MAN GROUP PLC (LON:EMG) (OTCMKTS:MNGPF) shares tanked as much as 14 percent in London trading after its flagship hedge fund suffered steep weekly losses that wiped out all the gains the fund had reported this year so far. MAN GROUP PLC (OTCMKTS:MNGPF) (LON:EMG) is the world’s second largest hedge fund. Its $16.4 billion computer-driven fund AHL lost 8.9 percent for the week to June 3. It had already incurred 3.1 percent loss in the previous week.
AHL enjoyed solid gains earlier this year on the back of soaring financial markets. But now it is down about 12 percent from its peak this year, and has suffered an overall loss since January 1. The managed futures funds like AHL, which are developed by scientists and mathematicians, use complex computer models to identify and make money from trends in hundreds of markets globally. But they suffer heavy losses when the markets behave unpredictably or take a U-turn.
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Man Group Relies On AHL For Key Revenue
Almost all the losses in AHL were due to long positions in international bond markets. Over the past two weeks, bond markets have been hit hard amid speculations that the Federal Reserve may scale back its $85 billion a month stimulus program. Some losses were also attributable to its bullish bets on Nikkei, which has fallen about 15 percent in the past two weeks.
Heavy losses at AHL are a big blow to MAN GROUP PLC (OTCMKTS:MNGPF), which still relies on the fund for most of its revenues. Though MAN GROUP PLC (OTCMKTS:MNGPF) (LON:EMG) has tried to diversify its income streams in the past few years. The world’s second largest hedge fund recently reshuffled its management and appointed Emmanuel Roman as its new CEO in a bid to revive performance.
Man Group: Shortsellers Finally Get Some Relief
Man Group has been targeted by shortsellers, a couple of big names of the hedge fund industry have been pessimistic of recovery at AHL for quite a while now. Lansdowne Partners has a 1.7 percent short in Man’s shares, whereas Cliff Asness’ AQR Capital has a 0.9 percent negative bet. Man Group, one of the largest of London’s hedge funds is still up overall after declining 15 percent but this is first major dip of the year. On the other end, funds like Odey Asset Management and Toscafund are bullish on their peer Man Group, and have major long positions.
Analysts Bearish on Man Group
AHL is about 13 percent lower than the “high water mark” above which it can charge hefty performance fees on its clients money, says the Financial Times hedge fund correspondent Sam Jones. Analysts have warned for the several weeks that MAN GROUP PLC (LON:EMG) (OTCMKTS:MNGPF)’s rally this year is overdone.
RBC analyst Peter Lenardos said in a note to clients that MAN GROUP shares have risen 30.7 percent in the second quarter this year so far. That’s much higher than the 2.4 percent gain in FTSE 250 index and 7.9 percent increase in the FTSE 350 Financial Services index in the same period.
MAN GROUP is not the only British asset manager to witness its stock tumbling today. Aberdeen Asset Management’s shares plunged 4.4 percent to 443.4 after its CIO Anne Richards sold shares of the company on Tuesday.
MAN GROUP shares were down 14.42 percent to 99.70 in London trading.