Man Group Plc (EMG), the world’s largest publicly traded hedge-fund firm, posted its first quarterly net inflows in two years as clients added money to funds at its GLG Partners unit.
Sales of Man Group’s funds totaled $4.1 billion in the third quarter, exceeding $3.4 billion of redemptions, the London-based firm said in a statement today. The $700 million inflow bucked the predictions of analysts including Peter Lenardos of RBC Capital Markets in London, who had estimated $500 million of outflows. Assets under management rose to $52.5 billion from $52 billion on June 30.
Redemptions have been slowing this year as some hedge funds managed by GLG had positive returns and clients became less concerned that the European sovereign debt crisis would hurt investment performance. Still, losses at Man Group’s biggest fund, AHL Diversified, continue to weigh on the company after it fell 9 percent this year through September, data compiled by Bloomberg show.
“Inflows were linked primarily to stronger performance in the first half of the year and were characterized by sizeable asset flows from certain customers, albeit into relatively low-margin products,” said Chief Executive Officer Emmanuel Roman. “We remain cautious in our outlook for asset flows going forward in the light of continued uncertainty in the macro-economic environment.”
Roman joined Man Group in 2010 as part of the company’s $1.6 billion acquisition of GLG.
The stock closed at 85.85 pence in London, up 3.6 percent on the day, for a market value of 1.6 billion pounds. The stock is up 3.8 percent so far this year.
Investment gains at GLG hedge funds added $300 million to assets under management in the period, with the firm’s main equity fund rising 2.6 percent and its market-neutral fund increasing 2.9 percent. GLG’s Japan Core Alpha Equity Fund, which bets only on rising stock prices and charges clients lower fees than hedge funds, gained 4.4 percent in the three months, bringing its advance for the year to 48 percent.
AHL, a $12.5 billion hedge fund that trades interest rates, bonds, stocks and currencies based on computer models, has been hurt over the past three years by a lack of market trends it relies on to make money. AHL posted its worst losses this year in May and June when U.S. Federal Reserve Chairman Ben S. Bernanke surprised traders by signaling the central bank may curtail bond buying, triggering a surge in yields. AHL’s assets declined by 10 percent in the third quarter and have have fallen by more than $10 billion since the end of 2010.
Man Group also experienced a decline in guaranteed products tied to AHL, which ensure clients won’t lose their initial investments. Guaranteed products are the company’s most profitable offerings because they charge the highest management fees, according to Lenardos. Assets in such funds dwindled by $1.7 billion in the period to $3 billion, the firm said today.
Man Group benefited from currency moves in the quarter, as the weakening of the U.S. dollar against the euro and U.K. pound added $1.2 billion to assets, according to the statement.
Roman, 50, has responded to falling assets by cutting costs, restructuring management and buying back Man Group’s debt. The company said it took a $60 million charge in August for agreeing to sublet a “significant” part of its London office. It also incurred an additional $30 million charge for terminating employees in the period.
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