Analyst warnings make hedge fund a marked Man

Date: Wednesday, November 12, 2008
Author: Robert Lindsay, Times Online.co.uk

Man Group, the world’s largest quoted hedge fund manager, was one of the worst performers in a sliding market as analysts issued cautions over its debt and said that it could be forced to cash out of another $19 billion (£12.3 billion) of assets under management.

The fund’s shares were already under pressure after last week’s admission that it was having to sell down the bulk of its poorly performing $8.5 billion Man Global Strategies (MGS) fund and offer cash back to clients.

They fell another 32¾p to 248p yesterday as Bruce Hamilton, of Morgan Stanley, cut his price target to 260p and said that if the performance of Man’s flagship AHL fund weakened, it would “imperil” another $19 billion of assets for which it has guaranteed client returns. After the market closed, Man revealed that AHL had risen 0.23 per cent in the week from Monday to Monday.

Fitch, the rating agency, put Man on “negative” watch, noting that it had stepped up its own temporary loans to the MGS fund to enable MGS in turn to hand cash back to clients.

The FTSE 100 fell 157.23 points to 4,246.69. wiping out all Monday’s gains as fears grew that the bulk of China’s economic stimulus package had already been announced over previous months. Mining stocks, which had led Monday’s rally, drove the sell-off. Vedanta Resources fared worst, down 115p at 683p. A slide in the oil price to below $55 meant that oil stocks such as Tullow Oil, down 54p at 498p, were also under pressure.

Banks lost ground, with Lloyds TSB, down 17.8p at 177.4p, hit by worries over how digestible HBOS might be. HBOS fell 8½p to 99.2p as investors bet that Sir George Mathewson’s rescue bid would not happen. Merrill Lynch said that the United States was the Achilles’ heel for HSBC, down 39p at 696½p, adding that it would have to write off $14 billion for bad mortgage loans in America.

Reed Elsevier was down 23½p to 508p, on talk that its Reed Business Information unit would fetch as little as £750 million.

Property developers, such as British Land, down 49½p at 556½p, were under pressure as fears about retail tenants were stoked by grim figures from the British Retail Consortium.

A warning from Horizons, the food service research company, that pub groups would not be able to fill a £1 billion gap in beer sales next year with food sent the sector into a slide. Enterprise Inns fell 14½p to 110p, Punch Taverns was down 18½p at 151¾p and Mitchells & Butlers slipped 13¾p to 171½p.

Horizons said that to make up drinks sales with extra meal sales, Britain’s hostelries would have to sell as much food as all the country’s Chinese restaurants put together. “We believe this is impossible,” it said. It added that as a result there would be more pub closures next year than the 1,500 widely predicted.

Whitbread, owner of the Costa coffee chain, fell 71p to 852p after Starbucks revealed a 97 per cent fall in fourth-quarter sales, driven in part by falling demand in Britain.

- New York: Selling on Wall Street was widespread as traders, particularly in commodities, were stung by fears that demand would be halted by the economic slowdown. The Dow Jones industrial average closed 176.58 points down at 8,693.96