Man Group hit by customer nerves amid market turmoil

Man Group, one of the world’s largest hedge funds, saw weaker than expected fund inflows and said its clients had claimed more of their money in recent months ahead of further market turbulence expected .

The London-based firm, which manages $142.3 billion in assets, saw net client inflows of $100 million in the three months to June, a sharp slowdown from 3.1 billion in the first quarter and below analysts’ forecasts of about $800 million.

He also said he saw “a pick-up in redemptions from May as clients made gains to manage other issues in their portfolios.” The group expects “some short-term flow volatility,” chief executive Luke Ellis said.

Shares of Man, which have risen 12.3% this year, fell 4.5% to 255.8p on Tuesday morning.

Hedge funds such as Man have generally fared better than traditional asset managers in turbulent markets this year: the S&P 500 stock index has fallen 13.6% this year and government bond markets are heavily sold off on concerns about high and rising inflation.

But many were still affected by the turmoil, especially those managing equity-focused hedge funds or long-only portfolios.

Man’s $15.1 billion TargetRisk fund, which invests in stocks and bonds, fell 14.8% in performance and his Numeric Global Core fund lost 19.8%, although both outperformed their benchmarks. The value of Man’s long-only assets fell $9 billion during the second quarter.

Last year, the $3.8 billion hedge fund industry saw net inflows for the first time in four years on hopes of a recovery in performance after years of disappointing returns. But this year there have been net outflows of $7.7 billion, according to data group HFR, a sign that caution has returned. Across the sector, hedge funds are on average down 5.8% this year.

Nevertheless, some parts of the industry are doing well. Computer-driven hedge funds, such as the Man’s AHL unit, which attempts to identify enduring price trends and patterns in the markets, have profited by latching onto movements in the bond and commodity markets. Its AHL Diversified fund gained 17.2% in the first half while AHL Evolution, which bets on trends in around 800 niche markets, rose 10.9%.

Chief Financial Officer Antoine Forterre said some investors who had suffered big losses elsewhere in their portfolios had reduced their positions in Man’s funds.

While the company had a “very strong pipeline” of entries, he added, “we can’t control what customers want to do and need to do.”

This year, entries have focused on absolute return funds, which tend to charge higher fees than long-only funds.

Forterre added that even after a difficult start to the year for global markets, Ellis’ view was that “there is probably more to come.”

Man’s basic pre-tax profit for the six months ending June rose 22% to $395 million from the same period a year ago. That was well ahead of expectations, thanks in part to higher performance fees, including $187 million from the AHL Evolution fund alone.

The group suffered $4.6 billion in investment losses and another $4.6 billion in losses from currency movements in the second quarter, leaving assets under management down 6%.