(Reuters) - Man Group shares fell about 5% on Friday after the British hedge fund reported higher than expected client outflows.

Client outflows amounted to a net $1.6 billion, although that was compensated for by an increase of $9.8 billion in its investment performance.

Assets under management rose 4.89% in the first quarter, to $175.7 billion by the end of March, from $167.5 billion at Dec. 31.

"Overall, an impressive investment performance update from Man Group this morning, whereas the flow profile remains more challenged," said an analyst take from Investec.

Last year proved challenging for hedge funds such as Man Group which use systematic strategies to catch consistent market trends.

Quantitative funds and multi-strategy hedge funds returned an average of 2% and 7.6%, respectively, in 2023. The hedge fund industry saw a net $80 billion of outflows for the year to Oct. 18, even as it raked in net profits of about $119 billion, said hedge fund specialist Aurum Funds in October.

Man Group is a multi-strategy fund which has quant and trend following funds.

Two of Man Group's trend following funds, AHL Alpha and AHL Diversified, posted positive returns, net of fees, of 6.9% and 12.1% respectively in the first quarter, after a negative performance in the last quarter of 2023.

(Reporting by Eva Mathews in Bengaluru, Andres Gonzalez in London; Editing by Savio D'Souza, Kirsten Donovan)

By Andres Gonzalez and Nell Mackenzie