UK-based Man Group, the world’s largest listed hedge fund company, has folded three of its fund operations into a new investment management business to increase transparency and risk controls, the firm said as it announced a drop in profits for the 12 months to 31 March this year.

Man said its existing MGS, Glenwood and RMF business operations will be drawn into a “new investment management business which unites Man's scale and expertise in hedge fund investing and shapes its business to address evolving investor requirements for increased transparency, governance and risk management”.

Industry commentators have said that the hedge fund industry, battered by heavy losses in 2008 and the Bernard Madoff Ponzi scheme scandal, will face tougher government regulation and face more investor pressure to be more open about their money-making strategies.

"As markets have changed, so have investor requirements for hedge fund investing. Performance remains an absolute requirement, but transparency, governance and risk management are now at the top of investors' agendas,” Peter Clarke, Man’s chief executive, said in a statement.

“They [investors] are looking for providers with the scale, expertise and systems to deliver the enhanced transparency, institutional quality governance and stronger controls over invested capital they require.”

Under the changes, John Rowsell, chief investment officer of Glenwood, will take the role of managing director of the new business unit and will be responsible for all business, operational and risk functions.

Herbert Item, CIO of RMF, will become chief investment officer and will be responsible for all investment functions. Both men will continue to report to Mr Clarke.

The news business unit’s team will build on existing systems integration which has been underway since 2008 and core integration tasks will be completed by the end of May 2009.

RMF, Glenwood and MGS portfolios will continue to be managed according to existing mandates by dedicated portfolio managers.  AHL will be unaffected by the creation of the new integrated business.

Meanwhile, in its estimated results statement, Man said its profit before tax and exceptional items was $1.2 billion in the 12 months to end-March, versus $2.1 billion in the previous 12-month period.

Funds under management are estimated to stand at $47.7 billion, down sharply from $74.6 billion a year before.

The firm logged private investor sales - described as "extremely robust" - of an estimated $11.1 billion; net inflows of an estimated $2.0 billion.

"Guaranteed products saw a $1.6 billion inflow for the year overall as investors sought the safety of capital protection in an uncertain market environment," Man said.

The firm traces its origins back to 1783 when it operated as a commodities trading business, specialising in sugar.