Man Group Plc, the world’s biggest publicly traded hedge-fund manager, said outflows increased 57 percent in the third quarter amid an environment for sales Chief Executive Officer Peter Clarke called “subdued.”
Clients pulled a net $2.2 billion from the firm, up from $1.4 billion in the second quarter, the London-based firm said in a statement today. Customers redeemed $5.2 billion from Man Group’s investment funds, compared with $3 billion of sales.
“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 fell 9.9 in London trading, the most in 11 months. Investors are becoming increasingly cautious about adding money to the $2 trillion hedge-fund industry as the European sovereign debt crisis crimps growth in the region. Hedge funds gained about 3.6 percent in the first nine months of the year, trailing the Standard & Poor’s 500 Index’s 15 percent advance and the Stoxx Europe 600 Index’s 10 percent increase.
Man Group’s assets under management rose 14 percent in the third quarter to $60 billion after its purchase of hedge fund investment firm FRM Holdings Ltd, which added $8.3 billion. Man Group’s funds increased by $500 million through positive investment performance.
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, Barclays Plc analyst Daniel Garrod, who has an equal-weight rating on Man Group, wrote in a note to clients today.
The stock slumped 9 pence to 83.40 pence. Man Group has declined 34 percent this year, for a market value of 1.5 billion pounds ($2.4 billion). The firm dropped out of the FTSE 100 Index of the U.K.’s biggest companies by market value in June.
Man Group has responded to the muted sales environment and underperformance of its biggest hedge fund, AHL, by planning cost cuts of almost $200 million. The company also shook up its management team in June by appointing Jonathan Sorrell, a former Goldman Sachs Group Inc. executive, finance director.
In Europe, banks, wealthy individuals and institutional investors are sitting on “an enormous amount of cash,” Chief Operating Officer Emmanuel Roman said on a conference call with analysts today. While these groups would like to invest in riskier assets such as hedge funds that historically have higher yields than government bonds, they are holding off, citing concerns about Europe’s economy, he said.
“When they move is a harder question,” Emmanuel said. “It is contingent on what happens in the macro space.”
AHL, which relies on computer algorithms to spot profitable trades in futures markets, rose 2.5 percent in the third quarter and is down 2 percent for the year, according to data compiled by Bloomberg. Assets in AHL declined to $16.3 billion in the third quarter from $16.7 billion three months earlier.
Assets in GLG Partners Inc. hedge funds were unchanged at $15.1 billion. The “majority” funds at GLG, which Man Group bought for $1.6 billion in 2010, had investment gains in the third quarter, the company said in the statement.