Man Group Hires New Risk Head for Troubled Fund

Date: Wednesday, May 9, 2012
Author: Reuters

Man Group has replaced the head of risk at its embattled flagship AHL fund as pressure mounts on chief executive Peter Clarke to stop the rot in the British company's shares, now trading at the lowest level in more than a decade.

Shares in Europe's largest listed hedge fund firm have slumped more than 60 percent in value since September, hit by continued client exits and poor performance at the computer-driven fund responsible for the bulk of Man's revenues.

Shares continued to slide on Tuesday [May 8], falling 4.5 percent to 84.85 pence by 1135 GMT.

The reshuffle at AHL sees Douglas Greenig, a mathematician with management and trading experience at RBS Greenwich Capital and Fortress Investment Group, replace Matthew Sargaison as chief risk officer. Mr. Sargaison becomes chief investment officer.

Tim Wong remains AHL chief executive.

The appointment coincides with a period of intense scrutiny for Mr. Clarke, fast running out of options to turn the group's sagging fortunes around. As CEO, Mr. Clarke initiated a plan in November to buy back up to $150 million of stock by the end of 2011, purchased 50,000 shares himself in September and unveiled a shake-up in the group's dividend and performance fee structure.

But analysts say MR. Clarke is almost powerless to change the performance of a "black box" computer fund led by teams of Ph.D. scientists and their complex algorithms, besides changing the personnel in charge of it.

Recent falls have sparked market talk of a takeover or shake-up of management, although Mr. Clarke insists he has the full support of shareholders. Almost 99 percent of shareholders who voted backed Mr. Clarke's reappointment as a director of the company at last week's annual general meeting.

Man bought GLG for $1.6 billion in 2010 in an effort to smooth out returns from AHL, which tries to latch on to trends in prices but can find it difficult to profit in choppy markets. The tie-up has so far failed to generate the kind of value most shareholders hoped for.

Meanwhile, the $21 billion computer-driven fund AHL, named after 1980s founders Michael Adam, David Harding and Martin Lueck, has struggled to perform recently as volatility hurts its models focusing on short-term market movements. AHL lost 6.4 percent last year just as chief rival Winton Capital made a 6.3 percent gain. Over the past 12 months AHL has lost more than 7 percent. Around 70 percent of Man's 2011 group revenue was generated by AHL funds or funds that allocate to AHL.

Man said last week AHL was on average 14 percent away from its so-called high-water mark, above which it can earn lucrative performance fees. Citi analysts estimate that after losses in April it is now around 17 percent away from that mark.

Recent outflows from AHL were largely from Nomura Global Trend—an open-ended version of AHL—which Man launched in Japan only last year, raising $2 billion by last May.

"Sales will remain subdued until we see positive performance enduring there," Mr. Clarke said on a call to journalists last week.