LONDON Man Group (EMG.L), the world's largest listed hedge fund firm, said slowing outflows helped lift assets to an estimated $43.8 billion (27.2 billion pounds) at end-September, at the top end of forecasts, boosting its shares.
The firm, which is seeing private investors put money into its products even as institutions withdraw cash, said on Wednesday net client outflows slowed to $500 million in the third quarter, well below the $1.4 billion in the previous quarter.
"The mix has shifted towards private investors, which is good for margins," chief executive Peter Clarke said on a call to investors and analysts.
Man Group shares were up 5.4 percent at 324.8 pence at 9:12 a.m., strongly outperforming a marginally higher FTSE 100 blue chip index .FTSE.
Net redemptions by institutional investors slowed in the past three months and they looked set to further improve, Man said, with net redemptions of $700 million set to be paid at the start of its third quarter.
"The trend in institutional redemptions is encouraging and the outlook shows a further improvement in Q3," Numis analyst Gurjit Kambo said in a note.
Man Group, whose share price has more than doubled since its year low in March, said in July it expected to return to overall net client inflows in the six months to March 2010.
But while private clients supported the business, net sales to such higher-margin clients still fell, and were down to $800 million from $1.9 billion in the three months to June.
UBS analyst Carolyn Dorrett attributed the fall in private investor sales to the weak performance of Man's flagship AHL Diversified managed futures strategy, which is heading for its first calendar year of losses since launch in 1996.
"This shows the negative impact that nine months of weak AHL performance is having on demand for Man's high margin retail funds," she said in a note.
The firm also said performance fees for the six months to September would be an estimated $30 million, ahead of Citi analysts' forecasts of $20 million and despite AHL's weak performance.
"With significant momentum across the business, new products and new market opportunities, Man is strongly positioned for growth," Clarke added in a statement.
Like many hedge fund firms, Man has been hit by the downturn in the industry and client redemptions. A year ago Man's assets were $70.3 billion.
(Editing by Hans Peters)