Man Group on slow recovery path
LONDON (Reuters) - Hedge fund firm Man Group Plc (EMG.L) showed it is slowly recovering from the industry's worst period on record, with better than expected profits and a small uptick in assets as client withdrawals slow.
The world's largest listed hedge fund manager said pretax profit more than halved to $302 million (183 million pounds) in the six months to end-September from $622 million a year before, although this was 8 percent above the group's estimate in September.
The result was boosted by performance fees from a fund based on its flagship AHL strategy, which has performed poorly this year but has achieved positive returns over the three months to September 30.
However, some analysts questioned the value of earnings from performance fees, which can fluctuate more than annual management fees.
"Performance fee ... is where the beat really occurs ... but this is regarded as lower quality," said analysts at Citi in a note.
Assets under management, on which fund firms earn regular fees, edged up to $44 billion at end-September from a trough of $43.3 billion reached at the end of June, helped by currency movements, and were little changed at the end of October.
Man Group CEO Peter Clarke, who told Reuters in January the firm was considering legal action over losses incurred from exposure to U.S. fraudster Bernard Madoff, said the firm is "looking at various class action lawsuits" but had not yet joined one.
AHL CONCERNS
Man's gradual improvement in fortunes comes as the $1.7 trillion hedge fund industry, which suffered its worst performance year on record last year with losses of 19 percent, begins to see investors return, helped by strong investment returns this year.
Man Group is continuing to see net outflows from institutional investors, but Clarke said the firm is still on track to see net sales to such clients at some point before March, helped by interest in its segregated accounts.
"I expect it to turn positive in our second half (the six months to March) because of our managed account platform ... The pipeline is sufficiently encouraging," said Clarke. "If it's not in our third quarter it will happen in our fourth quarter."
At 9:33 a.m. Man Group shares were 0.6 percent lower at 323.2 pence, in line with a 0.6 percent fall in the FTSE 100 .FTSE index.
Investor sentiment towards Man Group, whose shares have outperformed the FTSE All Share .FTAS by 16 percent so far this year, has been influenced by the performance of flagship strategy AHL, which has performed poorly this year.
AHL, a computer-driven strategy that bets on trends in global futures markets, has suffered like many such funds from a lack of clear trends in some markets and is down 15 percent since December 29 last year.
This leaves it around 16 percent below its high-water mark, analysts say, above which it generates performance fees. Continued...
