Man Group's Clarke Warns HFs

Date: Monday, September 17, 2007
Author: HF Daily

The recent credit squeeze is likely to prompt investors to bypass hedge funds in favor of more traditional investment vehicles, therefore threatening the survival of some hedge funds, according to Man Group CEO Peter Clarke. “There is going to be a chunk of the [hedge fund] market where the prime brokers are saying, ‘You know what, sorry guys, but we’re out of you and focusing on these guys’,” Clarke was quoted as saying by Australia’s The Age newspaper. “I think there will be a—flight to quality is a bit pompous—but flight to security, where, particularly the investment banks, say: ‘We’d rather deal with people who have got through this, followed the rules and have got credibility and capital’.” The company’s shares, part of the FTSE 100, fell 18% for the six weeks ending Aug. 29, though Clarke told the newspaper that Man Group had emerged from the credit squeeze with surplus liquidity in part due to the renegotiation of its credit facility in June. “We’ve secured, corporately, massive liquidity facilities on terms which are unbelievably favorable,” he said. “I’m very happy to admit that. There’s no way that we could replicate that now—absolutely no way, because the market is simply not there.”