July 17, 2006

Man Group AUM Up, Charlemagne Capital AUM Down

LONDON (Hedgeworld.com)--The contrasting fortunes contained in the trading statements of two listed hedge fund groups--Man Group and Charlemagne Capital--shows how the turbulence of the past month has played out in allocations. It is also reflected in the sharp divergence of the share price performance of the two hedge fund groups.

Man Group, the world's biggest quoted hedge fund operator by assets under management, withstood the downturn in global markets during the second quarter to raises assets under management by 8% to more than $54 billion. It said that sales in the quarter more than tripled to $5.3 billion from $1.6 billion in the same period a year ago. "Demand for our fund products has been very strong, both from private and institutional investors," the company said in a trading statement.

The performance of Charlemagne, which targets emerging markets with private equity, long-only and hedge funds, reflected the sell-off in those markets and the greater volatility that has ensued. Charlemagne saw a net redemption of $333 million in the second quarter, leaving it with assets under management of $4 billion. More positively, Charlemagne still managed first-half net inflows of $278 million.

"After a strong first quarter for emerging markets, the second period saw a period of considerable retrenchment," said Jayne Sutcliffe, chief executive of Charlemagne, in a statement. "However, we remain firmly convinced that emerging market share is fundamentally undervalued compared with developed markets."

Investors who backed Charlemagne's March initial public offering at 100 pence per share seemed to have anted up at exactly the wrong time. The stock struggled to keep the float price before turning south in mid-May; it closed on July 11 at 62 pence.

For now, the decline seems to have abated. Indeed, Charlemagne attracted some attention from bargain hunters on reports that forecasts of 2006 earnings per share of around 8.7p puts the stock on a lowly multiple of just seven. This implies that the fear of a further lurch downwards in emerging markets is still troubling many investors.

However, the far larger scale and diversity of Man Group's hedge fund operation has seen it emerge relatively unscathed. Though the stock has become much more volatile, the shares closed lower at 2,537 pence on July 11--but nearly 60% above their year ago level--and down only about 8% from their all-time high in early May.

At Man Group's annual meeting held on July 11, shareholders approved a 6-for-1 stock split that will take effect later this month. In response to a question from a shareholder, Chairman Harvey McGrath said that no decision had been taken about floating or selling its brokerage arm.

BMcIntosh@HedgeWorld.com

Contact Bob Keane with questions or comments at bkeane@investmentadvisor.com.

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