THE STRUGGLING hedge fund industry suffered another blow yesterday as Man Group revealed its flagship vehicle had been caught out by the recent rally in equities.
Shares in Man, the world’s largest listed hedge fund, plunged six per cent after it said AHL, its computer-driven vehicle, lost 5.5 per cent last week as hopes of measures to tackle the Eurozone debt crisis prompted a rally in equities. AHL’s position was also hit by a sell-off in bonds.
The $24.9bn (£15.79bn) AHL fund uses complex algorithms to follow market trends. Analysts at Numis have estimated it provides about 80 per cent of Man’s profit.
AHL said in its weekly commentary that a change in market direction in the week to 10 October had hit its long positions in fixed income, as well as its short positions in equities and energy markets.
The fund is down 3.2 per cent so far this year, between eight and nine per cent away from its high-water mark, above which it can earn lucrative performance fees. Shares in Man closed down 5.96 per cent at 156.3p last night, prompting speculation of a takeover approach for the group.
City A.M. understands Anglo-Australian fund manager Henderson, which has taken over rivals Gartmore and New Star over the last two years, is unlikely to be interested in an approach but could look at hiring staff or teams from Man if the opportunity arose.
Henderson said it did not comment on speculation and Man declined to comment.
Hedge funds have endured a torrid summer with many failing to anticipate the swings in global markets.