Man Group Plc cautioned investors about the outlook for its business as volatility in financial markets showed no signs of abating, prompting clients to withdraw funds.
The world’s largest publicly traded hedge fund reported $1.3 billion of net outflows in the first quarter, the first since 2013. Total assets under management rose to a record $82 billion on “positive investment performance across all managers,” it said in a statement from London on Friday.
“While we have a reasonable pipeline of sales, in particular in our quant businesses, recent market volatility reminds us of the uncertain macro environment,” said Chief Executive Officer Manny Roman, 51.
Lackluster returns from some hedge funds in Europe, spurred by a recent bond market sell-off, are prompting clients to withdraw capital. Man Group’s main AHL Diversified fund fell 6.2 percent over the past month, cutting gains this year to 1.2 percent. BlueCrest Capital Management is facing $2.7 billion in redemptions from its oldest hedge fund in the second quarter after losing 3.5 percent this year, a person with knowledge of the matter said.
Redemptions at Man Group were $5.5 billion in the quarter, more than offsetting sales of $4.2 billion. The outflows included $900 million from discretionary long-only funds and $600 million from fund-of-fund alternatives.
Assets under management climbed $9 billion this year to a record $82 billion. Investment performance boosted the total by $4.3 billion. The purchase of money manager Silvermine and Bank of America Corp.’s funds-of-funds unit contributed to the remainder.
The firm posted a loss of $2 billion related to foreign exchange movements.
Man Group’s shares initially rose on Friday as part of a wider rally as Prime Minister David Cameron’s Conservatives won a parliamentary majority in the U.K. elections. They fell 1 percent to 177.2 pence by the close, crimping 12-month gains to about 76 percent.
“Broadly the business is on the right track, but the volatility and the gearing to investment performance go with the territory,” Keith Baird, analyst at Panmore Gordon & Co., said by telephone. He cut the stock to hold from buy and lowered his price estimate to 180 pence from 230 pence.
Man Group has purchased five money managers since the beginning of last year, including Pine Grove Asset Management and Numeric Holdings. That helped assets grow 35 percent in 2014. It has also expanded its presence in the U.S.
While Roman’s outlook for business was cautious, inflows will probably return in the second half, said Peter Lenardos at RBC Capital Markets in London.
“Despite net outflows being higher than anticipated and AHL’s recent selloff, we view today’s statement positively as funds under management continue to grow,” Lenardos said.
Assets under management at Man Group’s quantitative hedge funds, which trade on mathematical models, rose 18 percent to $15.2 billion in the quarter. Its GLG division grew assets 19 percent to $17.2 billion.
Man Group increased Roman’s bonus 43 percent to $2.5 million in March after the share price doubled since he became CEO two years ago.
Chairman Jon Aisbitt will step down next May, Man Group said. A board committee, led by independent director Phillip Colebatch, will identify his successor.