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Europe Preview: Where Is Man Group Headed?

UK listed hedge fund Man Group reports full year profits on Thursday and the numbers are likely to be very impressive given the turbulent market in recent months. In late March, Man Group predicted funds under management should exceed $75 billion with profits up 52 percent to top $1.8 billion. It will be interesting to see how CEO Peter Clarke views the prospects for the rest of the year when the numbers hit the tape at 8:00 CET.

Man Group currently manages only $1 billion of funds for US clients and is seeking ways to boost its presence in the world’s biggest market for hedge fund investment. Over 60 percent of the world’s total investment in the asset class comes from the US, and Man Group is doing deals and hiring sales people to try and pick up more funds. In April, Man Group bought a 50 percent stake in New York based credit specialist Ore Hill Partners. Industry watchers believe more deals are on the way.

Man Group last year sold its futures and options broker MF Global through an IPO on the New York Stock Exchange. At the time, the listing was seen as a bit of a failure, given shares began trading at the low end of the range and then fell lower when trading began. But with hindsight, the sale looks like a master stroke, for Man Group at least. About $2.9 billion was raised just weeks before the credit crunch began in earnest in August. Since the IPO, shares in MF have nearly halved in value.

Man Group still holds just under 20 percent of MF Global’s stock and is still owed money by the brokerage, which has been beset by liquidity concerns and is seen by many as a takeover target. Last week it posted a quarterly loss and was forced to raise cash through a share sale to JC Flowers. Some of that money will be used to pay Man Group back and help cover losses made when a trader at its commodity business made an unauthorized bet on wheat futures that cost the firm $141 million.

The performance of Man Group’s various funds will be closely watched given the big headlines some recent hedge fund failures have made on both sides of the Atlantic. With global markets expected to be volatile for some time to come, if Man Group can show its major funds are posting strong returns, the group as a whole could benefit from the problems being faced by some its smaller rivals.

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