Man Group Says Shorting Ban Will Not Hurt Flagship Fund

Date: Thursday, September 25, 2008
Author: Ambereen Choudhury and Poppy Trowbridge, Bloomberg.com

(Bloomberg) -- Man Group Plc, the largest publicly traded hedge-fund manager, said it doesn't expect to be hurt by the U.K.'s ban on short selling of financial shares.

Man has about 14 percent of its $69 billion of assets invested in the so-called long/short funds, the ones most affected by the short-selling ban, the London-based company said today in a statement. The flagship fund, AHL Diversified Futures Ltd., uses computer programs, trades stocks mainly through indexes and ``is not expecting to be impacted by the recent short-selling restrictions,'' the company said.

The U.K.'s Financial Services Authority introduced emergency measures last week after short sellers were blamed for a plunge in shares of HBOS Plc, the U.K.'s biggest mortgage lender, which had to be rescued with a buyout from Lloyds TSB Group Plc. Man, which isn't on the FSA's extended list of financial companies that can't be shorted, fell 15 percent this week on speculation that the ban would hurt its investment returns.

``Whilst performance for the industry in the first eight months of the year has been broadly negative, managed futures has been one of the few styles to have generated positive performance,'' Man said.

The net asset value for AHL was $34.89 as of Sept. 22, a decline of 3.4 percent from the previous week. The fund has increased 18.3 percent over the last 12 months, Man said in a separate statement.

Man, which initially rose 4.3 percent today in London trading, were up less than 1 percent at 400.25 pence as of 9:30 a.m. The shares are down 30 percent this year, valuing the company at 6.7 billion pounds ($12.6 billion).

Man doesn't expect any ``material impact'' from its counterparty exposures to Lehman Brothers Holdings Inc., which declared bankruptcy last week, or from U.S. insurer American International Group Inc., which was taken over by the government.

Under the new U.K. rules, investors can't take new short positions in U.K.-listed financial services companies. Existing short positions can't be increased. Man asked regulators to be added to the list of stocks protected form short sellers, the Financial Times reported with out naming its source. Man spokesman Paul Farrow declined to comment.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets and participate substantially in profits from money invested.

To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net