Man Group profit down

Buildings are reflected in a sign for Man Group hedge fund firm in London November 6, 2008.

LONDON (Reuters) - Man Group posted lower profits and a further fall in assets, bucking the trend in a recovering hedge fund industry as clients continued to withdraw cash following poor returns from its flagship AHL fund.

The world's largest listed hedge fund firm said assets -- on which investment firms earn fees -- were $39.1 billion (26.1 billion pounds), down from $42.4 billion in December, after clients withdrew a net $1.5 billion in the first three months of the year, although this was less than half the withdrawals a year ago.

The drop in assets was due mainly to poor performance from AHL, a black box fund named after 1980s founders Michael Adam, David Harding and Martin Lueck.

The fund, which makes money from following market trends, has been hit by sharp reversals in bond and currency markets. It has fallen 17.2 percent over the past year during a strong period for the hedge fund industry, although it has made money since January.

At 0946 GMT, Man Group (EMG.L) shares, which are down by more than a fifth this year, were 1.4 percent lower at 246.1 pence, while the FTSE 100 index was 0.15 percent higher.

"Our funds under management ... were dominated by the consequences of the minus 6 percent in December we saw from AHL," Chief Executive Peter Clarke said in a call to analysts, investors and journalists.

AHL's losses had affected sales, he said, adding: "The catalyst for improved sales will be material positive performance in the managed futures style and from AHL..."

Two years ago, the firm's assets under management were $74.6 billion.

"We believe a sustained pick-up in AHL performance is needed before net inflows are to be seen and hence there remains risk to our $3.6 billion net inflow forecast for the coming year," said Credit Suisse analyst Rupak Ghose.

The firm also said profit before tax and adjusting items for the year to March was estimated at $530 million, less than half the level a year ago and below analyst forecasts, as falling assets and poor performance hit management and performance fees.

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(Editing by Karen Foster)