Man Group, the world’s largest listed hedge fund, on Thursday said that investors added a net $700m to its funds in the final three months of 2005, more than triple the amount in the previous quarter, but below some forecasts.
Funds under management rose to $45.8bn, up from $44.4bn at the end of September, the London-listed investment group said.
Clients added $2.1bn to Man’s funds, of which the new global fund Man IP accounted for $900m, but withdrew $1.4bn. Market movements and the impact of currency transactions added $700m.
Geoff Miller, analyst at Bridgewell, lowered his recommendation on Man on the back of the update.
“We continue to believe that the growth prospects remain good, but having seen the very strong run in the shares in recent months....the re-rating relative to the sector has run its course and it will be earnings progression that will underpin future performance,” said Mr Miller in a note.
The gross sales figures fell short of some analysts’ expectations. Rupak Ghose at CSFB, who forecast gross additions of $2.5bn, said: “In particular institutional sales were weaker than expected at $500m, but this can of course be lumpy.”
The figures did not include funds raised at the latest global launch, Man BlueCrest, which netted $320m but will not start trading until later this month.
Shares in Man slid 2.6 per cent in early London trade to £19.99. The stock has climbed 30 per cent in the last year and has this month repeatedly hit record highs.
Analysts hope that Man’s acquisition of bankrupt Refco’s US regulated brokerage division will diversify the group’s revenues away from the fund management business. There was no mention of the acquisition, completed in November, in Thursday’s statement.
Hedge funds, which set high minimum investment levels and typically charge a 2 per cent management fee and 20 per cent performance fee on gains delivered, were the preserve of unabashed risk takers and the super rich. But the sector has increasingly drawn investment from institutional funds on the hunt for higher returns.
But as the sector has become more crowded, and attracted the attention of the regulators concerned at the influence such funds exert in the global marketplace, the pace of its expansion has slowed and the once heady returns have become harder to achieve.
The CSFB/Tremont hedge fund index gained 5.9 per cent last year to November, down from 7.9 per cent the previous year and 13.2 per cent in 2003.