Last week Man said customers took out $1 billion from the hedge fund during the first three months of the year. That followed a $2.5 billion outflow in the previous quarter. Clarke explained in a statement May 1 that "investor sentiment remained fragile."
Investors are feeling fragile these days about more than just the market. The hedge fund's shareholders have been breathing down Clarke's neck in recent months, pressuring him to boost share prices. At the annual general meeting on Tuesday, Man's directors resolved that "enough was enough" and said the company needed to get back on track before the end of the year, according to the Financial Times. One insider griped anonymously in the newspaper that Man needs to make its merger with GLG work for shareholders.
Clarke insisted on a conference call May 1 that his team is "fully focused" on delivering performance for investors.
It would also help if Clarke could make that performance simpler for his investors to decipher. In part due to transactions such as Man's more than $1.6 billion acquisition of the hedge fund GLG Partners Inc. completed in October 2010, the company's financial statements reflect an "aggressive" AGR score of 13 as of September 2011, indicating higher accounting and governance risk than 87% of the companies in Western Europe. The score was a 1 in March 2011 and a 5 three months later, putting it into the "very aggressive" category during those times.
Those deals complicated Man's announcement of financial results for the year ended March 31, 2011, when the company informed its investors it had overstated the values of both Man Multi-Manager and Ore Hill by $397 million. On the same day, Man also announced that it had raised $257 million by selling back a 25% stake in BlueCrest Capital Management that it had held since 2003. It's convenient for Man that it happened to have an unusual gain on the same day it reported large impairments, making the hit to its earnings look possibly less alarming.
The complexity of the financial statements, however, is also alarming. Investors need clarity on a company's finances to be able to make smart decisions on what they will do next. If Clarke wants to win their confidence, he also needs to think about making his business as straightforward as possible.
Given the circumstances, it's unfortunate that Man used to report its annual performance at the end of March, rather than at the end of December like most others in the asset management industry. While it's nice that the company changed its reporting cycle recently to align with others, Man's financial reports for the year ended December 31, 2011 are now tougher to compare to those for the year ended March 31, 2010.
At least Man has an independent board that discloses its governance practices. Given that, GMI gives Man a B on its governance despite the low AGR score. As the stock price falls more than 4% intraday to $89.65 per share on Monday, investors trying to understand the company's finances can take cold comfort in that one.
A spokeswoman for Man did not respond to a request for comment within press time.
It's not that Man has necessarily done anything wrong, but its deals in recent years have created a balance sheet that would give anyone a headache. For example, in 2009 Man combined its three operations, RMF, Glenwood and MGS to launch its investment business Man Multi-Manager, according to reports. Then Man said in March 2011 that it had agreed to buy the remaining 50% stake in the hedge fund Ore Hill that it didn't already own for $18 million, according to a calculation by the New York agency Fitch Ratings.
Region: Western Europe
Industry: Investment Services
Market Cap: GBP 1,835.4mm (Mid Cap)
ESG Rating: B
AGR: Aggressive (13)