Member Article

Man Group under pressure as markets edge higher

Markets, whilst under pressure, did not experience a significant sell off this morning, despite news of an unsuccessful Slovakian vote on the expansion of the eurozone’s bailout fund, the EFSF. The nation is the last to ratify an increase in the size and powers of the fund, the latest hiatus in its approval highlights the difficulty Europe has in coordinating a united response from 17 independent constituents. Whilst ratification is anticipated to occur later in the week, further bad news came in the form of domestic economic data which showed that UK unemployment had reached a 17 year high, increasing by 114,000 in the three months to August and representing a total jobless rate of 8.1%.

The news may have been tempered by a release from the trio of Greek inspectors: the EU, ECB and the IMF, who stated the latest review in Greece was satisfactory enough to allow the next €8bn tranche of bailout funds to be released in early November. Sentiment was also augmented by a statement from the European Commission President Jose Barroso, who outlined what he referred to as a “roadmap” to resolve the eurozone debt crisis. The FTSE began the day in negative territory but quickly fought back to find itself around 0.5% higher by late morning.

Banking stocks were boosted following an overweight recommendation from Societe Generale, the French institution stating that the sector is currently priced for turmoil. It suggested that current valuations already discount large sovereign debt haircuts, recapitalisations and a double dip recession. Barclays, RBS and Lloyds were amongst those specifically mentioned, the first two reacting particularly positively with 6.4% and 2% gains, respectively.

Contrary to the above, the hedge fund giant Man Group found itself under pressure following a weekly net asset value (NAV) update for its AHL fund. Investors were informed that the $25 billion fund lost 5.5% in the week to 10thOctober. This performance was described as “very weak” by Espirito Santo, with particular concern surrounding performance fees now that the fund is 7% below its absolute high water mark (the point at which such fees are receivable). The shares found themselves at the bottom of the FTSE 100 with a 6% loss, finishing at 156.3p.

The CAC 40 and DAX both ended the day higher by more than 2%, outperforming the FTSE 100’s 0.85%. Today’s contribution did however see the UK index finish at 5442, the highest close since the start of August.

This was posted in Bdaily's Members' News section by John Dance .