Man Group Plc, slated to become the first firm to list a hedge fund on the New York Stock Exchange this autumn, will delay the public offering as market conditions have deteriorated dramatically, a source familiar with the company's plans said on Thursday.
The London-based company -- the world's largest publicly traded hedge fund group with more than $60 billion in investments -- told U.S. financial regulators in May that it wanted to list the Man Dual Absolute Return Fund in New York in September.
Now plans have been postponed indefinitely after stock markets tumbled recently amid fears about the subprime mortgage market, the source familiar with Man's plans but not authorized to speak about them publicly told Reuters.
A spokesman for Man was not immediately available for comment.
Hedge fund industry analysts speculated that losses at Tykhe Capital LLC and AHL Core, the two hedge funds picked to invest the Man Dual Absolute Return Fund's assets, cooled Man's desire to press ahead even further. Investors familiar with Tykhe said July's losses accelerated dramatically in August.
Also, rapid stock price declines at Fortress Investment Group and the Blackstone Group, the hedge fund and private equity fund firms that listed shares this year, were bad omens as well, analysts said.
Man's IPO would have marked a milestone for a British company that has never before raised money in the U.S. capital markets through a public offering, but has sold hedge funds of funds to wealthy Americans for years.
Man's plans would have given less affluent American investors, for whom hedge funds' $1 million minimums are too expensive, another way to access the once-red hot asset class.
At the end of May when the average hedge fund returned 2.38 percent and demand for hedge funds among average investors surged, an IPO seemed to be a very good idea. Man planned to let investors put in as little as $2,000 -- or $20 a share for a minimum of 100 -- for a taste of hedge funds that has long been off limits to everyone but the richest private investors.
However, the outlook changed dramatically this summer with many different types of hedge funds, not just the ones concentrating on fixed income plays, reporting heavy losses.
Tykhe Capital, a 5-year-old New York-based fund company that manages roughly $1.8 billion, has seen its portfolio value plunge about 20 percent in August after one of its portfolios lost 7.9 percent in July and the other slipped 4 percent, according to an investor briefed on the matter.
Tykhe Capital did not returns calls seeking comment.
The fund's four principals use computer models to buy and sell U.S. stocks short. Tykhe was expected to invest as much as 85 percent of the of the hedge fund's assets, according to documents filed with the U.S. Securities and Exchange Commission.
Tykhe's losses aren't the most dramatic in the $1.75 trillion industry.
Last month Sowood Capital lost 57 percent and was forced to close down. Industry analysts warned that even though industry performance numbers showed a slight gain in July, heavy losses might be lurking at funds that have not yet reported their results.
They also said market conditions could worsen this month, making it even more treacherous for hedge fund managers, like Tykhe, who often use leverage, or borrowed money, to try and boost returns.
Fortress was the first hedge fund and private equity firm to float its shares in February. Since then they have dropped 35 percent. Blackstone shares are off 28 percent.
(Additional reporting by Dane Hamilton in New York)
(Reporting by Svea Herbst-Bayliss)