Market Report: Man tumbles on concern over redemptions

The prospect of yet more pain for hedge funds unsettled Man, the London-based fund group, which traded lower as the London market came off the rally path.

Last year, the industry was knocked off keel by the financial storm, with assets under management (AUM) sliding as clients, suddenly strapped for cash and rattled by convulsing markets, liquidated their portfolios. The industry's due diligence processes were also called into question as the Bernard Madoff scandal unfolded, impacting various fund-of-fund businesses.

Last night, Morgan Stanley said the tumult may not have run its course. "[The] hedge fund redemption cycle isn't over," the broker warned, saying that, in Man's case, the problems may be compounded by the exposure of its RMF fund to the Madoff scandal.

"We are bearish on asset retention for [fund-of-fund managers] which were exposed to Madoff, given the potential damage to due diligence credentials and expect this to compound redemption pressures for RMF," the broker said. "We assume that Man Group sees AUM shrink by [about] 75 per cent from [the] March 2008 peak of $33bn [£23bn] at RMF to [about] $9bn by March 2011, implying additional redemptions of 13 per cent in the first quarter of 2009 and further net redemptions of [about] 40 per cent in 2010."

The assessment sent the company's stock down by 6.7 per cent, or 12.5p, to 171.9p.

Overall, the market gave back gains from the session before, with the FTSE 100 falling as low as 3,760.7 before recovering to 3,830, down 92.8, at the close. The FTSE 250 was 74.6 points behind at 6,049.1.

Morning trading was unsettled after disappointment at Lloyds Banking Group's failure to reach an agreement with the UK Treasury on its participation in the Government's asset protection scheme. Investors were expecting details first thing in the morning, when the group, which closed 22.2 per cent, or 16.7p, weaker at 58.3p, posted full-year results.

Sentiment took another hit after the US Commerce Department said the world's largest economy shrank by 6.2 per cent in the final quarter of last year, significantly worse than an initial estimate of a 3.8 per cent contraction. The grim data was supplemented by concern for Citigroup, the banking giant, which was part-nationalised after the US Treasury raised its stake to 36 per cent by converting preferred stock into common equity.

Financial stocks were the biggest losers of the day as the appetite for risk vanished as quickly as it had suddenly materialised in the previous session.

Barclays was down 17.3 per cent, or 19.6p, at 93.4p while HSBC was 6.7 per cent, or 35.7p, down at 491.2p. Traders were busy speculating whether or not the latter would move to bolster its capital position when it posts results next week, with some anticipating a possible rights issue or a dividend cut.

In the insurance sector, Aviva eased to 289p, down 10.6 per cent, or 34.2p, after Morgan Stanley reduced its target price for the stock to 447p from 561p. "Although we expect Aviva to hold the final dividend for 2008, we think management could take the opportunity to signal a change for 2009," the broker said, keeping the stock at "equal-weight".

Legal & General, which was more than 27 per cent ahead on Thursday, was also weak, losing 9.6 per cent, or 4.3p, to 40.2p.

Among miners, Kazakhmys lost 6 per cent, or 16.7p, to 261.5p after Goldman Sachs moved the stock to "neutral" from "buy" in a sector review.

The broker was more positive on Anglo American, which was moved to "buy". The trend in the wider market ensured that the stock drew little immediate benefit from the upgrade, trading down by 25p to 1001p.

Elsewhere, DSG International was almost 8 per cent, or 1.7p, behind at 20.2p following an adverse tax ruling and a bearish analysis by Deutsche Bank, which moved the stock to "sell" on trading and covenant breach concerns. "We consider the equity value of DSG is an option on survival, and so it is very difficult to value," the broker said.

The broker also moved Marks & Spencer, down 1.3 per cent or 3.5p at 261p, to "sell", saying the retailer's promotional response to tougher trading conditions was "inept".

"We believe the shares could track back down to the 2008 low of 200p if trading figures continue to disappoint," Deutsche added.

Among smaller companies, Chromogenex slumped to 0.3p, down almost 66 per cent, or 0.7p, after the laser treatments business said it was seeking shareholder approval to de-list from the Alternative Investment Market, citing its low market capitalisation, the lack of liquidity in its stock and the need to conserve cash.

Neutrahealth surged 1p or 23.5 per cent to 5.2p after the vitamins and supplements group said it had received an unsolicited approach from one of its major shareholders, Elder Pharmaceuticals. The company said the approach may lead to a partial offer that would result in Elder's stake increasing from 21 per cent to 50-60 per cent.

Get midday market updates at independent.co.uk/sharewatch

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links