Man Group, the world largest publicly traded hedge fund, suffered a rough summer like much of the industry, with assets dropping by nearly $6 billion in the latest quarter amid redemptions and weak performance.
The firm said investors pulled a net $2.6 billion its funds through September, while volatile markets prompted another $3.4 billion in losses. Overall assets now stand at $65 billion, the company said Wednesday.
The firm expects to post $145 million in profits before taxes from management and performance fees for the six months ended Sept. 30, compared with $147 million in the same period a year ago, prior to its acquisition of the hedge fund GLG Partners. On Wednesday afternoon, shares of the Man Group were down more than 19 percent, in large part because analysts had not expected such a steep drop in assets.
“The extreme volatility of markets in recent months has created challenging performance conditions across asset classes,” said Peter Clarke, chief executive of Man. “This has tested investor appetite for risk but also reinforced the need for diversifying, non-correlated investment returns.”
Indeed, Man’s flagship AHL product, which trades using computer models, fared well through the summer. It was up about 6.5 percent in July and August, the company said. The firm’s long-only portfolios suffered some of the greatest losses in the latest quarter, down about $1.9 billion. The funds also experiences some of the highest redemptions, as retail investors rushed to secure cash.
Man’s results mirror a number of big firms that have seen assets decline steeply owing to the sharp sell-off in stocks and highly volatile markets. A number of portfolios lost money as stocks went down and then failed to profit when many went back up because they had reduced exposure to the market. Slow growth in developed economies and the continued uncertainty over the Eurozone’s debt crisis have caused the markets to gyrate wildly, pummeling investors accounts and general sentiment.
Man’s results will also be watched as a barometer of investor sentiment, in particular whether there is a flight to safety. Man had been on a fundraising tearr, collecting $9 billion of assets in the quarter ended June 30. The firm pulled in another $4.5 billion through September, but it was not enough to overcome investor redemptions and performance losses.
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