Hedge Fund Titan's Share Price Down 10% On End-Year Results

by Phillip Morton, Investors Offshore.com, London

02 June 2009

Man Group PLC, the world’s largest hedge fund, saw its share price tumble by more than 10% after it announced that funds under management and its profits had fallen by 37% and 40%, respectively. The fund, which boasted USD74.6bn in equity in March 2008, now has only USD44bn under management. Redemptions in the fund are showing no signs of slowing with funds under management decreasing by USD2.6bn during March and April of 2009.

In its end of year statement, Chief Executive at Man Group PLC, Peter Clarke commented:

“The past financial year saw extraordinary turmoil in financial markets globally which put extreme stress on business models across the financial services industry. Man has not been immune.”

Over the course of its financial year, Man Group’s pre-tax profits fell 40% to US1.2bn. Upon adjustments for amortization and provisioning, Man's pre-tax profits fell 64% to USD743m. The dividend is unchanged at USD0.44.

“Man remains a strong business on fundamentals but industry challenges and recent performance weakness means that earning prospects appear modest in the shorter term,” rationalized Peter Clarke.

Clarke, optimistic about better returns in 2009, underlined that 2008 had been disastrous for the entire industry due to the financial and economic crisis, exacerbated by the emergence of the Madoff Ponzi fund. Clarke noted however that 2009 would bring better prospects for investors, restore clients' trust and allow the industry to recover.

"Madoff had two real impacts for us. The first was the industry-wide impact. An event of that nature in an already fragile economy around the world was not helpful to investor sentiment and precipitated redemptions across the industry,” noted Clarke.

"For Man, we did have an investment in Madoff as part of our institutional portfolio. We've suffered some damage in our reputation at RMF as a result of that. And clearly we've been working hard in dialogue with our investors to rebuild the confidence and reputation. I think we've got some solutions in terms of the changed environment with our new investment management business."

“2009 has begun very well for the hedge fund industry with positive returns across the industry overall," continued Clarke. Adding: "A number of market commentators anticipate that the industry's funds under management will bottom out this year around USD1 trillion and then regain upward momentum. There is a weight of money on the sidelines looking to get back into the markets. So I think the opportunities for the hedge fund industry in terms of inflows are strong. The question is when those inflows will begin and how strong they will be."

Clarke concluded:

"Through these turbulent markets we have preserved financial resources, maintained surplus capital and acted to protect investors. Looking further ahead, our international scale and track record will continue to afford us market access and investment opportunities, reinforcing our leading competitive position."

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