Market Report: Man Group suffers as hedge fund gloom grows

Click to follow
The Independent Online

These are tough times for the hedge funds industry and so it was no surprise that shares in Man Group, one of Europe's biggest hedge funds, closed within a whisker of a two-and-a-half-year low. Man dropped 23p to 1,162p and, from a technical standpoint, market professionals reckon the stock could fall a lot further if it breaches the 1,155p level in the next few sessions.

These are tough times for the hedge funds industry and so it was no surprise that shares in Man Group, one of Europe's biggest hedge funds, closed within a whisker of a two-and-a-half-year low. Man dropped 23p to 1,162p and, from a technical standpoint, market professionals reckon the stock could fall a lot further if it breaches the 1,155p level in the next few sessions.

It seems that hedge fund managers are struggling to deliver at present. In fact, for the past week, rumours have been rife that a major US fund is on the verge of collapse after losing a colossal amount of money betting on the price of GM shares and bonds. April is thought to have been a particularly bad month for the industry and investors are thought to be rushing to pull their cash out of many funds.

Dealers reckon fellow hedge funds are most likely to be behind the heavy shorting of Man stock yesterday. One dealer said: "It is a great way for hedge funds to make money from the difficult trading conditions which have beset their industry. They know life is difficult for Man because they have first-hand experience of it." Man and RAB Capital, down 3p to 42.5p, are the only listed hedge fund managers in Europe and both stocks are on a firm downward trend. Since the start of April, Man has lost about 15 per cent of its market value, while RAB has lost a more dramatic 25 per cent.

One reason for the particularly sharp drop in RAB's share price is the hedge fund's significant exposure to the mining industry, especially the more speculative end of the sector. For example, RAB has a sizeable holding in White Nile, which has for months been trying to secure control of a major oil concession in south Sudan. RAB also has big stakes in Cambrian Mining, down 1.5p to 130.5p, Asia Energy, off 32.5p to 560p, and Cambridge Mineral Resources, unchanged at 7.75p.

But the City has lost its ardour for the small-cap mining sector over the past few months, sending shares in the trio mentioned - and many others - plummeting. That does not bode well for White Nile, which is tipped to return from suspension soon. Even if the group secures the much-talked-of concession in Sudan, few expect its stock to rise further. In fact, most believe it will beat a hasty retreat from the highs it touched before the suspension.

The FTSE 100 had a quiet session, finishing down 2.3 points to 4,884.2 despite gains by stocks on Wall Street in early US trading. Pearson retreated 5.5p to 649p on the back of a downgrade by UBS. Slashing its rating to "reduce" from "neutral" , the Swiss broker set a 590p price target on the media group. It warned investors the stock is one of the most expensive in the sector.

Corus, up 0.75p to 41.25p, received a welcome boost from Goldman Sachs. The broker highlighted the company as being among its favourites in the European steel arena. It tipped Corus shares to outperform the market over the coming months. Boots improved 4p to 596p on renewed rumours of a bid for the retail giant by venture capitalists.

Credit Suisse First Boston tried to put a floor under Rentokil Initial, 1.5p better at 153.25p, by arguing that at the stock's current level, the company is vulnerable to a private equity bid. CSFB calculates that a financial buyer could generate a return on equity of 100 per cent over three years if it bought the company at its present market value. Brokers reported solid demand for companies which generate a large proportion of their revenue in the US due to the recent strength in the greenback. So Invensys ticked 0.25p higher to 12.75p, Tomkins gained 1p to 250p, Signet added 1.75p to 102p and Ashtead rose 1.25p to 88.75p.

TTP Communications dropped 1.5p to 38.5p on worry that sales at the technology group have slowed during the past few months. Protherics dropped 1p to 46.75p as investors fretted about the company's cash burn rate.

In the smaller companies' world, Dinkie Heel, the AIM-listed manufacturer that has turned itself into an investment company, rose 0.38p to 2.5p after breaking into the black for the first time since 1998. Dinkie bought 75 per cent of the sportswear group Friedman's this year and word has it the group has a second acquisition in its sights. Kewill Systems improved 1.5p to 61.5p on news the software group had won a major contract from GE Healthcare.

Mano River Resources rose 0.5p to 9.75p after announcing the purchase of diamond licences from De Beers in Guinea, West Africa. The deal also gives Mano an extensive data-base of information about the licence area which will save the group a large sum and speed up the exploration process.

Main movers

↑ Xstrata 932p (up 24p, 2.6 per cent). Citigroup raises its earnings forecasts for the mining sector.

↑ William Morrison 191.25p (up 3.75p, 2.0 per cent). Some analysts believe the company is vulnerable to a predator after the stock's recent drop.

↑ Next 1,498p (up 22p, 1.5 per cent). Some bears close their positions as it becomes clear just how big a short position already exists in the stock.

↑ Scottish Radio 881.5p (up 23.5p, 2.7 per cent). In demand ahead of results this week.

↑ Bank Restaurant 2.37p (up 0.62p, 35.4 per cent). Appoints Robert Breare as an executive chairman.

↑ Clean Diesel 65p (up 5p, 8.3 per cent). Posts in-line first-quarter results.

↑ Stanley Leisure 524.5p (up 2.5p, 0.5 per cent). Sells its betting shops to William Hill for £500m.

↑ Lupus Capital 14.5p (up 2p, 16.0 per cent). Investors remain hopeful the group will soon unveil a major acquisition.

↑ Gaming Corp 14p (up 0.25p, 1.8 per cent). Director share-buying excites.

↓ William Hill 510.5p (down 14.5p, 2.7 per cent). Buys Stanley Leisure's chain of betting shops.

↓ Cambridge Antibody 565p (down 14.5p, 2.5 per cent). Decides to drop its target of being profitable by 2008.

↓ easyJet 241.5p (down 4p, 1.6 per cent). Ray Webster decides to step down as chief executive.

↓ Oxus Gold 48.25p (down 7.75p, 13.8 per cent). Investors worry that the group's interests in Uzbekistan could be under threat from the growing civil unrest in the Central Asian country.

↓ Northamber 88.5p (down 15p, 14.5 per cent). Issues a profits warning.

↓ Marakind Minerals 23p (down 5.75p, 20.0 per cent). Traders worry about the company's exposure to troubles in Uzbekistan.

Comments