Yesterday shares of Man Group’s publicly-traded hedge fund group plummeted after news of an uptick in redemptions, but that isn’t the worst news.
Man Group is a huge hedge fund – $65 billion AUM, the biggest in Europe – and it’s not just trading one strategy, like other hedge funds. They’re very diversified, as the CEO Peter Clarke said today in a statement, “Extreme market volatility in recent months has […] reinforced the need for diversifying, non-correlated investment returns. The benefit’s of Man’s strategy to build out a range of investment styles to suit differing market conditions have been strongly evident in this period.”
Normally it is a benefit to be diversified.
But Man Group’s shares plummeted 23% yesterday (graph below) after news of a $1.8 billion increase in the firm’s redemptions and a $4.5 billion drop in the firm’s sales. Those redemptions were driven in large part by poor hedge fund performance. DowJones writes, “half of the firm’s fall in assets has been driven by net poor performance at GLG,” the hedge fund that Man Group acquired last year. GLG lost $1.1 billion because of general under-performance, and $1.9 billion from its long-only funds.
Long-only fund losses are expected right now. So far this year, it’s been long/short and value driven investors that have been killed in particular, because the market is down.
The worst news is this, from Dow Jones:
Notable under-performance within GLG’s hedge fund stable came from the GLG Emerging Markets fund, managed by Bart Turtelboom and Karim Abdel-Motaal, which lost 13.3% in July and August, and the GLG European Opportunity Fund, managed by Markus Merz, which dropped 13.5% in the same period.
… [Man] AHL gained 6.5% during July and August, and is up 7.7% in the five months to the end of August. This leaves it around 5% off its high-water-mark.
… Galia Velimukhametova’s GLG European Distressed is up 7.1% Pierre Lagrange’s GLG European Long Short fund has gained 5.9%, while the GLG Market Neutral fund, managed by Steve Roth, is up 5.6%.
Man Group is well diversified in the hedge fund space. These poor numbers in all of their funds might be hint of more terrible performance numbers to come at hedge funds, and not just the long/short, value, and event-driven managers like we’ve been seeing so far this year.
We spoke to an investor in a Emerging Markets fund yesterday. The news they’re getting from the fund (not GLG) is that it doesn’t know what’s driving losses. The fundamentals look good, but his picks are simply not performing.
And the fact that Man Group won’t hit its high water mark also isn’t good news, because it means its managers aren’t getting paid well for their work.
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