Man Group shares soar on hopes of recovery

Date: Thursday, October 1, 2009
Author: ouise Armitstead, Telegraph

The world's biggest listed hedge fund manager said its assets are growing again after 15 months of decline, signalling a recovery after the sector's worst year for a decade.

Man Group, which is seen as a bellwether for hedge funds, said assets under management were up 1.2pc to $43.8bn (£27.2bn) at the end of June. Although the increase was modest and the group admitted that institutional investors are still redeeming their money, the figures were above market expectations.

Shares in Man Group rose 7.5pc to 331.2p on back of the trading update for the six months ending September 30, ahead of the group’s interim results in November.

Peter Clarke, chief executive, said: “Investor sentiment is continuing to improve across the industry, the performance outlook is healthy and the prospects for sustained industry inflows are very promising.”

After an appalling 2008, global hedge funds are rebuilding their tattered reputations with industry returns reaching 14pc in the first eight months of the year, according to Hedge Fund Research. Last year the sector lost an average of 19pc.

Man Group, whose assets peaked at $79.5bn in June 2008, was particularly hard hit by its exposure to the $50bn fraud perpetrated by Bernard Madoff, the Wall Street financier. The group lost $360m of client money in the fraud. In May, the group warned shareholders that management fees would suffer this year because institutional clients were defecting as a result. Man Group’s shares fell as low as 150p in March.

The hedge fund manager said positive performance across many of its funds in the first half had generated $30m in net performance fee income compared with $160m in the same period last year. However, its flagship AHL fund is suffering, down 6.9pc between April 1 and August 1.

Pre-tax profits fell 55pc to $280m, down from $622m at the same time a year ago.

In a note, Credit Suisse said: “We believe that Man Group is an outstanding franchise and believe that the decrease in the rate of institutional redemptions is likely to be seen positively by investors. Moreover we believe that the medium-term outlook for Man is positive given the strong private client distribution network in Asia.”