Man Group, the world's largest listed hedge fund group, is set to stage what will likely be the second-largest IPO on a U.S. exchange so far this year when it spins off its U.S. brokerage arm, MF Global, this month.

The offering could raise about $3.8 billion, putting it in a league with Blackstone Group's high-profile $4.13 billion IPO last month. But investors are likely hoping that MF Global's debut will not mirror the rocky entry of Blackstone into the public markets.

The offerings come amid new headwinds affecting private investment funds, including the possibility of higher taxes and lower returns. There are also market worries about a fallout in the securitized debt markets, reflected by the recent implosion of two Bear Stearns hedge funds.

On Friday, tier-one investment firm Carlyle Group cut the price of an IPO of a European affiliate on Euronext Amsterdam to $19 per Class B share, down from a range of $20-$22 per share stated earlier.

And IPOs in other sectors are also facing challenges. Quark Pharmaceuticals Inc. and ShoreTel Inc. both postponed public offerings last week for various reasons.

Blackstone priced at the top of a $29-$31 forecast range, then rose another 13 percent in its market debut. But concerns over congressional calls for higher taxes on the prominent investment advisory firm have plagued the stock since, along with worries that a recent binge in leveraged buyouts may be waning.

Blackstone last week saw the value of its common units drop below the $31 offer price, an embarrassment for a blue-chip investment firm with a sterling reputation for market acumen. Its shares traded down 38 cents, or 1.3 percent, at $29.31 on the New York Stock Exchange on Friday.

Some say MF Global's offering has some red flags of its own that may give investors pause, albeit unrelated to external factors like those afflicting Blackstone and competitor Fortress Investment Group.

SELLING SHARES

Man Group is selling 97.4 million shares in the offering, or 80 percent of its stake in MF Global, and will reap all proceeds.

MF Global also announced a $1.2 billion debt offering this week that will be used partly to repay debts to Man Group, according to a regulatory filing.

It looks on the surface like a near total bailout by the parent, said Francis Gaskins, president of IPO research firm IPOdesktop.com. Man is basically leveraging its own company. Instead of a leveraged buyout, they are selling to the public.

The firm's lofty valuation may be another area where investors could see a red flag. And the offering includes the remnants of the collapsed futures trading business, Refco Inc., which Man Group bought in 2005.

Gaskins said MF Global's price-to-earnings ratio, based on its results for the fiscal year that ended March 31, 2007, is 39 versus 27 at peer Interactive Brokers.

MF doesn't have highly visible growth, making this a high multiple.

MF Global, in the filing, said derivatives volumes had slumped, both for it and others in its sector, in the most recent quarter.

Shares of New York-based Fortress hit an all-time low of $21.90 last week after an IPO that shot up nearly 70 percent in its first day of trading from $18.50. The shares were trading at $23.54 on Friday.

Fortress shares have been moving lower since June 15, the day a legislative proposal came to light that would raise the tax rate from 15 to 35 percent for hedge fund and private equity firms that go public on U.S. exchanges, an issue that has also weighed on Blackstone.

Investment