Mark Gilbert is a Bloomberg Gadfly columnist covering asset management. He previously was a Bloomberg View columnist, and prior to that the London bureau chief for Bloomberg News. He is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”

The good news from the world's largest publicly traded hedge-fund firm is the industry is back in fashion. The bad news is that even the world's largest publicly traded hedge-fund firm is suffering a squeeze on fees.

Fee Compression
Man Group's net management fee margin
Source: Company filings

Tuesday's earnings from Man Group Plc are something of a curate's egg. The 9.2 percent drop in net margins in the first half of this year is the worst since the 14 percent shrinkage in the first half of 2015 -- and means fees are down more than 30 percent since the end of 2014.

The problems facing the hedge-fund industry are well known. In short, their performance hasn't justified what they used to charge. Competing cut-price products such as mostly passive exchange-traded funds have attracted investor cash that might previously have been allocated to active hedge-fund managers.

On Track for Best Year This Decade
Year-to-date inflows into European ETFs have already surpassed full-year percentage gains seen since 2013
Source: ETFGI {}

After flat-lining for several quarters, Man's funds under management reached a record $96 billion by the end of June, boosted by a combination of net inflows of $8.2 billion, a $3.8 billion gain from rising market values and an acquisition that added $1.8 billion.

Not Dead Yet
Man Group's funds under management reached a record in June
Source: Company filings

Man says it expects both inflows and fee compression to moderate in the second half. There's certainly life in the hedge-fund industry yet -- provided it can learn to cope with the somewhat straitened circumstances imposed on it by the rise of cheaper competition.

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