Hedge fund firm Man Group assets fall to $44 bln

Date: Thursday, May 28, 2009
Author: Reuters.com

* AuM $44 bln vs $46.8 bln at end-March

* Fee income to be lower this year

* Institutional investor redemptions to slow - CEO

* Pretax profit $1.2 bln vs $2.1 bln

* Stock down nearly 5 pct (Adds analyst, detail, background)

By Laurence Fletcher

LONDON, May 28 (Reuters) - Man Group (EMG.L) said that assets under management continued to fall as performance sagged and clients pulled out cash, sending shares in the world's largest listed hedge fund firm sharply lower.

At 1132 GMT, Man's shares were down 4.8 percent at 238.25 pence after the group said that fee income -- which is partly based on assets under management -- would be hit.

Assets, which fell by more than a third in the 12 months to March, dropped to $44 billion by May 26, from $46.8 billion at end-March when its financial year closed, and $74.6 billion a year earlier, the firm said on Thursday.

"The lower current assets of $44 billion is below market expectations," said one analyst, who asked not to be named.

The drop comes after a 5.4 percent rise on Wednesday, as markets had anticipated stronger results.

The hedge fund industry is facing its biggest challenge to date, with investors pulling their money out after a record poor performance last year and a series of scandals such as the $65 billion Bernard Madoff scam.

In the brief period between its March 26 trading update and the close of the quarter alone, the group lost $0.9 billion in assets due to poor performance and currency effects.

Man's flagship AHL managed futures investment strategy, which bets on trends in global futures markets and which ran $20.4 billion in assets as at March, has fallen 2.2 percent in the year to May 19.

Managed futures funds in general are the second-worst performing strategy so far this year, according to Credit Suisse/Tremont, having been the top performer in 2008.

 

"TOUGH OUTLOOK"

Performance in other strategies has lagged the firm's expectations, Chief Executive Peter Clarke said.

During the year, Man's RMF Four Seasons strategy, which was exposed to U.S. fraudster Bernard Madoff, lost 15.6 percent, while its Glenwood product lost 16.7 percent and its multi-strategy Man-IP 2202 fell 8.3 percent.

"Obviously this was not the performance we or our investors were expecting from the product range," Clarke told Reuters.

Net outflows from institutional investors were $4.3 billion, while net inflows from private investors were $2.2 billion.

Since March, institutional net outflows were over $3 billion, Clarke said, while private investor net inflows were around $1.8 billion.

However, Clarke said he expects redemption requests from institutional investors to "shift significantly downwards from here" and for the greater percentage of private investor assets to benefit margins.

"They will sell products but it may take some time -- it's a tough outlook for the hedge fund industry," said another analyst who requested anonymity.

Full-year profit before tax and adjusting items was $1.2 billion, in line with its guidance in March and down from $2.1 billion a year ago, the firm said.

The final dividend is 24.8 cents a share, meaning the total dividend for the year stays at 44 cents.

Net performance fee income for the year was $358 million, slightly above guidance of $340 million given in March and down from $936 million a year ago. (To read the Reuters Hedge Fund Blog click on blogs.reuters.com/hedgehub; for the Global Investing Blog click here) (Editing by Simon Jessop)