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
Arts and Entertainment
musicOfficial chart could be moved to accommodate Friday international release day
Sport
Wes Brown is sent-off
football
News
i100
Sport
Italy celebrate scoring their second try
six nations
Sport
Glenn Murray celebrates scoring against West Ham
footballWest Ham 1 Crystal Palace 3
Arts and Entertainment
Drake continues to tease ahead of the release of his new album
music
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

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower