Man Group assets fall, to sue over Madoff exposure

LONDON (Reuters) - Shares in Man Group, the world's biggest listed hedge fund firm, slid on Wednesday after it said funds under management fell 21 percent and that it would sue over its exposure to the Madoff scandal.

Man said its assets totaled $53.3 billion at the end of last year, below Citi analysts' expectations and down from $67.6 billion at the end of September.

Part of the drop was due to net redemptions, which reached $3.2 billion in the three months to December.

Man Group's shares were down 5 percent at 214 pence at 1014 GMT (5:14 a.m. EST), up from a trough of 200 pence earlier. The blue chip FTSE 100 Index was 1.6 percent lower.

Man will take legal action with its investors over exposure to the alleged fraud by U.S. financier Bernard Madoff, Chief Executive Peter Clarke told Reuters in an interview.

"We will be suing the people involved," Clarke said. "We will be looking for remedies on behalf of our investors. We will take action in conjunction with our institutional investors."

U.S. authorities have accused Madoff of running a scam that they say may have cost investors across the globe as much as $50 billion.

Man Group said last month it was exposed to Madoff Securities through its institutional fund of funds business, RMF, which had around $360 million in funds directly or indirectly sub-advised by Madoff.

NOT SEEN MADOFF

Randal Goldsmith, director of fund research at S&P Fund Services, told Reuters this week it had put its rating on RMF's Four Seasons Strategies fund under review, due to its exposure to Madoff.

RMF had not met with Bernard Madoff since 2001, Goldsmith said, but had invested via a feeder fund into his business. The group had done its due diligence on the feeder fund, he said.

Man Group declined to comment. Clarke said the firm did not usually invest via feeder funds, however.

During the three months under review, Switzerland-based RMF saw a negative performance of 7 percent.

Man said its overall drop in assets was mainly due to the decision, announced in November, to move most assets in its Man Global Strategies product into cash, reducing overall assets by $9.7 billion, although Clarke said there was scope to increase gearing in MGS in a "measured" way.

"The outlook for institutional sales remains very subdued in the short term and continued institutional redemptions mean that we will see institutional net outflows until markets stabilize and confidence returns," he said.

Analysts at Citi said the comments on institutional outflows were worse than it had expected.

(editing by John Stonestreet)