Man Group blue as assets fall

Man Group's asset base has dropped $6bn since June. Funds aren't as much fun when everyone starts pulling their cash out...

by Dave Waller
Last Updated: 28 Sep 2011
Volatile markets are eroding the amount of money that hedgies have to play with: note goings-on at Man Group, the world’s largest listed hedge-fund, where investor redemptions and ‘negative returns’ (what ordinary folk would call losses) are playing havoc on its figures. Assets fell by more than 8% between 30 June and 26 September, from $71bn to $65bn. Investors pulled out a net $2.6bn, while negative fund performance was $1.5bn, and a further $1.9bn was lost thanks to the dollar strengthening against funds denominated in the euro and the Aussie dollar.

As a result, Man Group shares quickly fell 17% this morning, making it by far the biggest loser on the FTSE 100. It marks a notable shift in fortunes for Man, which in July reported record fund sales of $9bn in the three months to June 30. Now its pre-tax profit forecast of $145m for the six months ending 30 September is well short of analyst forecasts.

With a cloud hanging over Europe, this just may not be the time to be running a business built around handling people’s loot. There’s been a trend towards pulling assets out to turn them into cash, in terror at the prospect of a failing Euro.

And Man’s money woes may be about to get worse, if the financial transaction tax winds up getting the go-ahead. We can imagine its Manly gaze was fixed on events in Brussels today - as EC president José Manuel Barroso backed controversial proposals for the Tobin tax. Borroso said he wants the financial sector to make a ‘contribution back to society’, returning the Eur4.6trn contributed to the financial sector by European states. Given Man’s recent performance, the tax won’t be any more welcome there than at any other cash-conscious City outfit.

Rumour also has it the 17 members of the eurozone could be forced beef up the bailout fund – the European Financial Stability Facility – to prop up their banks ahead of a default by Greece on its debt. It seems it’s the season for eye-catching taxes. The Greeks are also weighing up a property tax based on electricity bills. Which is odd – most property tax tends to be based on property. Maybe that’s the way to escape the Tobin tax – to hole up in your Mediterranean mansion with your lights off till this all blows over. We doubt that approach would work for Man Group though…

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