A unique global franchise

Man's private investor base has been the bedrock of our investment management business since the 1980s. Sourced through our network of intermediaries and other distribution partners, it is truly global.

At the end of the financial year, Man had $27.8 billion under management in its private investor business. Investors are located in 80 countries, with the biggest concentrations being in Japan (25%), Asia ex-Japan (25%) and Europe (34%). There are also a significant number in the Middle East and Latin America.

The nature of this investor base is evolving. Although, traditionally, hedge funds were the preserve of the wealthy, recent years have seen a broadening-out of the investor profile, with products offering a lower initial investment threshold. This shift is part of the gradual incorporation of hedge funds into the investment mainstream, and we have seen a strengthening of this trend during the last financial year. There are a number of reasons for this.

A solid investment proposition

Private investors look to hedge funds to provide medium-term capital growth, and to protect their capital during times of market downturn. This has become of increasing importance following the market dislocations of recent times. Hedge funds can achieve this through their ability to apply alternative methods of investing and trading to an extremely broad range of markets. In doing so, they tend to behave differently to investments based on traditional techniques and markets. This diversification can lead to smoother overall portfolio growth.

Importantly, the value proposition of hedge funds remains valid. Hedge funds encompass a wide diversity of styles, and we anticipate that the changing nature of the global financial markets will result in a refocusing of private investor assets towards certain types of styles and strategies. For instance, managed futures - which, through our manager AHL, have been a mainstay of our private investor product range for over 20 years - are likely to build on the excellent performance of last year.

A proven and diverse product range

With over 25 years' experience in alternative investments, Man has a proven ability - which our private investors recognise - to produce investments that offer performance, diversification and security.

Man's product range is diverse in a number of ways. First, through our single manager and multi-manager investment businesses, we offer products forming a spectrum of risk/return objectives. Second, Man has long pioneered capital guarantee structures, and offers a range of these in addition to openended products. And, through innovative structures such as the highly successful Man-IP 220 series, we can offer investors the opportunity to benefit from a package of managers in a single product. This ability to design, structure and manage complex investment vehicles sets Man apart from much of its competition.

An encouraging outlook

Despite the overall contraction in size of the hedge fund industry over the past twelve months, the outlook for Man's private investor business remains very positive. Over the years, we have pioneered the distribution model of opening offices in key regions, and using these as the base to form partnerships with local intermediaries and banks. With access to local and highly experienced intermediaries, the private investors in our products tend to have a superior understanding of their nature, and of how they fit into a diversified portfolio. The consequence of this is that both our distribution network and the end investors take a longer-term view than average, a fact demonstrated by our comparatively low redemption rates.

During the last financial year, we have continued to grow our presence in existing markets and expand into new ones, and have seen excellent results in a number of areas, in particular the Far East. Globally, we have expanded our intermediary network - which encompasses independent financial advisers as well as major financial institutions - from 2,100 to 2,200. We continue to work closely with many of the world's most reputable banks, some of whom not only distribute our products but provide capital guarantees and leverage. In Europe, in recognition of the growing importance of the onshore market, we opened a new office in the Netherlands, and plans are well under way to open another within the European Union during the next financial year.

Reputation, capital strength, security and the proven ability to perform in testing conditions - all these are valued by our private investors. A cornerstone of our business has been the understanding that we need to combine flexibility with consistency. In a dramatically changing marketplace, we look forward to continuing to serve our investor base and deliver differentiated performance.

From left to right Christoph Möller (Sales), John Rowsell (Glenwood) and Tim Wong (AHL)