Man Group Funds Battered in Choppy Markets

LONDON—Hedge fund firm Man Group suffered a slump in performance fees and profit after many of its funds either lost money or failed to keep pace with the market.

The firm, which announced last week that Chief Executive Manny Roman will leave next month to take the top job at U.S. bond fund giant Pacific Investment Management Co., said profit from performance fees for the first six months of the year dropped to $8 million from $172 million a year ago.

That, together with a drop in management fee profit, pushed pretax profit down to $98 million from $280 million, roughly in line with analysts' forecasts.

"The first half of 2016 has been a particularly challenging period for the global investment management industry," said Mr. Roman, who will be succeeded by Man Group President Luke Ellis.

The scale of the drop in profit illustrates how hard many hedge funds are finding it to make money this year in choppy markets, with the U.K.'s surprise decision last month to exit the European Union proving tough for managers to navigate.

Hedge funds on average were down 0.8% in the first half of the year, according to Hedge Fund Research, with some big names such as Lansdowne Partners and Odey Asset Management notching up large losses.

Man Group shares, which had already fallen 30% this year, were down 2.8% at 119 pence in morning trading.

Man's computer-driven hedge funds that latch onto big market moves profited during the first three months of the year but then gave back that profit in the second quarter, said Mr. Roman. Market volatility in the wake of the U.K.'s shock vote to leave the EU has made life harder for the firm's traders, he added.

The firm's GLG European Long Short fund, headed by Pierre Lagrange, one of London's best-known hedge-fund managers, fell 5% during the first half of the year. However, its computer-driven AHL Evolution fund, which trades harder-to-access markets such as German power or emerging market interest rate derivatives, gained 5.4%.

The firm attracted $1 billion of investor cash during the six months, compared with outflows of $2.6 billion a year ago. Nevertheless, performance losses of $2.2 billion pulled Man's assets down 3% to $76.4 billion.

"Occasional periods of weak performance fee profits are to be expected at Man," said Credit Suisse analysts Tom Mills and Martin Price, who had forecast slightly higher performance fees.

Mr. Ellis added that London's financial services industry needed to "make its case more than ever" in the wake of the Brexit vote.

"We need to better explain the value of the industry and the City of London, not least the £ 66.5 billion ($87.22 billion) in tax revenues that it contributes to the U.K. economy, and to support the government in developing a regulatory regime that will sustain London's pre-eminent position as Europe's leading financial center," he said.

Razak Musah Baba contributed to this article.

Write to Laurence Fletcher at [e-mail]

(END) Dow Jones Newswires

July 26, 2016 05:55 ET (09:55 GMT)

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