This week on our Masters in Business interview, we speak with Luke Ellis, CEO of Man Group, a global active investment manager, with $104.2 billion in AUM. Man Group is and the world’s largest publicly listed hedge fund. He ran the equities derivative business at JPMorgan, and built the fund of fund business at FRM, where he was Managing Director from 1998 to 2008.

He explains how his childhood love of horse racing and poker led him to thinking about statistical advantages and disadvantages in gambling and investing. His natural feel for numbers led him to earn degrees in Mathematics and Economics from Bristol University.

Our conversation was recorded on Tuesday, June 9th, before markets took an 11% hit — nut you can here Ellis’ thinking as to why equities were overdue for a correction.

Man Group has 5 different quantitative engines that drive their investing, including a private single family home fund. He credits the firm’s quantitative approach and discipline as helping them through this period. The firm is 80% institutional, with 20% of individual clients coming from private banks/family offices. Man Group runs about 60% hedged, and 40% long-only. The long-only portion fell with the markets, but the hedged portion gained enough to allow the firm to dramatically out perform during the drawdown, across the entire firm, when the markets bottomed, Man was down only 11%.

The hedge fund industry is in a Darwinian struggle, becoming more of a “Winner take all” concentration of alpha. The cost of succeeding has become increasingly high, especially for technological processes and human capital.

His favorite books are here; A transcript of our conversation is available here Monday.

You can stream and download our full conversation, including the podcast extras, on iTunes, Spotify, Overcast, Google, Bloomberg, and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.

Next week, we speak with Jeremy Siegel of Wharton School of Business and Wisdom Tree, discussing valuations and asset management under lockdown.

Luke Ellis Favorite Books