October 18, 2012

Outflows at Man Group Reach $2.2 Billion

Q3 outflows rose 57% in ‘subdued’ sales environment

The largest publicly traded hedge fund manager in the world, Man Group, saw its outflows boosted by 57% in Q3, in a sales atmosphere that its CEO, Peter Clark, characterized as “subdued.”

Bloomberg reported Thursday that while Q2 saw outflows of client funds totaling $1.4 billion, in Q3 they reached $2.2 billion, according to a company statement. Sales totaled $3 billion, while customers withdrew $5.2 billion.

“The flow environment continues to be challenging and this was reflected in lower sales in the quarter,” Clarke said in the statement. “Investor sentiment, and consequently the outlook for flows, continues to be subdued.” The stock reflected the gloomy news in London trading, dropping as much as 8.1%—its largest intraday fall in 5 months.

Wary investors are hesitating to put their money into hedge funds, which have only gained about 3.6% so far in 2012 compared with gains for the S&P 500 Index—15%—and the Stoxx Europe 600 Index—10%.

AUM at Man Group increased 14% to $60 billion in Q3 after its acquisition of FRM Holdings, a hedge fund investment firm that brought $8.3 billion into the fold. Positive investment performance added another $500 million to its funds.

Barclays analyst Daniel Garrod said in the report that the company faces a “worsening” capital position, with excess regulatory capital posting a bigger-than-estimated decline to $500 million from $704 million at the end of June. In 2012 Man Group has fallen to a market value of 1.6 billion pounds ($2.5 billion); that’s a loss of 32%. In June its lower valuation dropped it from the FTSE 100 Index of the U.K.’s biggest companies by market value.

The company has planned to cut costs by nearly $200 million, and made changes to its management team in June with the appointment of former Goldman Sachs Group exec Jonathan Sorrell as finance director.

COO Emmanuel Roman was quoted saying that in Europe, not just banks but also institutional investors and wealthy individuals are holding “an enormous amount of cash.” They’re holding off on putting those funds into hedge funds and other riskier assets, he said, because of worries about the economy in Europe. He said in the report, “When they move is a harder question. It is contingent on what happens in the macro space.”

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