No Man is an island but dependence can be deadly

Elizabeth Fournier
IN the last few years Man Group has repeatedly tried to divert attention away from its struggling flagship AHL fund.

But investors just don’t want to let it go. So inextricably linked are the computer-driven fund and its parent’s overall performance that yesterday’s disappointment – its worst monthly drawdown in 10 years ­– sent shares plummeting by more than 16 per cent.

It’s hardly the warm welcome new chief executive Manny Roman was hoping for – particularly following a stellar April for AHL that must have had him thinking things were looking up.

The so-called black box fund tracks profitable trends in stock and bonds – a strategy put under huge pressure by recent volatility, particularly in the US and Japan. All the computer algorithms in the world can’t predict how investors will react to macroeconomic rumours, and AHL has suffered the consequences of Abe’s policymaking and uncertainty over the Fed’s money printing plans.

But it’s not AHL’s dependence on market stability that’s the problem – it’s Man’s dependence on its star fund. One analyst has already downgraded his view, saying a one per cent drop in AHL’s performance is a six per cent hit to overall earnings. Man has spent big bucks investing to reduce its reliance on AHL (including in Roman’s former employer GLG) but at the moment they’re not enough to divert attention away from the dark clouds hanging over the new CEO’s head – and a change in the weather is unlikely to come soon.