Formerly Massive Hedge Fund – The Man Group – has plummeted in Assets Under Management (AUM) over the last few years resulting in a depressed stock price.  In the past, Man Group had more than $79 billion in AUM prior to acquiring GLG.  GLGs AUM were $23.7 billion at the time of purchase in 2010.  Combined AUM today are less than $59 billion (down from $68 billion this time last year) and the firm’s stock is in Pink Sheets in London with a value of $1.44 or more than 80% off the price from a few years ago.  

Dealbook reports "Along with assets, revenue and profits have fallen drastically since 2008. In 2008, Man Group was pulling in about $3.2 billion of revenue and about $1.7 billion in net income. By 2011, revenue sank to $1.6 billion and profit was down to $211 million."

Man’s latest strategy has been to try to raise capital in the United States where it has successfully raised $3.1 billion in Q1 2012 (while losing $4.1 billion in AUM the same quarter with other investors).  Man had announced in 2011 that it was focusing efforts in the US family office market to raise capital.  More info here - http://nyti.ms/f7GKpN

Man Group has a checkered history as in December 2008 it was found out that one of Man Group’s funds of funds has invested $360 million with Ponzi schemer, Bernie Madoff.  In the last quarter of 2010, one investor withdrew $1 billion. Their former brokerage unit, spun off in 2007, Man Financial Group aka MF Global was shuttered and account holders have been left with a short fall of as much as $1.6 billion.  More recently, Man Group has been humiliated by the performance of former trader, David Harding, whose Winton Group has outperformed Man Group by more than 25% over the last three years including having an up year of 6.2 % in 2011 while Man’s AHL was down roughly the same amount.  Winton Group charges a 1% management fee vs. Man Group’s 3% raising questions of management complacency and whether Man Group’s orientation is towards asset gathering rather than performance.  Winton Group’s fund now eclipses Man Group by $29 billion AUM to $21 billion.  More here –  http://bit.ly/IPj5NK

More info can be found here - http://nyti.ms/IkmkZP, here - http://bit.ly/7rZocX and here - http://bit.ly/qkpzhf

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HFM Week reports that Calstrs has increased it’s allocation to Lyxor’s managed accounts platform for Global Macro investing purposes.  Lyxors AUM for managed accounts has increased by more than 7% in the last quarter to $11.5 billion from  $10.7 billion at the end of 2011.  

"The California State Teachers’ Retirement System (CalSTRs) has boosted its existing allocation to Lyxor Asset Management after it selected the Societe Generale Group subsidiary late last year as its advisor in the development of a new global macro hedge fund strategy, HFMWeek has learned"

More info can be found here - http://bit.ly/IkCh5O

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 PerTrac’s ninth annual database survey finds that more than 60% of all hedge fund assets are controlled by hedge funds with more than $1 billion under management.  Funds of that size make up roughly 4% of all hedge funds.  Despite their size, total AUM for those funds increased by only 1.4%.  Institutional bias seems to be more apparent in Funds of Hedge Funds (FOHF).  The number of FOHFs reporting more than $1 billion in assets increased by 18% but the overall number of FOHFs decreased by 4.8%.  PerTrac’s study is unique in that it aggregates data from 11 different hedge fund databases.  54% of hedge fund managers report to only one database.  

"The study also found among reporting funds that:

– Overall, the number of single-manager hedge funds and FoHFs increased to 13,395, a growth of 3.73% from 2010 to 2011.

– The AUM of single-manager hedge funds and FoHFs expanded by 3.37% to reach $2.245 trillion at the end of 2011.

– More than half of all single-manager hedge funds and FoHFs are denominated in US Dollars and 77% are denominated in either US Dollars or Euros.

– The number of single-manager hedge funds increased by 6.98% in 2011, reaching 10,007 funds.

– The AUM of single-manager hedge funds was $1.798 trillion at the end of 2011, an increase of 4.2% from 2010."

The full press release is here – http://on.mktw.net/JMvvY7 .

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Broad and Wall Advisors, a leading research consultancy in the investment management space, has released the results of “Alternative Fund Capital Raising with Private Banks”. 

In a survey circulated to more than 700 professionals in the alternative investment space, Broad and Wall Advisors gauged the success of funds in placement of their offerings through Private Banking channels.  Of those surveyed, 73.6% said they had sought to place their offerings on Private Bank Platforms (PBPs).  

Outcomes for those who Pursued Private Banking Platforms

Those who pursued PBPs had achieved different levels of penetration into the Private Banking organization.  When measured by final stage of distribution, 33.3% of respondents had reached out to Private Banking contacts without any further introduction to decision makers.  25.6% had been introduced to Private Banking decision makers without progression.  Less than 10% of respondents had their funds actually placed on a PBP.  Only 2.6% of respondents had raised capital through a PBP. 

Observations on Barriers and Qualification from Private Banking Platforms

47.2% of respondents pursuing PBPs said that though PBPs would listen to them, the majority of offerings from the PBPs they spoke to were proprietary.  Only 8.3% of respondents said they could find and had discussions about distribution with majority open platform private banks. 

45.9% of respondents said that PBPs lacked sufficiently informed staff to discuss alternative investments with them. 

Why didn’t Alternative Fund Managers Pursue Private Banking Channels

26.4% of respondents had not pursued the PBPs.  57.1% of that group said they did not seek PBPs because they perceived that Private Banks were only interested in funds they had a financial stake in or in the largest fund offerings only.  Separately, 35.7% perceived that Private Banks had too many layers of decision makers for platform placement. 

Demographics

More than 10% of those sent surveys responded.  The median respondent had more than 20 years experience in the investment management profession.  Geographically representatives came from Europe and the Americas.  U.S. participants were from New York, New Jersey, Connecticut, Florida, California and other states.  Besides fund managers, third party marketers and hedge fund cap intro groups participated.   Funds ranged in size from startup to a few billion dollars. 

For more information on the survey and other benchmarking studies by Broad and Wall Advisors, please contact Marty Secada at martysecada@broadwall.biz or at 917-291-0557.  

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With the assistance of Cliffwater, the $73 billion, Ohio Public Employees Retirement System has allocated $170 million more to hedge funds to bring it’s total to $1.265 billion.  The allocations are:

CanyonValue Realization Fund - $90 million

and 

Ascend Partners Fund II - $80 million

a prior commitment to this announcement was also made to 

AQR Capital Management - $100 million

You can find out more here - http://bit.ly/H67lm4

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The New York Times reports that though hedge funds on average performed negatively vs. the S&P a few hedge fund managers took home more than $1 billion in pay for the year.  Leading the list was Ray Dalio of Bridgewater whose fund returned slightly more than 16% who took home $3.8 billion.  

Former DUMAC manager and current mutual fund manager, Brad Alford, says “The industry’s fees and performance are so out of whack it’s unbelievable,”

Paul Tudor Jones, who matched the market performance but takes home a 4% management fee and a 23% performance fee (4 and 23) made $175 milllion.  

More info at the New York Times - http://nyti.ms/GZzFuB

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North Carolina’s state pension fund is prepared to increase their investments to hedge funds by more than $2 billion.  Investments will come primarily in long / short strategies with another $360 million to go to credit hedge funds.  You can find more here - http://bit.ly/za9qMI

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 Recent articles in the media show the dire predicament of US Pension Funds.  Public Pension Funds have more than a $2.9 Trillion shortfall and growing.  In some cases, due to the euphoria of the 1990s stock market, public unions afforded greater benefits to former employees such as lifetime pensions for those without sufficient years of service, or cost of living  increases on pensions that in some cases doubled every ten years even as inflation has been flat as seen here, http://bit.ly/ybKZzT .  In other cases, because pensions are backed up by US, state and municipality taxpayers, calculations on taxpayer liability exceed more than $10,000 per resident such as in Chicago which has more than $14,000 in liability as seen here, http://bit.ly/wbRJJJ.  State pension funds are unfunded by more than $1 trillion as seen here, http://bit.ly/rQkFmC .  Finally, a recent Credit Suisse report says that 97% of corporate defined benefit pension funds are underfunded.  In many cases those pension funds will either be rescued or will enter into settlement upon corporate bankruptcies such as the one for General Motors.  More corporations are chosing to migrate to defined contribution plans, http://nyp.st/AuR7SK, or are pushing more investment capital into alternative investments. 

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 TD Ameritrade’s president, Tom Bradley, gave his long term vision into 2020 of the investing landscape.  Some highlights - 

(a)  He predicts that by 2020 $45 trillion will be held by investors

(b) The $8 trillion women hold will grow to $22 trillion by 2020

(c) He thinks RIAs have an advantage over other money managers due to their Fiduciary responsibility and product agnosticism.

More can be found out from Bradley here - http://bit.ly/zRdF78

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Scorpio Partnership reports Private Bank new moneys from clients has fallen by 19% in 2011.  The Merrill Lynch / Cap Gemini sponsored report that most families have recovered from the 2008 financial market meltdown.  However, they are leery of investing new monies into their private banks.  With fees frequently around 2-3% and returns less than that, potential clients have lost interest in the relationship.  AUM at private banks fell by 16% in 2008 but only rose by 18% when the following year and by 11.4% in 2010.  Conversely, there has been a flight to size as larger private banks have raised more AUM despite better performance from smaller firms managing less than $20 billion.  There is more info here - http://on.ft.com/x1sKad

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