Man Group inflows surge after Japan fund launch

Date: Thursday, July 7, 2011
Author: Laurence Fletcher, Reuters

* Net inflows $3.7 bln in 3 months to June

* Funds under management $71 bln

* GLG's hedge funds on average made losses in quarter

* AHL falls 3.2 pct between May 30 and July 4

* Shares rise 3.1 percent (Adds detail)

LONDON, July 7 (Reuters) - Man Group boasted stronger than expected first-quarter inflows as investors keen to profit from bleak markets helped the world's biggest listed hedge fund manager accelerate its belated recovery from the credit crisis.

Man, which only began winning back investors earlier this year after two years of outflows, reported net inflows of $3.7 billion for the first quarter of its financial year, up from $700 million in the three months to end-March.

Analysts at Singer had expected $2.5 billion of net inflows.

The performance strengthens the position of CEO Peter Clarke, whose $1.6 billion deal last year to buy GLG and boost Man's assets had set up a power struggle with GLG's influential co-CEO Emmanuel Roman.

Man's resurgence has been helped by the bumper launch in Japan of an open-ended version of flagship computer-driven fund AHL, which has now raised $2.3 billion, in spite of AHL's recent performance losses.

Man's total assets rose to $71 billion, marginally below analysts' forecasts, from $69.1 billion at end-March after tough markets knocked $1.1 billion off the value of its funds.

"This rise ... masks a significant amount of progress in terms of net sales," said Singer analysts in a note.

Man Group shares were up 3.1 percent at 1057 GMT, while the broader blue-chip market was up 0.45 percent.

However, Man added that AHL, a $23.9 billion fund named after 1980s founders Michael Adam, David Harding and Martin Lueck, was 12 percent below its so-called "high-water mark", the level above which it can earn lucrative performance fees.

The fund, which has suffered from a lack of market trends it can latch onto and which was hit by May's commodities sell-off, has fallen 3.2 percent between May 30 and July 4.

"The fly in the ointment remains AHL's performance," said Peel Hunt analyst Mark Williamson in a note.

"We remain of the belief that AHL as a strategy is not broken and that investment performance will re-assert, but this is taking much longer than we had hoped."

Man said the "black box" fund was still defensively positioned in bonds and had significantly cut its short bet on equities.

Meanwhile, hedge funds managed by GLG, which it bought last year for $1.6 billion to boost assets and diversify its business, saw performance losses on average this quarter.

GLG's Alpha Select was down 5.6 percent in the two months to end-May, and Atlas Macro was off 2.1 percent. Its long-only funds are roughly flat.

"Current markets are creating challenging performance conditions for most asset classes, and our assumption is that investor sentiment will remain patchy over the summer months," said CEO Clarke in a statement.

Clarke told Reuters at last month's GAIM conference in Monaco that Man saw higher net inflows in the three months to June than the previous quarter.

He also said that while there was a "big opportunity" for Man to expand in the U.S. -- cited as a driver behind its acquisition of GLG -- there was "a bigger opportunity outside the U.S."

Having suffered a painful fallout from the credit crisis, with assets dropping below $40 billion last year, Man is now running a similar level of assets to 2008.

However, its recovery has been slower than the wider hedge fund industry, which began to see clients return as early as 2009 and this year saw total assets balloon above $2 trillion for the first time, according to Hedge Fund Research.