Muscle Man Fink

WE'VE all heard of Girl Power, but hedge fund supremo Stanley Fink would like to convert us to Man Power. The company he runs - Man Group - has metamorphosed from a small sugar broker to a FTSE 100 company. Man shares have soared in the past three years, in defiance of the bear market.

Dubbed 'The Hedgemaster' in the City diary columns, legends surrounding Fink include a story that he swam across Lake Zurich to his office every day when he worked in Switzerland. Disappointingly, it is not true. Fink believes that the hedge fund industry is also shrouded in myths.

The man on the street associates hedge funds with amoral profiteering and high stakes betting. Insurance bosses this year accused them of being bogeymen who deliberately drove down the stock market by 'short-selling' - an Alice-in-Wonderland manoeuvre involving the sale of shares you do not actually own.

Fink, unsurprisingly, is keen to rebut the charge. 'If people say hedge funds are depressing the market, that is just plain wrong,' he insists. 'After September 11, the people selling shares were insurers, for liquidity reasons. Hedge funds saw shares as cheap and were buyers.'

Man is probably best known outside the Square Mile as the sponsor of the Booker Prize, now officially known as the Man Booker.

'People kept saying we were the biggest company nobody had ever heard of,' says Fink, who is reading his way through the nominated books.

Part of the problem is that few people understand what the company actually does. I invite Fink to explain it simply.

'We specialise in products that can make money whether the markets are going up or down. Most of those products are loosely labelled hedge funds. We are also one of the largest futures brokers, allowing industrial users and others to hedge their business exposures.'

Hmm. That sounds reasonable, but surely there must be something behind all these accusations that hedge funds are A Bad Thing?

What about the attack on the Bank of England by hedge fund legend George Soros in 1992, which cost British taxpayers £4bn? Or the 1998 collapse of Long Term Capital Management fund in the US, for that matter?

'The label hedge fund is a broad church,' says Fink. Soros-style funds, he explains, are now less than 20% of the industry. 'There can be strategies that actually stabilise share prices,' he says.

Man does cater to retail investors, but more to millionaires than to the man on the street. A typical client invests £100,000 in each of two or three funds.

Fink argues that one big advantage of hedge funds is that they can go short of the market. Conventional mutual funds, by contrast, must invest most of their money in the stock market, even if they don't like the look of it.

'That is the thing,' Fink says. 'In a conventional fund, the most you can do is go down to zero. A hedge fund can go negative of a stock.We are no cleverer than conventional fund managers. But if you and I have the same golf handicap and you had to go round the course using one club only, and I had 14 clubs, all things being equal, I will beat you.'

Why, then, I wonder, should people invest in shares at all? 'Most people would say you should invest in the stock market. I am saying don't put all your eggs in one basket.'

Fink himself has done remarkably well out of shares, with a holding in Man Group of around £60m. He bought his first shares in the company at 18p, and has watched them rise to more than £12. 'It is the best investment I ever made in my life, other than my wife, of course,' he says.

Fink, at the age of just 45, has been married to Barbara for more than 20 years. They have three children - Alexander, Gabriella and Jordan.

Although he was the highest paid executive in the FTSE 100 last year, with total pay of £3.8m including a £3.3m bonus, he has so far avoided becoming a target of the anti-fat-cat league thanks to Man's performance.

He gives a lot to charity and is at pains to avoid seeming ostentatious. He assures me that some 2000-year-old Chinese figures on display were 'bought very cheaply', adding: 'I should have got some for myself.'

When I admire the boardroom in Man's offices at Sugar Quay, near the Tower of London, he seems a little discomfited. It is an impressive room featuring an enormous hi-tech table with special devices for cutting out annoying noises during video conferences. Fink, however, insists that his own office is much more modest, and shows it to me on my way out so I can see for myself.

Perhaps this comes from his no-nonsense-Northern roots. The son of a grocer, years in the City have not robbed him of his Mancunian accent. As a young man, he was driven by a desire to escape lower middle class financial insecurity.

'My father was not in any way a negative role model, but I looked around at him and his generation of middle managers. It made me shape my career to try never to end up like that - as an unsuccessful middle manager living near the edge.'

Fink won a place to read law at Trinity Hall, Cambridge, where he met Barbara. 'It was in my first year so I didn't indulge in some of the usual pursuits,' he quips. 'I got a 2:2 and thought I could get a job anywhere, but I had a rude awakening when most law firms rejected me.'

Accountancy firms were less picky. He qualified with Arthur Andersen before working for confectioner Mars, then American bank Citigroup. He joined Man in 1987, and soon after did a career-transforming deal with Swiss chocolate legend Klaus Jacob Suchard.

'I guess if you make your chairman a multi-millionaire in cash it is probably quite a good move. I was put on the board at the ripe old age of 29, but soon I will be the eminence grise.'

He was sporty at university, but he had never actually swum Lake Zurich until last year when he and some colleagues did it for charity. Apparently, the story arose because of a misunderstanding at a lunch with a journalist.

The transformation Man has undergone in recent years is remarkable. It was set up in the 18th century by James Man, an apprentice barrel-maker turned sugar broker. His big break was winning an exclusive licence to supply the Royal Navy with rum, a contract that continued until the 1970s when the weekly tot was abolished.

For 200 years, the firm operated as a partnership. The futures brokerage was set up in the early 1980s and a stock market float came in 1994.

Fink became chief executive in 2000. In the same year, Man sold off its commodities business to its management and took full control of US joint venture partner Glenwood.

Entry to the elite FTSE 100 index came in 2001. Last year, it took over privately-owned Swiss rival RMF for £570m and GNI Group for £100m. It now has a market value of nearly £4bn and 2,500 employees in 15 countries.

'By every parameter, we have achieved,' says Fink, who adds that he is concentrating on embedding the businesses he has already bought, rather than looking for more big deals. 'Acquisitions create a need to merge cultures,' he says.

Despite Man Group's success so far, I have a sneaking worry that it might be too good to be true. What are the risks to the business?

'The thing that would kill it is systematic failure of financial settlement systems round the world,' he says. 'If a major exchange like Eurex went down it would give us problems. The other risk would be a total absence of volatility. We do require markets to move, though in most cases we don't particularly care which way.'