Man Group Assets Rise 4.5% as Investor Additions Slow

Date: Thursday, January 10, 2008
Author: Tom Cahill, Bloomberg

Man Group Plc, the world's largest publicly traded hedge fund manager, said assets under management rose 4.5 percent in the last three months of 2007 as investors added money at the slowest pace in 15 months.

Man Group declined 3.8 percent in London trading after saying investors put $600 million into its funds, bringing assets to $71.7 billion. Sales of $4.2 billion in the last quarter were offset by $3.6 billion in redemptions, the London-based company said in a statement today. Fund performance added $1.5 billion to assets, and currency and other adjustments contributed $1 billion.

Peter Clarke, who took over as chief executive officer last April, delivered returns at Man Group's flagship fund that outperformed peers. Still, individual investors put in money at a slower pace than pension funds, endowments and other institutions.

"It's not been a great environment to sell," said Jason Streets, head of research at Evolution Group Plc in London, who has a "buy" recommendation on the shares. "The noise has been quite negative, even though their fund performance has been positive. As the market settles down they have a very strong track record on which to be selling retail product."

Man Group fell 20 pence to 508.5 pence at 12:20 p.m. in London trading, valuing the company at 8.7 billion pounds ($17.1 billion). The shares are down 10.6 percent this month, wiping out 2007's gain.

'Slightly Disappointing'

Man Group's figures were "ever-so slightly disappointing" because net sales to individuals slowed, Streets said. Money managers benefit from individual investors because they tend to pay higher fees than institutions such as pension funds.

Man Group oversaw $68.6 billion at the end of September and $60 billion in December 2006. Individual investors account for $41.7 billion of Man's investments, while institutions comprise $30 billion, Man said in the statement.

The company's flagship AHL Diversified Fund rose 17 percent in 2007, compared with the average hedge-fund gain of 10 percent, according to Chicago-based Hedge Fund Research Inc. Man Group will attract clients because its funds have outperformed rivals, said Daniel Garrod, an analyst at Citigroup Inc. in London.

"AHL has been performing at a high-water level, which has to help," said Garrod, who has a "buy" recommendation on the shares. Garrod, who spoke in a telephone interview in advance of Man Group's statement, forecast assets under management would rise to $70.9 billion.

Private Pools

Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall. They typically seek clients with at least $1 million to invest.

Hedge funds attracted $164 billion globally in the year through September, up from $126 billion in all of 2006, according to Hedge Fund Research.

Still, the pace has slowed. Hedge funds garnered $45.2 billion in the third quarter, a decline from record inflows earlier in 2007 as subprime-mortgage losses hurt returns.

Man, which started as a sugar trader in 1783, raised $2.9 billion last year ago in the initial public offering of its MF Global Ltd. brokerage unit.

To contact the reporter on this story: Tom Cahill in London at tcahill@bloomberg.net .