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Man Group profits fall as investors withdraw money

Date: Wednesday, September 29, 2010
Author: Emma Rowley, Telegraph

Man Group, the London-listed hedge fund manager, saw first-half profits fall significantly as investors continued to pull their money.

Clients withdrew a net $600m (£380m) over the past three months, with a $100m inflow from institutional investors offset by private investors departing.
The net outflow represented an improvement on the previous quarter, the group said, but added many investors were reluctant to commit capital given market uncertainty.
Management fees for the half were an estimated $205m, down from $245m last year, as funds under management shrank to $39.5bn in September from $44bn a year ago.

Performance fees were “minimal” at £10m, with Man’s flagship fund AHL rallying but still mostly below the “high water marks” at which the fees kick in. AHL has recovered to be up 7.6pc for the year to date, after a 16pc fall in 2009.

Pre-tax profits dropped 55pc to $135m for the six months to the end of September.

The figure reflected about $45m incurred in costs relating to the group’s $1.6bn acquisition of its rival GLG.

The takeover is expected to close shortly after New York-based GLG’s stockholder meeting on October 12.

Man Group also disclosed it would pay its former brokerage arm MF Global $35m in an arbitration settlement linked to the unit’s 2007 initial public offering.

Peter Clarke, chief executive, said Man’s investment strategies had performed well in difficult conditions. “The past six months have seen mixed macro signals across global economies and continued uncertainty in markets,” he said.

However, Numis analyst David McCann said the update “was disappointing... as it indicated the company expects to report performance fees, flows and performance below our expectations”.

Shares in Man Group fell 5.2 to 214.1p.

Meanwhile, DE Shaw, the world’s second-largest hedge fund by number of employees after Man Group, is to cut 10pc of its global staff after investors withdrew billions of dollors of their funds from the firm.

About 150 employees will lose their jobs as a result of the cuts, which one source close to DE Shaw described as a “right-sizing” of the business.