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Last updated 12 hours ago
Sep 28 2011 | 8:44am ET
Shares in the Man Group, the world’s largest hedge fund group, plummeted as much as 22% on Wednesday on the news that the firm’s asset base has declined by $6 billion since June.
Man announced in a statement that its assets will fall 8.5% to $65 billion as of September 30, from $71 billion at end-June. Investors redeemed $2.6 billion from the group’s funds in the second quarter. Man CEO Peter Clarke told reporters during a Wednesday conference call that those redemptions had included a “couple” of single investors in September withdrawing “a few hundred million." Negative fund performance accounted for $1.5 billion of the decline and the strengthening U.S. dollar accounted for another $1.9 billion.
The decline in AUM is the steepest the group has seen in three years.
“The extreme volatility of markets in recent months has created challenging performance conditions across asset classes,” said Clarke in a statement. “We are assuming that investor appetite will remain suppressed for the remainder of the year.”
During the conference call, Clarke told reporters the company hopes demand for hedge funds and other investment products will improve “once there is clarity in markets, particularly in Europe.”
Man said sales were likely to decline 50% in Q2 to $4.5 billion. The group estimates that redemptions were up 34% to $7.1 billion.
Man’s before-tax profit for the six months ending September 30 is likely to fall to $185 million from $227 million in Q2 2010. Management performance fees will be down 8.4% year on year to $230 million.
One bright spot in an otherwise gloomy outlook is the Man Group’s AHL Diversified fund, a computer-driven hedge fund that accounts for about a third of its total assets. AHL has gained 9.7% since the end of June, according to Bloomberg data, and is up 0.5% for all 2011. The fund gained 17.2% in 2010 after tumbling 16.7% in 2009.
On the other hand, funds operated by GLG, the London-based hedge fund manager bought by the Man Group in 2010, are poised to post losses. GLG’s hedge funds will shed about $1.1 billion in Q2, according to the Man Group’s statement, while its long-only funds will lose $1.9 billion.