Industry questions

Below is a brief overview of our industry. To find out more, visit our alternative investments explained page.

Alternative investments, elements of which are referred to as Hedge Funds, exist outside the mainstream markets, and are designed for lower risk and greater returns.

Initially devised in the US in 1949, hedge funds really took off in the late eighties, and have since evolved into mainstream investment products that now form a key part of both institutional and private client portfolios.

How is Man different to other hedge fund providers?

Man is one of the world's largest hedge fund providers. We have a worldwide presence and offer opportunities in our 13 offices

Amongst our recent awards, we were voted:

  • European asset management firm of the decade 2006 by Financial News
  • Best provider of managed futures 2006 by Euromoney
  • Hedge fund of the year 2005 by Funds Europe awards
  • Man's Energy Fund won Hedgeweek's Commodity Fund of Hedge Fund award for 2009
  • Man's Emerging Market Opportunities fund was named Best Fund of the Year in 2009 in the Asia and Emerging Markets category of the annual InvestHedge Fund of Hedge Funds awards
  • Man AHL Diversified plc won 'Best CTA Hedge Fund over 3 years' at the BANCO Swiss Hedge Funds Awards 2009
  • Man won Best Alternatives Provider to Private Banks at the Global Private Banking Awards 2009

Our commitment to sustainability is reflected in our corporate governance and corporate responsibility agendas. We have grown exponentially over the years and support the development of our employees through training and education. Employees are encouraged to take part in the many social events organised throughout our global offices.

What is a hedge fund?

The term hedge fund is used to describe funds that are not conventional investment funds - that is, they use strategies other than investing long. Traditional shares and bonds are privately organised investment vehicles, in pursuit of ‘absolute return' with the ability to profit in rising and falling markets.

Hedge funds distinguish themselves from traditional investments by virtue of a number of investment tools that are unavailable to traditional investors such as leverage, short-selling and derivatives. Through the use of such tools, they have the ability to both improve the returns and reduce the risk of an investment portfolio.

What are the different types of hedge funds?

Hedge Funds can be divided into two main categories - single manager and fund of hedge funds (FoHFs).

A single manager hedge fund usually focuses on trading financial instruments for a specific strategy or sector to target maximum opportunities for growth within a designated area.

FoHFs, on the other hand, invest in a number of underlying single manager hedge funds and construct portfolios based upon those selections. Therefore FoHFs are more diversified than a single manager hedge fund and as a result, are the preferred vehicle for pension funds and other institutions.

Different hedge fund strategies include:

  • Relative Value - looks to exploit relative pricing discrepancies between related financial instruments (e.g. convertible arbitrage or fixed income arbitrage)
  • Event Driven -engages in the purchase or sale of securities of companies which are undergoing substantial changes (e.g. M&A or restructuring)
  • Global Macro - takes an opportunistic approach that exploits shifts in macro economic trends
  • Equity Hedge - offsets long and short positions in equities (may have a net long or short exposure)
  • Managed Futures (Commodity Trading Advisors) - which trade in the world-wide futures markets, ranging from global financial instruments to tangible assets such as coffee, crude oil and gold

What does the credit crunch mean for hedge funds? How have they been affected?

The fallout of the fastest credit deterioration in the last five years has had worldwide implications across the whole of the asset management industry. Hedge funds were also widely affected, with the press focusing on hedge fund casualties and write downs. However, there is another side to the credit crunch story as some hedge funds made huge gains through shorting sub-prime debt. This underlines the ability of hedge funds to perform in a bear as well as a bull market.