WEST PALM BEACH, FL (HEDGECO.NET) – For some time now, Man Group has maintained the title of world�s largest hedge fund. Along with the title, came the perception that all was well within thecompany. Very suddenly in April however, the company�s share price began to drop from its previous high of BP18.51. Market analysts attributed this decline to difficult market conditions andclassified the drop as �cyclical volatility.� Today Man stock price hovers near BP13.00.
It was soon discovered that the drop in Man�s share price was the result of short-selling activities of other hedge funds. These same funds are said to be continuing to short-sell the stock. According to published reports, more than 16% of Man�s market value has been loaned out, and the stock has become the most loaned out security in the British markets.
This development is also supported by Jason Street, an analyst at UBS investment bank. Street said, �There�s huge short interest in Man Group, It�s the most shorted stock in the UK market.� Man authorities said they do not know why the stock has lost such value.
According to an anonymous Merrill Lynch broker, the trouble was caused by Man�s AHL fund, which in the past had produced annual returns near 15%. AHL fund has lost more than 10 % of its value during the past three months. The fund uses the so called �Black-box system� analytical tool for trading decisions. Roderick Campbell, a manager at Cross Asset Management Company said, �The black-box systems point to times when the market is likely to go up, and the traders buy, but the trend hasn�t gone very far. Then the line is crossed again the other way and traders sell, but again it doesn�t go far. Managers are paying the trading fees without benefiting from the long trends. This is not only unprofitable but also expensive.� Other market experts think Man�s AHL fund may not be the only problem, some research analysts predict a gain of only 6% for the asset manager during 2004, while others predict a negative return altogether.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: [email protected]
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