Man Group defends 'black box'

By DAILY MAIL REPORTER
Updated: 06:47 EST, 25 March 2010

Hedge fund manager Man Group is struggling to convince investors that its 'black box' model to predict market moves is dented rather than broken.

Its flagship AHL fund, which is supposed to spot and follow market trends, had a nightmare year to February, falling by 12.5% while global share prices rose 35%.

As a result, investors pulled out £1.7bn of funds in the December quarter.

Man's total funds shrank from £31bn a year ago to £26bn.

Profits for the year to March will fall 31% to £338m after a 78% slump in fees for investment performance.

Despite all this, the shares crept up 2p to 244.5p.

AHL's problems were well flagged - it dropped 6% in December.

It came unstuck in last year's volatile conditions, especially following the Dubai crisis.

The shares have more than halved from the peak of over £6 in 2008, slashing Man's market value from £10bn to £4.2bn.

For a decade it was a huge City success story, making fortunes for bosses and soaring into the top 100 stocks.

Once a cocoa trader, it reinvented itself with seemingly ingenious models.

It has been adept at selling these to investors in Europe and the US, and is now seeking new markets in Asia.

But all this depends on how its funds perform. Chief executive Peter Clarke says AHL is having a better 2010, rising 5% in the past three weeks and a net 2% since January.

'This may be the catalyst for sales to private investors' he says, admitting that 'it does need to be sustained'.

Seeking to limit the damage, Man intends to hold dividends for the year at 29.2p, putting its shares on an incredible 12% yield. Its other funds performed better than AHL.