Decision to diversify has already paid off

WHEN Man Group announced its intention to snap up GLG back in May 2010, it was nothing less than a very public act of renunciation. It was essentially saying that there was more to fund management than quant funds, which use computer algorithms to make investment decisions. Diversification was the future, Peter Clarke told shareholders and clients.

In 2009, Man Group’s flagship fund AHL – which then accounted for about half of the fund manager’s assets – lost some $1.2bn or around 17 per cent. It was the first ever annual loss in the fund’s 20-year history, but Clarke decided it was enough to instigate a massive structural change.

As Man was putting the finishing touches to its GLG acquisition last October, there were suggestions that the deal had been too rash. Quant funds – including AHL along with those run by Winton and BlueCrest – were experiencing something of a comeback thanks to strong trends in bonds, currencies and commodities.

But yesterday Clarke’s decision was vindicated. AHL is still 10 per cent below the high water mark at which fund managers can cream off all-important performance fees, down from 3.7 per cent in December.

The Japanese earthquake and tsunami, which precipitated a stock market shock, took AHL down with it (although it has since pared back some of its losses). At any rate it proves that Clarke’s decision to move some of the fund manager’s eggs into another basket was the right one.

david.crow@cityam.com