Man Group, the world's largest listed hedge fund manager, said demand for its investment products had held up well despite the industry suffering a dismal start to the year.

Investors poured $5 billion (£2.5 billion) into its funds in the first quarter as total funds under management rose from $74.6 billion to $79.6 billion during the three months to the end of June.

Redemptions fell to $2.5 billion as Man's mix of institutional and individual customers held their nerve, despite the sense of a downturn that is beginning to grip the industry.

Jon Aisbitt, chairman at Man Group, told shareholders at Man's annual meeting today that the group was confident of its prospects for the rest of the year.

He said: "This success in asset raising reflects the group's broad geographic presence and the continued attraction of conservatively structured alternative investment products.

"We have also benefited from reduced redemption rates."

Peter Clarke, the chief executive, added that hedge fund returns remain relatively stable compared with the performance of other asset classes, such as equities and fixed income.

Analysts welcomed today's quarterly management update. Ian Poulter at Landsbanki said funds under management were already halfway towards his full-year forecasts.

Michael Long and John Holmes at Keefe, Bruyette & Woods said: "Despite continued tough market conditions and negative newsflow on the hedge fund industry in general, Man was able to achieve positive investment performance in the quarter from all four of its major product groups."

AHL, Man's managed futures fund, gained 3.8 per cent in the first quarter. Glenwood, a fund of funds, returned 2.4 per cent, Man Global Strategies, which offers multi-strategy and style hedge fund porfolios, made 1.7 per cent and RMF, another fund of funds, 2.5 per cent.

Investec said it was retaining its "hold" recommendation on the shares, which put on 14p to 603.5p, a rise of 2.37 per cent.

Man sold $2.2 billion worth of guaranteed products in the first quarter, $1.3 billion worth of open-ended private investor products and $1.5 billion worth of institutional investments.

The group has $48.3 billion worth of private investors' funds under management and $31.2 billion in institutional funds.

Man's healthy performance came just a day after grim figures showing that the hedge fund industry suffered its worst first-half performance in almost 20 years.

According to Hedge Fund Research, the Chicago-based research firm, hedge fund returns globally were down almost 0.7 per cent for the first six months of the year, threatening to push the industry into only its second full-year loss.

Andrew Baker, deputy chief executive at the Alternative Investment Management Association, the hedge fund industry body, said: "Depending on strategy of manager and location, things are not as bad as the figures might suggest.

"Some strategies such as macro and short-bias equity will have done well but specialist credit, most arbitrage strategies, event-driven and fixed income value will have taken some knocks.

"The sector is probably still in net redemption but categorically not in meltdown," he said.

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