Man's gotta do: Man Group's FD, Kevin Hayes

“Culturally we hit a bit of a barrier because, ‘I’m here to re-engineer you’ is not necessarily a welcome statement. So there was a bit of negotiation and that was the thing that weighed on me the most, getting frustrated in really getting traction. But one of the greatest things we did was Lehmans India ­ something I had never dreamed, thought about, even considered, and there it was. I was front and centre in that initiative,” he says.

“I had the discipline to extract costs and we saved a good deal of money through outsourcing and productivity processing. But the idea was really to infect the culture with a new way of thinking about processes. I had a lot of fun,” he says.

“But then it got to a point where you’ve set up some processes, you have very capable people and that will be self-sustaining. Then it’s time to move on again.”

Hungry for more
At this stage one might have expected a man with Hayes’s CV to break into the top ranks. But perhaps he was a touch too hungry. Despite being a barrister, a former partner with a Big Four firm, a veritable old-hand at Lehmans as a divisional financial controller in New York, international CFO out of London and a proven grower of the business, Hayes wonders if the bank’s top brass were ever willing to accept him into their ranks. His thoughts are surprising and probably ring true for many FDs pondering their next move.

“At the end of my time there I had gone to Lehmans saying, ‘My career has reached a plateau; what are the opportunities?’. In some large organisations you tend to find ‘inner’ and ‘outer' circle situations and I think, by that stage, I was more on the outer circle than the inner. So when I said, ‘What’s my next challenge’, they said, ‘Well, we’ve picked the team’,” he reveals. “It’s probably more the fact that I drifted to the outer sides, rather than being in the inner circle that led to Lehmans saying that. And it’s important for organisations to pick key people they feel comfortable with.”

And he admits he found himself at an impasse. “I had been thinking about things in ten-year cycles, though not deliberately: I don’t think I’d ever in those 12 years talked to a headhunter, other than to recruit somebody. But if you put your head above the parapet you find there’s lots of good things out there.”

And along came Man Group, his first plc FD job. Hayes got to enjoy the tail end of bull market prosperity and growth in his first year there, before the crunch and Madoff turned the screws. In his first set of financial results, 2007 saw the group report pre-tax profit up 60% to $1.5bn on funds under management (FUM) of $61.7bn at its March 31 year-end. By the following year-end pre-tax profit had almost doubled and FUM rose to $74.6bn.

But by March 2009 the global economic landscape was unrecognisable with the implosion of Lehmans and the shocks that followed: investor panic sent redemptions through the roof and Man lost most of its 2007-08 gains, reporting pre-tax profit slashed by half and FUM at $46.8bn (losing another $3.5bn in the following three months), well below 2007’s levels.

Crunch time
In December 2008, the group admitted a $360m exposure to the Madoff scandal through investments made by its money-spinning fund-of-funds business, RMF, in “Madoff-related” funds. Despite a careful campaign of investor relations to explain where the failure in due diligence was, a number of Man’s clients simply cashed out. Three months after, Man Group cut its workforce by 15% ­ a relatively modest cull of almost 300 jobs compared to the scale of redundancies the business world is used to these days ­ cutting out $60m in cost across the business over the next year.

As head of group risk (as well as group head of tax, treasury and technology) it happened on Hayes’s watch. But it is the one topic of discussion where he reverts to toeing the party line. Man swiftly re-jigged itself to integrate its platforms, “re-diligenced” and stressed its strong capital base, as you would expect. “Everybody is a risk manager in a crisis,” he says. Some of the investors that decided to remain with Man undertook their own due diligence on Man’s checks and balances, reflecting how badly trust in the group was shaken.

But his answers don’t go far enough to shake the feeling that, before the event, so long as it received its redemptions on time, the group had no need to ask questions.
“The role of the regulator [the Securities & Exchange Commission] to govern was somewhat leaned on in the past and many people relied on the regulatory role around the Madoff structure,” Hayes believes. “People are now less willing to assume the regulator is going to provide a degree of assurance.” With the European Commission and the SEC looking into stepping up hedge fund regulation this ethos may not last.

As head of IT in a business for which trading technology is mission-critical, Hayes used his experience from the Lehmans process and productivity gig to grow Man’s infrastructure without adding cost. “Our two core assets are people and technology. In a business like ours that has the ability to grow dramatically, getting scale out of infrastructure without adding costs is a key thing, not just adding head-count but leveraging automation,” he explains.

“In investment management, what you want to try and do is focus on what we add value to, what is core to our investors, as opposed to taking on board a lot of processing ­ so the IT expense, having a good portfolio of technology and investing in that technology is very important and having a finance director overseeing that is good.”

Hayes has his fingers in a lot of pies. He is also the highest-paid FD in the FTSE-100 (including salary and bonuses) according to Financial Director’s November 2008 salary survey ­ while his chief executive Peter Clarke enjoyed the same status in our 2007 survey, though on about £3m more, all told ­ reflecting the impressive growth Man Group has enjoyed since Fink turned it into a hedge fund tour de force from a modest, 200-year old sugar brokerage whose activities pre-date the birth of commodity futures.

Whether he becomes chief executive at Man when the time is right, or moves on, as many of the FTSE-100’s top FDs have done amid the credit crunch, it’s unlikely he will settle for the familiar. “At university I realised that a big part of accountancy was law, so I decided I’d do a law degree too, which started halfway through my accounting degree,” he recalls.

“But there was another reason which is that, at that point, not many people did law and accounting together. To me, it was a fundamental decision, something about me being different. In New Zealand students go overseas because you have to get that experience. They go to England or Canada: they have a lot of the same social systems. So I chose New York.”

Perhaps London is going to wear a little thin.

Curriculum Vitae – Kevin Hayes
Qualification – CPA, NZICA, AICPA

Career
2007-present
Finance director, Man Group

2005-2007
Managing director – productivity and process improvement, expense and sourcing services, Lehman Brothers

2002-2005
International CFO, Lehman Brothers

1999-2002
Managing director, global capital markets controller, Lehman Brothers

1995-1999
Global fixed income controller, Lehman Brothers

1994
Partner, financial services, banks and securities dealers, Ernst & Young, NY

1989-1995
Chartered accountant, Ernst & Young

1986-1989
Trainee, Ernst & Young