The credit rating of hedge fund firm Man Group has been placed on review and could be downgraded.
Moody's placed all debt and preferred stock ratings of Man Group on review for possible downgrade yesterday, citing reasons such as ongoing pressure to grow earnings, margins and funds under management.
Operating lower-margin products such as managed accounts, and lower sales of guaranteed products are behind Man’s current challenges, said Moody’s.
Key funds have also continued to under perform.
Moody’s also cited “pressures on the hedge fund business model more generally” as a challenge. The ratings agency said underperformance relative to investor expectations has called into question the sustainability of high fees.
Man's funds under management declined 15% from $69.1 billion (€52.7 billion) in March 2011 to $58.4 billion as at December 2011.
However, Moody’s noted several factors that offset the negative trends including Man's strong liquidity with a healthy net cash position estimated at $573 million as at December 2011.
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