* Q3 net outflows $2.2 bln after $1.4 bln previous qtr
* Assets under management up 14 pct to $60 bln
* Man launching new funds, tweaking flagship fund AHL
* CEO says environment continues to be challenging
* Shares down 7.4 pct
By Laurence Fletcher
LONDON, Oct 18 Man Group shed client
funds for a fifth straight quarter, raising fresh doubts about
when the embattled hedge fund manager's campaign to restore
investor confidence will bear fruit.
Man's share price has buckled 70 percent since early 2011 as
poor fund returns prompted fee-paying clients to take billions
of pounds of cash elsewhere.
The group has made a raft of changes this year to try and
reverse its fortunes: slashing costs, launching new funds and
naming Jonathan Sorrell, son of WPP CEO Martin Sorrell
as finance director.
The measures have so far failed to impress.
Clients pulled out a net $2.2 billion over the three months
through September, compared with $1.4 billion the previous
quarter, and the company warned on Thursday that there were few
signs of improvement.
"The flow environment continues to be challenging," Chief
Executive Peter Clarke said in a statement. "Investor sentiment,
and consequently the outlook for flows, continues to be
Clarke told analysts that the firm had suffered another $1.4
billion of outflows during the current quarter. Man declined a
request to ask Clarke about the firm's progress.
The shares, which have rebounded by around 37 percent since
early July thanks to wider market gains and renewed speculation
of a takeover, were down 7.4 percent at 85.7 pence by 0951 GMT.
Man, formerly a member of the UK's FTSE 100 blue chip index,
has been giving up assets since the credit crisis - save for a
brief upturn during the first six months of last year.
The persistent outflows cast further doubts on the merits of
the controversial $1.6 billion purchase of fund firm GLG in
2010, which has so far failed to offset volatile returns from
Man's flagship computer driven fund, AHL.
In June the firm signalled a fightback when it replaced
Finance Director Kevin Hayes with Sorrell, while in July it
announced another $100 million a year of cost cuts, bringing
savings since the GLG deal to $250 million.
But despite its attempts to attract investors, Man continues
to be held back by poor returns from $16.3 billion AHL, which
tries to make money following trends in global markets.
The fund accounts for 70 percent or more of Man's earnings,
according to brokerage Numis.
In a note on Thursday, Numis warned that unless markets
return to showing steady trends, "we believe it will become
increasingly difficult to sell AHL to new investors and retain
existing ones as the poor numbers start to impact the medium-
and long-term record".
The fund also has higher fees than rivals with better track
records, added Numis, which rates the stock a sell and says the
shares are "uninvestable".
On Thursday Chief Operating Officer Emmanuel Roman told
analysts that it was "very hard" to know when the performance of
these so-called CTA (commodity trading advisor) computer funds
"We've spent quite a bit of time trying to make performance
better in AHL. Yes, we do trade slower and there are many other
things we've worked on."
AHL, named after 1980s founders Michael Adam, David Harding
and Martin Lueck, made large gains in 2008's market chaos but
lost 6.4 percent last year and this year is down 0.6 percent.
In contrast, the MSCI World Equity index is
up 13 percent this year. During the third quarter AHL saw $700
million of client withdrawals.
"Due to its reliance on AHL ... we see Man's share price
coming under increasing pressure without a noteworthy
improvement in performance at AHL," said Jonathan Gosling,
financials analyst at Edison Investment Research.
AHL is around 14 percent away from its so-called high-water
mark, the level above which it can earn lucrative performance
The firm is considering launching two AHL computer programs
- Evolution and Dimension - as stand-alone funds for investors,
while Man has also been busy launching computer funds and
raising money in its Man's Systematic Strategies unit.
Last month it hired Sudi Mariappa, former global head of
portfolio management at bond fund manager Pimco, to drive a
major push into fixed-income.
Man's total assets rose 14 percent over the three months to
end-September to $60 billion, boosted by the recent acquisition
of fund of funds firm FRM. The rise in client outflows over the
second quarter was mainly in lower margin products, Man said.
Guaranteed products - complex, high-margin products with a
fixed term mixing a range of funds - saw a further $300 million
of net withdrawals, as a unit that was once a driver of profits
continues to shrink.
On Thursday Man said it had withdrawn its title sponsorship
of the Man Asian Literary Prize. It also sponsors the Man Booker
Prize, one of the most coveted awards for English language