Man Group, the world’s largest listed hedge fund manager, yesterday blamed punishing equity market corrections for a 5 per cent drop in performance on its flagship investment strategy.

Peter Clarke, chief executive of Man Group, said that this week’s turmoil in the Chinese stock market would be a further short-term blow to quantitative strategies such as that of AHL.

Unveiling its preliminary results for the year to March 31, Man said that its $18.5 billion (£9.4 billion) AHL investment strategy had lost 4.8 per cent. The fall helped to force down the group’s performance fees by 20 per cent to $358 million.

The 20-year-old strategy, which is based on computer models that identify trends in the movements of different asset classes, lost about 1.3 per cent in the last quarter.

The disappointing performance overshadowed a 24 per cent increase in funds under management to $61.7 billion at the group. Pretax profit on asset management was up 13 per cent to $1.3 billion, enabling Man to propose a 40 per cent dividend increase.

AHL’s difficulties are likely to increase interest in the performance figures from other well-known quant funds. It emerged yesterday that Goldman Sachs’s biggest hedge fund, its Global Alpha quant fund, lost 3.4 per cent in the first four months of this year. The investment bank refused to comment.

According to the Credit Suisse/Tremont Hedge fund Index, quant funds are down 0.87 per cent for the year to date, despite big improvements in performance since April, while the index is up 5.43 per cent since the beginning of 2007.

Mr Clarke said that AHL had been hit by “sharp reversals” in equity markets last June and this March. Markets plunged most recently amid fears of slowdown in world growth, a bounce in the yen, defaults in US sub-prime banking and a Chinese stockmarket bubble.

However, he said that the corrections helped to reduce correlation between asset classes, which would improve the strategy’s risk management. Wednesday’s 6.5 per cent fall in China’s Shanghai Composite Index would hit the strategy’s monthly performance, but would be mitigated by its heavier investment in currencies and bonds, Mr Clarke said.

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