By James Mackintosh

Bear Stearns and the beach might sound like a bad novel, but the two – Bear’s imploding hedge funds and the impending holiday season – are behind a series of disappointing financial services floats.

This week the floats of Man Group’s brokerage arm in the US, a London-listed hedge fund from New York’s Third Point, and a Lehman Brothers fund of private equity funds have all raised less than planned.

“The problems of Bear Stearns and general market turbulence have an effect,” said Jeremy Tigue, who manages the £2.6bn Foreign & Colonial Investment Trust. “But there’s also just been too many of them. There’s a degree of market indigestion.”

At the same time, fund managers are unwilling to put money into little-understood assets just before heading off on vacation, particularly with the US subprime crisis and the collapse of hedge funds that invested in it making headlines.

However, the biggest disappointment, that of Man raising only $2.9bn (£1.41bn) from the New York IPO of MF Global, against the $3.5bn-$3.8bn it had hoped for, also appears to have been affected by investor unwillingness to rate it similarly to a stock exchange.

Shares in MF Global – the leading exchange-traded futures broker, which also controls the new US Futures Exchange – dropped another 5.8 per cent early yesterday, to $25.95, after falling 8 per cent from their $30 listing price on Thursday.

The fund from Third Point, best known for the acerbic letters written by founder Dan Loeb to underperforming executives, also fell on its first trade, after raising only $525m of the €500m (£336m) it hoped for on Thursday.

The previous day Lehman had injected an extra $45m, on top of the $100m it planned to invest, in a fund of private equity funds it was listing in Amsterdam to ensure it reached its $500m goal.

Mr Loeb this week brushed off the concerns, even after his delayed fund float failed to hit its target.

Calling it a “real success”, he said: “It is very different from a traditional corporate IPO, there isn’t a specific need for money for a particular investment. The €500m goal was an estimated target. It was a round number that we picked.”

But one banker who specialises in listing “alternative” funds – property, private equity and hedge funds – said they were always a difficult sell, and market nerves over subprime had made that worse.

“These are transactions where you need some fantastic momentum to get them away,” he said.

Several other funds have had a hard time reaching their goals this year. An Amsterdam-listed fund from Carlyle investing in US residential mortgages raised only $300m two weeks ago, against its $415m goal.

Brevan Howard, a London hedge fund manager, raised €770m in March, well below the €1bn-€1.5bn it hoped for. And the listings of a planned diamond fund and at least two funds of hedge funds were put on ice over the summer after failing to secure investor backing.

However, few expect the alternative fund party to stop. Investors in unlisted hedge funds still appear to be pumping in money, with no sign of the caution that hit the sector after the collapse of Amaranth Advisors in the US last autumn.

Indeed, the total loss of investor money in the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage fund, and the loss of 91 per cent in its less-geared sister fund, have been good news for rival hedge funds, such as New York’s Paulson & Co, which bet against subprime.

A stream of new listed vehicles is being planned for September, with bankers hoping investors will return from their summer breaks reassured that the subprime mayhem is contained.

Copyright Fund China 2009.

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