Struggling hedge fund manager Man Group bade goodbye and good riddance to 2011, as it revealed funds under management (FUM) took another dive in the final quarter of last year.
FUM at 31 December 2011 fell $6bn to $58.4bn from the $64.5bn billion at the end of September, an even bigger fall than the $4.6bn dive suffered in the second quarter of 2011.
Though the group saw $3.1bn of new money flow into its funds in the final quarter this was comfortably outweighed by redemptions of $5.6bn, as investors fretted over the global economic situation. The net outflow of $2.5bn was even worse than the $2.3bn outflow predicted by RBC but at least the redemptions of $5.6bn were less severe than the $7.3bn of redemptions seen in the July-September quarter.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Negative investment movement accounted for $1.5bn in the decline of the value of the fund, with the flagship fund AHL Diversified plc down 7.7% in the quarter, though there was a positive overall performance at GLG.
Latest Videos FromMoneyWeek
Foreign exchange (FX) and other movements also conspired to add to Man's misery, pushing down the value of FUM by $2.1bn. The main factors were the previously announced guaranteed product "de-gears" of $1.6bn and FX translation effects of $0.3bn.
With the value of FUM heading south, net performance fee income fell $4m in the final three months of 2011 but this was offset by $76m of net management fee income. In the nine months to the end of 2011, net management fee income stood at $278m and net performance fee income at $35m.
With money disappearing down the drain, management has been motivated more than ever to look at operating costs and efficiencies, and it said a further $75m of cost reductions from the end-2011 cost run rate will be put into place by the end of this year, of which $50m will be realised in 2012, with the remainder feeding through in 2013.
Man's financial position remains robust, the group assured, with net tangible assets of $1.6bn, net cash of $600m and total available liquidity resources of $3.2bn. After the repurchase of shares and the payment of the interim dividend, the regulatory capital surplus on 31 December 2011 was around $850m.
Peter Clarke, Man's Chief Executive, conceded that the second half of 2011 had been a tough one for the group.
"Investment performance varied significantly across styles, with market volatility and reduced market liquidity impacting trading opportunities. Although some of our funds performed strongly and sales held up well, we experienced a net outflow in the last two quarters, albeit with reduced redemptions in the final three months," Clarke said.
"With a strong capital base and continued focus on efficiency and performance, we are well placed to benefit when investor demand improves," Clarke claimed.
jh
