Man Group, the world's largest listed hedge fund manager, is planning to take legal action to recover its $360 million (£245 million) of likely losses in the $50 billion Bernard Madoff scandal, it emerged yesterday.

Peter Clarke, Man's chief executive, let it be known that Man was exploring every avenue to try to have the money returned. “We will be suing the people involved. We will be looking for remedies on behalf of our investors,” he said.

A spokesman added: “We are actively reviewing all options to recover assets for our investors.”

Man was one of the first companies to reveal the size of its exposure to the disgraced corporate financier's activities and is thought to be among the 15 most vulnerable companies worldwide to Mr Madoff's securities firm.

This week, French investors said that they would instigate proceedings against banks, including UBS and HSBC, for allegedly helping to channel money to Mr Madoff.

Customers of Man's $24 billion RMF institutional fund are likely to suffer losses as a result of the scandal, which has drawn in a host of celebrity investors, including Arpad Busson, the hedge fund manager who is Uma Thurman's fiancé, and Kevin Bacon, the actor.

Man's legal plans came as it revealed that assets under management had slumped by $14.3 billion during the three months to the end of December. The bulk of the drop in funds, or $9.7 billion, came after Man stripped the investment risk out of Man Global Strategies, one of its best-known funds.

Private clients pulled $3.8 billion of funds from Man over the period, while institutional investors withdrew $2.5 billion. Man shares fell by almost 6 per cent to 211.75p.

Hedge funds have suffered huge losses at the hands of turbulent investment markets during the past 12 months. Worldwide, the $1.5 trillion industry lost 18 per cent for its investors last year, according to Hedge Fund Research, the Chicago-based research firm.

Institutional investors, many of whom were facing losses across their portfolios, rushed to withdraw assets from hedge funds, often prompting them to suspend redemptions or forcing them into destructive fire sales.

Man said that, despite the devastating conditions, fund sales to private investors were “robust” at about $2.7 billion during the fourth quarter. It also said that AHL, its flagship managed futures fund, had returned 22 per cent over the period, ending the year up 25 per cent.

Jason Streets, at Evolution, said that Man's trading update yesterday could have been worse. “There seems to be nothing as bad as some feared that we didn't already know - the MGS deleveraging - and some gleams of light in these dark ages,” he said.

Ian Poulter, at Teathers, noted that performance fees at AHL would have been sizeable during the fourth quarter.

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