The UK stock market has taken the perceived problems in the hedge fund market to heart in its treatment of its two listed hedge fund operato...

The UK stock market has taken the perceived problems in the hedge fund market to heart in its treatment of its two listed hedge fund operators, Man Group and RAB Capital.

According to Bloomberg data, Man Group trades at a historic price-earnings ratio of 14 and a prospective ratio of 11. RAB Capital, whose current price-earnings ratio is 16 has a forward ratio of 13 even though it has more than doubled its profit in the first half and increased management fees by 41 per cent.

By way of comparison, the FTSE 100 index had a recent average price-earnings ratio of 20, UK’s Amvescap, trades at a prospective price-earnings ratio of 17 and Aberdeen Asset Management is at 21.

The UK market at least seems to be suggesting that hedge fund growth has run out of steam and that future growth may be seen in the more traditional mutual funds.

It also suggests that the generally held view is that the hedge fund business model – exceptional performance matched by exceptionally high charging – cannot last much longer. After all, if the market is good at anything, it’s spotting undervalued assets.

This may also explain why so few hedge fund managers have choosen to list their shares and to submit themselves to public scrutiny and opprobrium over corporate governance and excessive pay.