say he is highly numerate and tough, too. “Stanley has balls of
steel,” says Kevin Davis, chief executive of the Man spin-off MF Global.
But he is full of contradictions. Fink drives a Prius and a Bentley, and
obsesses about philanthropy and luxury. He built his own hotel in the French
ski resort Courchevel because he wanted to have somewhere to relax beyond
his own chalet — the hotel is next door.
And he has put more money into a prestige hotel in London where he will
shortly move into the penthouse suite. He is also the backer of a new
service for the affluent, Key-2 Luxury, which buys members access to VIP
services.
“I am not obsessed with luxury,” he says, countering my assertion. “I just
have a view that the world is not serving the needs of affluent people
properly.”
That may not be a priority right now. The financial crisis has put the
spotlight on rich hedge funders like Fink. Persistent short-selling of
shares has clearly had a terrible effect on markets, but Fink insists that,
overall, hedge funds do good. Characteristically, he numbers his reasons.
“First, most hedge funds that do take medium to long-term positions in shares
are fairly activist shareholders, and do things in terms of engaging
management in dialogue and creating value in companies that many long-only
investors don’t.”
“Second, if you look at when insurance companies were forced to sell shares,
when they had to have reserves with a capital equivalent to 25% of their
equity, the market in the UK would have gone into a death spiral without
hedge funds and other participants that had the liquidity and conviction to
defy the trend.”
“And third, the ability to short shares and trade more actively creates more
liquidity and drives down transaction costs. So in my view the best markets
are the ones where the most varied numbers of players are playing with
different timescales and approaches, and having big hedge funds is extremely
helpful.”
Others disagree, but Fink is probably the least likely hedge funder to feel
the public’s anger. His commitment to causes like the Evelina’s children’s
hospital at St Thomas’s in London has won him widespread respect. Only a few
have questioned his motives.
A recent book on the super-rich quoted a speech he gave for the Charities Aid
Foundation, saying he loved the access he got to royalty and celebrity.
Friends say Fink can sometimes be too honest for his own good. “Stanley
wears his heart on his sleeve,” says another former colleague.
Fink says simply that his upbringing explains everything. He was born into
Manchester’s tight-knit Jewish community, which has a tradition of helping
the less able. And his war veteran father hit hard times running a
cornershop, after leaving the family lampshade business.
Fink, an asthmatic, studious child, the second of three brothers, felt then
“the precariousness of financial life”. That’s why he likes amassing money
now.
But from Manchester Grammar to Cambridge, into accountancy, Mars, Citibank and
then the Man Group, Fink — now worth £110m — never lost that sense of how
social mobility had pulled him up.
“It is an indictment of the current government that social mobility is now
less than it was before,” he says softly.
That makes him, in the main, a Conservative supporter, though his new chairman
at Isam is Labour’s former fundraiser Lord Levy. Such is City pragmatism.
But just occasionally in our interview Fink allows emotion to hold sway.
Why back Boris Johnson to be mayor in London? He says bluntly that he was
opposed to Ken Livingstone because he created tensions with the Jewish
community. “He seemed to revel in it.”
And when he discusses his own brain tumour, his face softens. He was on safari
in Africa with his family in 2004 when he suddenly lost the power to speak.
Doctors thought it was a stroke, then in London a tumour was diagnosed.
It was removed, but he spent four weeks in the National Neurological Hospital
and took three months off before returning to Man. He bends to show me the
staple scars in his scalp. “If I go bald, I will look really hard,” he
grins.
Fink admits he found getting back to work harder than he expected. He was
gobbling aspirin for headaches, he needed notes to speak in public, and he
tired easily. He stepped down as chief executive last year and left this
July.
Isam gets the benefit. He wants to ramp up its business. He is meeting
clients, looking at the barriers to growth. “It’s not rocket science. We’ve
got very good performance here, very low correlation to the stock market. I
am checking what systems need to be upgraded as we expand.”
Isn’t he worried about what’s happening here and in America?
Fink pauses. “I haven’t fully digested the knock-on effect of losing Lehman.
My guess is that America will come out of recession in six months because
they went in first. They are resilient. And they’ve got an election — they
are always more optimistic with a new president.
And the UK? “We won’t have a new prime minister, our economy went into
recession later and we are more indebted, and Europe is starting to go into
recession now, so we will be dragged into that. We will be in recession for
12 to 18 months.”
But being in a small hedge fund isn’t going to be easy. One former hedge
funder predicts “a massive flight to quality” as clients panic. “Stanley
will have his work cut out.”
And won’t Man Group be uneasy about Fink using his old contacts?
Fink brushes it off. “We are an ant to a lion,” he says. And there’s no
uneasiness. On Thursday, Man even threw him a belated goodbye party at a
City livery hall.
Fiddling while Rome burns?
Not a bit of it. “But I am an iconoclast,” says Fink. What will be, will be.
Then he will think his way out of it.
WORKING DAY
THE Isam chief executive wakes at his home in Middlesex at 7am. “I take my
wife some coffee and I am on the Tube before 8 am,” says Stanley Fink.
He is at his new office in London’s Kensington by 9 am. “I am working four or
five days a week now, meeting clients and staff. And I spend about three
half-days each week on outside work.”
Fink is heading a climate-change initiative for the Conservative party. He is
also chairman of governors at an academy school funded by the Ark children’s
charity in White City. “It’s nominally Church of England, but half the kids
are Muslim, the head came from a Catholic school and I am a liberal Jew.
It’s a great example of multiculturalism.”
DOWNTIME
STANLEY FINK relaxes by reading, skiing and playing golf. “I do the gym when I
can but I need to be fitter. I probably should lose a stone; the doctors
would say two.”
He spends money on gadgets — he has three mobile phones — and property. “I
tend to buy homes.” There is no contradiction between his love of luxury and
his philanthropy, he says. “What
I spend on myself creates jobs. But I am also motivated to pay 40% tax and
give 20% away, rather than the state taking 60%. I incline to civil
liberties and freedom of choice.”
