Man Group to List Hedge Fund on NYSE

Date: Thursday, May 31, 2007
Author: Houston Chronicle

LONDON — Man Group PLC, the world's largest hedge-fund manager, plans to list a hedge fund on the New York Stock Exchange in its latest push to raise money from U.S. investors.

The move highlights a broader trend of hedge-fund managers boosting their assets through exchange-traded funds that can be bought by both institutional and retail investors.

Shares in Man Dual Absolute Return Fund, a closed-end company, will be offered at $20 apiece, for minimum orders of 100 shares. Plans for the initial public offering were filed with the U.S. Securities and Exchange Commission Friday.

The company didn't say how much money it is looking to raise. Similar funds listed in Europe have raised as much as $2.2 billion in IPOs, mainly from institutional investors who want access to hedge-fund strategies through a liquid stock.

Man Dual Absolute Return Fund will invest in two ways: a long/short equity strategy managed by Tykhe Capital LLC, a New York-based hedge fund manager using quantitative models; and AHL Core, a managed futures trading program operated by Man.

About 80 percent to 85 percent of the money raised will be allocated to Tykhe and the rest to AHL. The fund plans to leverage its assets by about 50 percent.

Man's Chicago-based investment arm, Man Investments Corp., is the fund's investment adviser, with Tykhe acting as sub-adviser. Morgan Stanley is underwriting the IPO.

Man Group already manages the assets of a couple of London-listed closed-end companies investing in pools of hedge funds. Earlier this year, shareholders voted to wind down Man Alternative Investments Ltd., another listed company, after its shares consistently traded at a discount to its portfolio's value.

Shares in closed-end companies can trade at a premium or discount to the value of the underlying portfolio, depending on supply and demand in the shares and investors' sentiment toward the portfolio's assets or investment manager.

These kinds of companies' shares almost always initially trade at a discount because of underwriting expenses and other IPO fees.

In its prospectus, Man Dual Absolute Return Fund said it will consider from time to time buying back shares or other actions to potentially reduce a possible trading discount. It said its net investment income will be distributed to shareholders each quarter as a dividend, which can be paid in cash or reinvested in the fund.

Man Dual Absolute Return Fund is Man Group's first public fundraising in the United States, and builds upon recent product launches targeted at U.S. retirement savers. Through funds of hedge funds and the AHL trading program, Man Group had about $61 billion in assets at the end of March, most of which has been raised in Europe and Asia.