Saturday, March 04, 2006

Philippe Jabre: The Return of the Hedge Fund "Legend"

The Financial Times published this article today praising the talent and survival skills of Philippe Jabre, one of the leading hedge fund managers in the world:

"An unbeaten risk-taker
>By Stephen Schurr

Even for the most extra­ordinary skier, neither acumen nor experience can prepare oneself for the mortal threat of an avalanche. Philippe Jabre learnt this last year.

Last February, Mr Jabre, then the star trader for London hedge fund GLG Partners, was skiing in Courchevel with his wife Zaza, a client and two guides when a huge mass of snow rapidly descended upon them. When the avalanche hit, his wife was submerged. Mr Jabre and his companions spent 23 minutes trying to find her and dig her out, with the odds of her survival dwindling by the minute. Miraculously, she survived, capping her recovery in January with a return to the slopes at the French ski resort where they own a home.

Mr Jabre also faced down two powerful forces in his professional life in 2005 that threatened to submerge him. The first was a near-cataclysm in the credit market that put his GLG Market Neutral fund down 18 per cent through May. The fund posted a remarkable recovery, capped by a double-digit return in December that put it up 5.47 per cent for the year.

The second was the UK Financial Services Authority’s investigation into his February 2003 trades in Japan’s Sumitomo after he received information about a coming convertible-bond deal from Goldman Sachs. It was the most high-profile regulatory probe in the history of the London hedge-fund community.

The latter reached its conclusion this week, with the FSA’s Regulatory Decisions Committee deciding to fine Mr Jabre and his former firm GLG £750,000 (€1.09m) apiece, determining that the trader and, in turn, his firm violated market conduct and committed market abuse.

The fine against Mr Jabre, born 45 years ago to a prominent Lebanese Catholic family, was the largest ever meted out to an individual. Despite the penalty, the RDC ruling marked the third time Mr Jabre evaded a dreadful fate. The judicial panel decided that Mr Jabre did not deliberately commit market abuse, ruling that he did not violate the FSA’s Principle 1 governing market integrity. Against the FSA regulators’ recommendation, the RDC opted not to ban or suspend Mr Jabre.

That he emerged with his licence intact can be seen as miraculous in some regards. When the two-year investigation came to light last year, it seemed to many in London’s hedge fund set a clear-cut case that would end with Mr Jabre’s head on a platter. As the investigation wore on, the details became less clear, as is often the case regarding the nebulous terrain of information exchanges between investment banks and hedge funds.

The decision ensures that Mr Jabre, for two decades a prominent fixture in London’s investment community, will have a third act – the first being the spectacular success, the second his near-demise under regulatory scrutiny and the third his potential return to running money. The course of the third act may not go smoothly. He will not be returning to GLG and he must re-register to run money if he plans to start a new fund – meaning the FSA once again holds the key to his future.

Mr Jabre was not available for comment. But several prominent individuals in the London hedge fund community said that whatever the outcome, the third act will be as closely followed as the first two because of his stature.

“Philippe is a hedge fund legend,” said a manager at a London fund that operates some strategies similar to GLG. “He is a born money-maker, and there are very few of those out there, even in the hedge fund world.”

Mr Jabre’s personality, according to those who know him well, is that of the quintessential hedge fund manager, only more so. The price of a ticket to this world is an extreme degree of competitiveness, high intelligence and innovative thinking. Mr Jabre established a reputation at a young age in the London investing community as both a risk taker and a brilliant trader. He earned an MBA from New York’s Columbia University in 1982, trained at JPMorgan and soon made his way to BAii, a division of BNP, the French Bank. In his 16 years there, he specialised in the budding market for convertible arbitrage, a strategy that involved buying a company’s convertible bonds and selling short the company’s stock.

Mr Jabre acquired a reputation among critics for operating aggressively. In 1997, he joined GLG Partners, a hot two-year-old hedge fund started by former Goldman Sachs bankers Noam Gottesman, Pierre LaGrange and Jonathan Green. It was developing a reputation as a player in the burgeoning London hedge fund industry, in part on the strength of its access to new offerings, and Mr Jabre’s convertible arbitrage brought a new dimension. “It’s ironic now, given the investigation, but one of GLG’s big moves toward legitimising themselves as a firm was getting Philippe,” said one hedge fund manager who was active in the 1990s.

Mr Jabre’s Market Neutral fund grew to more than $4bn at its peak, returning 23.1 per cent returns on average after fees between 1998 and 2005. According to individuals familiar with his investing style, Mr Jabre’s ability to beat the benchmark by 18 percentage points a year on average was his push to move away from convertible arbitrage and toward more opportunistic trading across various asset classes.

GLG helped Mr Jabre, who has four children, become a rich man, with his personal fortune estimated at £180m-£200m, enabling him to concentrate on charitable efforts, including a focus on Lebanese causes.

However, the two-year FSA investigation caused an irreparable strain in the relationship between GLG’s senior ranks and Mr Jabre. Individuals familiar with the firm say GLG came to view Mr Jabre as someone who took unnecessary risks. One individual described the rift as akin to “a rock group that becomes huge, where their success leads to their eventual break-up”.

While Mr Jabre officially remains on leave, individuals say he will not return to GLG. Mr Jabre will almost certainly look to raise money for his own firm. Some individuals say the FSA could decide to block any attempt by him to set up a new fund in London. But other hedge fund industry participants, however, say the FSA would grant him approval since the RDC did not suspend him.

And no one is questioning Mr Jabre’s continued ability to attract investors. Said one hedge fund manager: “Somebody was asking me the other day whether he could raise money if he starts running his own hedge fund. My God, he’ll almost be killed in the rush.”"

6 Comments:

Anonymous Anonymous said...

So what is the relevance of this?

04 March, 2006 14:23  
Blogger JoseyWales said...

I realize the above question is rhetorical. Still, chatty mood today...

The "relevance", I guess, is that we are so screwed up and insecure as a country/people that we want to grab a piece of success/celebrity/notoriety wherever we can find it. "Philip, Philip you billionaire-Courchevel-skiing-master-of the-universe-trader, I am like you."

This goes in the "Keanu Reeves was born in Beirut" file. ;)

04 March, 2006 15:21  
Anonymous Milad said...

Guess who is more of a role model to our children?:

Philippe Jabre or Michel Aoun?
Philippe Jabre or Samir Geagea?
Philippe Jabre or Saad Hariri?
Philippe Jabre or Hassan Nasrallah?
Philippe Jabre or Nabih Berri?
Philippe Jabre or Walid Jumblat?

That is relevant, isn't it?

Or are you so "screwed up and insecure" that you don't see that or are you just jealous of success?

04 March, 2006 20:01  
Blogger JoseyWales said...

Milad,

Maybe I am jealous. BUT...

There are more important national developments than the tribulations of one ex-pat.

Instead of gossip, which is fun, about Jabre, Carlos Ghosn, Selma Hayek etc perhaps we should ask why are most of "our" role models, as you call them, living and thriving ABROAD.

Don't you get annoyed when the only people we can brag about are outside or remotely connected to the country? Sort of like an Egyptian bragging about the pyramids that "he" built.

05 March, 2006 14:22  
Anonymous milad said...

We have greatness at home:

The mountains that "we built" and the leaders that we elected.

For the last 30 years the best thing that happened to Lebanon is its emigrants, like Jabre. They are most of the 65 billion dollars that are in our banks.

And that is unfortunate.

05 March, 2006 17:06  
Anonymous Anonymous said...

well we can try to teach the locals to become... say top money managers, through etradingc dot com for instance (am-ber-gur, a la pink panther)

27 March, 2006 14:24  

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