Man Group, the world's biggest hedge fund manager, is considering legal action to recover its losses from the Madoff scandal, following a bruising three months in which its funds under management tumbled by a fifth.
Man said yesterday it was planning to sue in conjunction with its investors over their exposure to the alleged fraud by the American financier. Authorities in the US have accused Mr Madoff of running a "Ponzi" scheme, which may have cost investors around the world as much as $50bn.
Last month, Man Group said it was exposed to Mr Madoff through its institutional fund of funds business, RMF, which takes money from institutional investors and places it in an array of hedge funds. It had about $360m invested in funds directly or indirectly sub-advised by Mr Madoff. "We will be suing the people involved," said the hedge fund's chief executive, Peter Clarke. "We will be looking for remedies on behalf of our investors. We will take action in conjunction with our institutional investors."
A spokesman for Man added that it had not yet decided how to proceed with legal action and was continuing to investigate the losses it had occurred and how they had come about.
"Not all the facts are currently available, so any action we take will need to be based on more complete information," he said. "In the meantime, we are actively reviewing all options to recover assets for our investors; we are in regular dialogue with our institutional investors through RMF about this process and the way forward."
The Madoff scandal could not have come at a worst time for the hedge fund industry, which is already reeling from a series of market-oriented disasters.
Man revealed yesterday that its assets totalled $53.3bn (£36.6bn) at the end of last year, below analysts' expectations and down from $67.6bn at the end of September.
Part of the drop was due to redemptions, which reached $3.2bn during the final three months of last year. Many investors are recalling the cash they had invested in firms such as Man as they try to repay their own debts and look for safer havens for their funds. However, some of the fall also reflects trading losses. During the three months under review, RMF experienced a negative performance of 7 per cent.
Even so, Man said its overall drop in assets was mainly due to the decision, announced in November, to move most assets in its Man Global Strategies product into cash, reducing overall assets by $9.7bn. "The outlook for institutional sales remains very subdued in the short term and continued institutional redemptions mean that we will see institutional net outflows until markets stabilise and confidence returns," Mr Clarke added.
Analysts said the company's comments on institutional outflows were worse than it had expected, but some of its products bucked the negative trend: some of AHL, the managed futures fund, for example, rose by a quarter over the full year. "Assets under management were lower than we expected but I have to say AHL continues to give us a pleasing performance," said Ian Poulter, an analyst at stockbroker Teathers.Reuse content