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May 26, 2006
Man Group Heightens Hedge Fund Concerns
There are some concerns in the market over hedge fund. The fear was fuelled by the world's largest hedge fund manager, Man Group. Man Group disclosed that some of its smaller competitors might be in serious trouble, as its future funds have made substantial losses this month. The disclosure made by Man Group raised serious concern that some smaller hedge funds may suffer greater losses and they might result in a decline in share prices. The news already had its impact as the FTSE 100 dropped 91.6 points, by reversing most of the gains made earlier.
Man Group confirmed that its flagship Man AHL Diversified Futures fund lost 3.7 per cent last week. In total, it has dropped 4.5 per cent so far this month. Despite of the losses, it has shown a net gain of 31.9 per cent in the first five months of the year. According to experts, Man Group's poor performance is a short-term movement due to volatile equity markets. The AHL fund has seen such fluctuations before. Hence, it is expected that the market will be able to handle this news efficiently.
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Many hedge funds have been betting huge sums on a complex commodity and currency strategy, involving short selling the dollar while at the same time buying gold and platinum using borrowed yen. Any funds in these positions in the last two weeks will have sustained heavy losses as commodity prices have tumbled and the dollar strengthened.
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