UPDATE 3-Man Group bleeds assets in volatile markets
* Funds under management $38.5 bln vs $39.4 bln at end-March
* Total net redemptions $1 bln in three months to end-June
* Institutional outflows $400 million, vs $3.3 bln year ago
* Private investor outflows $600 million
* Shares up 1.2 percent, underperforming the market
(Adds detail, background)
By Laurence Fletcher
LONDON, July 8 (Reuters) - Clients of British hedge fund firm Man Group (EMG.L) pulled out cash for the seventh straight quarter during a volatile period for markets, offsetting a recent pick-up in performance from its flagship AHL fund.
The withdrawals stand in stark contrast to the wider hedge fund industry, which has seen roughly $30 billion of net inflows since last summer in a rebound from $330 billion of outflows in the year to June 2009.
Man, in the process of buying smaller rival GLG Partners GLG.N, said assets under management -- on which fund firms earn fees -- fell 2.2 percent to $38.5 billion, less than half the amount it ran two years ago.
The main reason, aside from currency and performance-related changes, was investor withdrawals of a net $1 billion during a quarter in which markets became increasingly volatile and the Dow Jones index plunged briefly at the start of May.
Outflows from institutions such as pension funds have shrunk to just over a tenth of levels seen a year ago, although private investors, who had been net investors with Man, are now pulling money out.
The outflows came despite better performance from AHL, the $21.1 billion computer-driven fund named after 1980s founders Michael Adam, David Harding and Martin Lueck, which beat peers and the market with a 2.3 percent gain in the five months to May after losing around 16 percent last year.
Man's shares, which have underperformed the sector by 23 percent and the FTSE All-Share .FTAS by 25 percent so far this year, were up 2.16 percent at 221.7 pence at 1217 GMT. The FTSE 100 .FTSE was up 1.6 percent.
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Citi analyst Haley Tam called the update "disappointing" but said redemptions by institutional clients were lower than in previous quarters and advised clients to buy on weakness.
"On a 12-month time horizon we are bullish on fund inflow prospects in high margin retail assets under management due to new product launches," she said in a note. "In the meantime, Man Group offers a 7 percent dividend yield."
Man's outflows highlight a key reason for its $1.6 billion purchase of GLG announced in May, which will boost Man's assets and helps it to diversify into more manager-driven funds.
"Given the continued market uncertainty, sales in the quarter have, as anticipated, remained subdued," said Chief Executive Peter Clarke in a statement.
Some investors have grown nervous after a 10 percent drop in world stocks, as measured by MSCI .MIWD00000PUS, in May on concerns over the pace of global growth and the debt crisis in southern Europe.
Man Group raised hopes in May that it had finally stemmed outflows with news that asset levels were little changed between the end of March and the end of May. [ID:nLDE64N12N]
The firm also confirmed it had a pipeline of $1.5 billion in new client accounts, most of which is not yet reflected in assets under management. (Editing by David Cowell)
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