Case Study Analysis: Man Group, Asset Management, and the 2007 Crisis

This case study examines Man Group, a leading publicly traded hedge fund company, and its strategic decisions during the 2007 US financial crisis. The analysis focuses on Man Group's opportunities within the asset management industry, particularly considering its position in the hedge fund and fund of funds sectors. The study investigates the company's financial position before, during, and after the crisis, exploring potential business opportunities and the crucial decision of whether to separate its brokerage business into a new company, MF Global, or to continue with traditional investment products. The case study analyzes the challenges posed by the crisis, including market fluctuations and reduced investment capacity, and evaluates Man Group's strategic options for growth and diversification. The study includes an assessment of the company's current position, alternative business scenarios, and proposed solutions to the problems, offering recommendations for future actions and considering implications for stakeholders. The study also includes ratio analysis, income statements, and manager profiles.

CASE STUDY
Analysis of opportunities for Man Group in asset management
industry and a review of Hedge Fund Industry during US crisis
situation 2007

Table of Contents
Table of Contents.............................................................................................................................2
CHAPTER 1: INTRODUCTION....................................................................................................1
1.1 Background of study..............................................................................................................1
1.2 Overview of company in relation to present case..................................................................2
1.4 Research Questions................................................................................................................3
1.5 Research Aim and Objectives................................................................................................3
1.6 Structure of case study...........................................................................................................3
CHAPTER 2: CASE BRIEF............................................................................................................5
CHAPTER 3: PROBLEM STATEMENT AND ANALYSIS........................................................9
3.1 Statements of problems in the case........................................................................................9
Conceptual Framework..............................................................................................................10
3.2 Research methods................................................................................................................10
3.3 Relevant literature review....................................................................................................12
3.4 Proposed plan of analysis....................................................................................................15
3.5 Sources of Data....................................................................................................................15
3.6 Ethical issues........................................................................................................................16
CHAPTER 4 ANALYSIS AND FINDINGS................................................................................17
4.1 An assessment of current position.......................................................................................17
4.2 Alternative business scenario...............................................................................................24
CHAPTER 5: PROPOSED SOLUTIONS TO THE PROBLEMS...............................................24
5.1 Integrated discussion analysis..............................................................................................24
5.2 Recommendation and proposed plan for action..................................................................25
5.3 Implications to Stakeholders................................................................................................25
5.4 Limitations of Research and scope for future research........................................................26
REFERENCES..............................................................................................................................27
Appendix 1 Ratio Analysis............................................................................................................31
Appendix 2: Income statement......................................................................................................33
Appendix 3 Selected Man group manager profile as on March 2007...........................................33
Appendix 4 Man Group Assets and management fee growth.......................................................34
Appindex 5 Man group Asset under management.........................................................................35

Appindex 6 Man group regulatory capital position.......................................................................36

CHAPTER 1: INTRODUCTION
1.1 Background of study
The present case is focused towards asset management industry as well as the Hedge
Fund and Fund of Funds Industries. The case describes about the UK-based alternative asset
management company namely Man Group, the world’s largest publicly traded hedge fund
company that is also known as fund of funds manager. In the year 2007, it was seen that the
company was willing to transform itself as there were many opportunities in the alternative asset
management industry. Man was prosperous to take advantages of such opportunities. The
company was proposed to separate its brokerage business into a new company, MF Global, at the
same, business was witnessed to continues its expansion in alternative investment offerings.
However, Man group was a specialised in hedge funds but the major disadvantage of Man Group
was that it is far behind large competitors in cross-selling of investment products to existing
clients. In 2007, globe financial crises were emerged and the capacity of people to invest in
financial market is reduced. The major reason behind this trend is related to the increment in
unemployment rate and decline in inflation rate and a steady fell in GDP. At that time, entire
stock market or financial market had faced crisis situation.
However, it was witnessed that in 2007, there were number of growth opportunities in
the financial market but the situation changed as there was less demand for financial products in
the market. The crisis situation has affected Man Group Company as well as its expansion
strategy as the company was stuck in dilemma whether to expand business in assets management
industry with a new company in order to diversify products through acquiring company. The
study is thoroughly based on finding out the opportunities for Man group in 2007 to move into
an investment management business. However, the company was having option to diversify into
closed ended schemes or private equity schemes. However, poor economic conditions had made
difficult for company to decide whether it must expand its business or to continue with
traditional investment products. The present case is fully focused to identify the opportunities for
Man Group for expanding its business or to focus of existing. In addition, the Hedge Fund and
Fund of Funds Industries and the Man’s Position in the Hedge Fund Industry during 2007 and
2008 will be examined.
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1.2 Overview of company in relation to present case
Man Group is the leading publicly traded hedge fund company which is globally
recognised as a fund of funds manager. The mentioned company was poised to transform itself to
take advantages of opportunities in the alternative asset management industry. The company is
trading since 1783 and has a soiled experience of 25 years in alternative investments. This is a
London based public company dealing in financial services. This business was initially founded
as a sugar cooperage and brokerage by James Man. At present, the company provides a range of
funds for corporate and private investors and has acquired a place in the world's largest publicly
traded hedge fund. Headquarter of the company is situated at Riverbank House in London and
this company employs over 1,000 people in different worldwide locations. The mentioned
company is also recognised to be a company that is noticed for being sponsor of the arts and
charitable initiatives which includes Man Booker Prize and the Man Charitable Trust. As per the
facts of 2015, this organization has USD 76.8 billion assets under management. This
organization has a powerful distribution network that serves a highly-diversified global client
base.
Main aim of this company is to serve the products as per the clients’ needs as well as
offer them a comprehensive composition of implicit return and funds through with excellent
performance-driven investment activities. This report is based on Man groupcompany and its
operation in finance industry. In 2007, the company desired to continue that diversification
program with new products including traditional hedge fund strategies, structured credit
products, and private equity investments with a climate change theme. However, there were
problems related to US subprime housing market that has influenced the entire financial system.
At that time, company has witnessed some opportunities for the growth. The company had to
decide whether it was strategically sound to forge ahead with the separation of existing two lines
of business as well as with asset management or to continue diversification across investment
strategies. The decision was based on the direction of asset management industry.
1.3 Statement of the problem
Through an in-depth analysis of case, it has been witnessed that Man group was having
problem of selecting between two options whether to separate its brokerage business into a new
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company, MF Global and continues its expansion in alternative investment offerings or to
continue with traditional investment products. It has also been evidenced that the company has
specialized itself in hedge funds and it is far behind from competitors to provide cross selling of
products to its clients. This has emerged as a secondary problem as the company is not able to
compete with competitors in the field of cross selling.
1.4 Research Questions
 What is the financial position of Man group before, during and after 2007 US crisis?
 What are the business opportunities available with Man group at the time of 2007 US
crisis?
 Whether Man group has to separate its brokerage business and go for a new company,
MF Global, or to continue with traditional investment products?
1.5 Research Aim and Objectives
Major aim of present investigation is to find out problems associated with Man group and
Hedge fund industry during US 2007 financial crisis and to decide the solutions while applying a
wide range of management tools or models.
The objectives of herewith investigation are as follows:
 To investigate the hedge fund industry since before, during and after 2007 US crisis
 To study the most optimal alternatives available for Man group to attain market growth
 To critically investigate the business opportunities available with Man group and to study
the suitable course of action for Man group at the time of 2007 US crisis.
 To identify and recommend suitable solutions for the current position of Man group and
to mitigate the adverse effect of existing problems.
1.6 Structure of case study
Chapter 1: Introduction: This chapter represents the main aim of present case as well as
the objectives of entire case study. This chapter further reveals the main problem of this case as
well as the brief of entire report.
Chapter 2: Case Brief: This is the next chapter that explains the points of present case
and helps in describing the overall case in a specific manner. In other words, this chapter
overviews the business case in the most summarized manner. This chapter is crucial in regard to
make reader understand about the major points of case and specific reasons to conduct study.
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Chapter 3- Problem statement and plan of analysis: This is the most important chapter
of present case study in which major problems are identifying that are based on the company.
The specific analysis of each problem along with a strong application of management theories
are presented in this study. The reader can find out major problems in the case and the
application of relevant literature review on various concepts, theories and models. In addition, a
proposed plan of analysis and sources of data collection are explained in this case.
Chapter 4: Analysis and findings: In this chapter, assessment of the current position of
Man Plc in the hedge fund industry of UK will be done as well as it represents the application of
concepts, theories, models that are discussed in chapter 3.
Chapter 5: Solutions to the problem and issues: This is the last chapter of the
investigation that presents the integrated assessment of analysis as well as helps in finding out
the best solution of the problem faced by the company. An action plan is represented in this
chapter for resolving problems.
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CHAPTER 2: CASE BRIEF
From the case investigation, it was found that it is all about a hedge fund industry and a
leading organization of the hedge fund industry namely Man Group. The mentioned organization
was witnessed selling investment products especially hedge funds to its client. This company has
sold its original agricultural business in 2000 and started to operate as a purely financial firm
under the name “Man Group plc.” The business started acting as a broker of futures, options, and
other equity derivatives for corporate and private clients. Major growth strategy of Man
Company to grow its brokerage business that culminated in 2005 purchased from Refco Inc. This
company was the biggest competitor of company which had collapsed amid allegations of fraud
and inadequate segregation of customer accounts. Man's asset management division provided
alternative investment products to its corporate and retail clients. The company was pioneer in
developing capital-guaranteed structured products that are based on underlying hedge fund assets
(Amenc, Martellini, and Vaissié, 2003). However, by 2000s, Man grew its asset management
business by acquiring companies and making profitable investments in young hedge funds.
However, the company was facing issues in other investment funds relating to short price
fluctuation hence, started earning losses. The company was failed in investment strategy in terms
of aggregate loss on derivative contracts and company has not remained effective in providing
good returns to the business. For sorting out the problem related to losses in fund investment,
company has decided to prepare a new scheme namely fund of fund scheme. As per the
application of such scheme, investors can make investments in other mutual fund scheme instead
of investing in a specific security. This aim was focused to diversify the investment and getting
maximum returns.
In 2007, business conditions had been changed as stock market had fluctuated and it
became difficult to get higher return. Thus, it could be said that hedge funds became the
instruments to get maximum returns even market was not performing well. Man group has
started providing strong competition to the rivals in hedge funds market. From the investigation,
it was found that in 2007 Man had faced the turn out of five years to March 2008 as Man Group
FUM grew explosively from $26.1 billion to $74.6 billion. The sales over this period relativity
outpaced redemptions as well as the performance of funds was mostly impressive. Hence, it
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could be said that 2007 was also marked very strong in terms of net income growth which was
just due to hedge funds.
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Illustration 1: Financial performance of Man Group

Within United Kingdom, Man was subject to regulatory capital requirements in both its asset
management and brokerage businesses. From the case investigation, it was found that company
was argued in 2007 that two divisions of company i.e brokerage business and asset management
would be best served by having appropriate individual capital structures. The company has
further separated its business for AHL investment products and decided to use MF global
services. At the similar time point, company has decided to raise up to $5 billion from MF
Global’s listing, the trimmed growth of the mentioned company was witnessed estimated
problem due to US 2007 sub-prime mortgage market crisis that was spread around the economy.
The appetite market has indicated that company can face significant reduction in valuation for its
brokerage business (Vaissié, 2003). On the other hand, potential investors in the IPO section
were seen concerned about Man Financials potential litigation losses. In the case, it was stated
that company was facing issues with selling of investment product. Furthermore, banks as well
as the other financial institutes were seen to be the biggest rivals for the company. The
companies were facing some issues in respect with large number of clients when they offer cross
selling products and Man Company was falling behind to offer such services to their clients. The
major reason was that company was dealing only in mutual fund scheme and because of this
reason, it becomes difficult for the firm to cross sell its product (Cohen and Mazzeo, 2010).
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The evidence of case stated that company wants to grow its business to a significant rate
in financial industry. There are various alternatives available in the form of whether Man group
has to separate its brokerage business and go for a new company, MF Global, or to continue with
traditional investment products. However, business was having option to diversify into closed
ended schemes or private equity schemes but the poor economic conditions had made difficult
for company to decide whether it must expand its business or to continue with traditional
investment products. This was the major focused area of entire case study. For a nutshell, it has
been evident from the case that year 2000s had been good to the Man Group however a single-
minded focus on asset management was an option that is hard to separate its brokerage business
as the market conditions were worsening. In context to asset management field, Man was seen to
be a victim of its own success with AHL and was also found pressured for diversifying its
earnings base. It can be said that company has expanded meaningfully into the fund of funds
business, but this did not seem to be enough. The question with the case remained around the
confusion where should Man look for its next leg of growth, and what restraints should it put on
this search.
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Illustration 2: Man group Asset under management

CHAPTER 3: PROBLEM STATEMENT AND ANALYSIS
3.1 Statements of problems in the case
Problem 1: Selecting between two alternate business options
The major problem that Man Company was facing is of selecting between two options
whether Man group has to separate its brokerage business and go for a new company, MF
Global, or to continue with traditional investment products. From this company, it was very
problematic to decide as the financial position of hedge fund industry was not up to the market
due to financial crisis. The organization was in confusion whether, to invest in existing
traditional hedge fund services or to invest in the new company MF global. From the
investigation, it was identified that Man Global Strategies (MGS) division allowed the company
to cultivate emerging newhedge fund managers. Hence, major problem of company is to decide
the selection of one among various alternatives.
Problem 2: Competitiveness in cross selling of product to its clients
Organization has faced competitiveness in the field of cross selling of financial products
to its customers as the rivals of organization are capable of offering such kinds of services to its
customers. Problem of the company is to offer cross selling of product to the customers that
keeps it behind to its customers. On the other hand, organization is specialised in selling hedge
funds to the institutional and individual client. However, it is lacking behind in meeting the
needs of customer in the section of cross selling. In other words, it can be said that competition
with rivals in terms of cross selling is the major problem of company in the present scenario.
Problem 3: Financial position during US 2007 sub-prime crisis
Financial position of Man group is seen during the period of US 2007 sub-prime crisis
that is considered to be a major issue of present investigation. It was witnessed that financial
performance of the company is seen fluctuating over the crisis time. Nonetheless, the impact of
such crisis was seen to the entire financial industry around the world and UK economy is one
among such countries that is significantly affected by the crisis. However, business entity has
expanded meaningfully into the fund of funds business, but this did not seem to be enough that
has influenced the financial performance of company. Hence, it can be said that fluctuating
performance of company is the major issue of organization.
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