Man Group thrives on fashion for hedge funds

Man Group, the UK-based hedge fund manager, yesterday said higher than expected numbers of investors were flocking to its products, pushing its full-year profits above market forecasts.

The company said that pre-tax profits in the 12 months to 31 March would exceed the £202m consensus among analysts. Man's shares, already the second best performer in the FTSE 100 last year, rose 3 per cent to 1,115p.

Man said it had been driven by strong sales as hedge fund investments have appeared attractive to investors in the falling equity markets of the last two years. Man's funds under management stand at $10.5bn (£7.4bn), 57 per cent higher than a year ago, with sales for the year at $4.5bn. Man has kept sales buoyant despite the lacklustre performance of its two main funds, AHL and Glenwood, in recent months. AHL is 16 per cent down on its net asset value peak, and Glenwood was down 0.2 per cent in February.

Concern over the two funds' poor performance has pulled the company's shares down by about 25 per cent since the start of the year, as most of Man's fees are based on how well its funds perform. For performance fees on AHL to kick in, Man would have to pick up at least 16 per cent so that its price is again above its NAV peak.

Gordon Aitken, an analyst at Credit Suisse First Boston, said the company's longer-term record remained "excellent". "They have achieved returns of 20 per cent a year for the last 15 or 16 years. They also have excellent distribution so their salesforce has been able to sell the products to intermediaries all over the world," he said.

Stanley Fink, Man's chief executive, said in October that demand from retail and institutional investors could see Man double assets under management in two and a half years, ahead of the three-year target announced on 31 March last year.

Man sells its products to institutional and, outside the UK, retail investors. Private investors include high net worth individuals in Continental Europe, the Middle East and the Far East.