Man Group stung by AHL losses, client exits

Date: Friday, January 15, 2010
Author: Laurence Fletcher, Reuters

* Assets $42.4 bln at end-Dec, shares fall 5.25 pct

* Total net outflows $1.1 bln

* AHL flagship strategy down 16.4 pct in year to Dec. 28

* Poor AHL performance affected sales, says CEO

Hedge fund firm Man Group (EMG.L) said on Friday assets had fallen back as poor performance from its flagship AHL strategy and fresh client withdrawals knocked the group's recent recovery off course.

The world's largest listed hedge fund manager, which in the autumn began to see assets recover from the effects of the credit crisis, said that AHL saw poor performance wipe $1.2 billion off assets in the three months to December.

The computer-driven strategy tries to make money by following trends in global futures markets.

At 1045 GMT Man Group's shares were down 5.25 percent at 297.9 pence.

Net outflows from private investors, who in the previous two quarters were net buyers of Man's products, were $100 million.

Institutional investors withdrew a net $1 billion, above the $700 million of gross redemptions the company flagged up in November.

These institutional outflows included $200 million of sales from part-owned firm Ore Hill's funds and client exits from distressed and convertibles strategies, which performed strongly in the 2009 rally.

"Might we have sold more if AHL was performing better? Yes, we may have done," Chief Executive Peter Clarke told Reuters in an interview.

"The industry is seeing modest net inflows ... (but) I don't feel we're missing out."

Overall assets under management at the end of Man's third quarter to end-December fell 4 percent to $42.4 billion.

The firm said it had been selected this month by a large pension fund as preferred provider for a mandate over at least three years that could lead the firm to manage up to around $1 billion.

Clarke, who told Reuters in November he expected institutions to become net buyers of Man's products at some point before March, said on Friday the recovery in flows might now be delayed into Man's next financial year starting in April.

Like most hedge fund firms, Man, whose assets stood at $74.6 billion in March 2008, suffered from investor outflows and performance losses during the credit crisis.

AHL STILL LAGGING

"We continue to be bearish about Man Group," analysts at Credit Suisse said in a note, adding that the outflows were "extremely disappointing".

"We continue to believe that the market underestimates the impact of weak investment performance at AHL on future sales."

The flagship AHL Diversified Futures strategy was down 16.4 percent in the 12 months to Dec. 28, 2009, in what was a boom year for the hedge fund industry as markets recovered.

The strategy, which is important both for sales to private investors and to the movement of Man's share price, was one of the big winners in a tough 2008.

However, while the strong and sustained rebounds in equity and metal prices have helped, like many such funds it was hit by sharp market reversals and a lack of clear trends in currency and bond markets last year.

In a letter to investors this week, AHL chief executive Tim Wong said 2009's losses were "commensurate with the types of drawdowns we have experienced in the past and within our statistical expectations".