Man Doubles Dividend After Full-Year Profit Rises 60%

Date: Thursday, May 29, 2008
Author: Tom Cahill, Bloomberg.com

Man Group Plc, the world's largest publicly traded hedge fund manager, doubled its dividend after earnings rose 60 percent last year and its flagship fund outperformed competitors.

Man Group advanced as much as 3.5 percent in London trading after pretax profit increased more than analysts estimated to $2.08 billion in the fiscal year ended March 31. Stanley Fink, Man Group's chief executive officer from 2000 until 2007 and now a director, plans to leave the company, it said today in a statement.

AHL Diversified Plc, whose computer-trading program is behind about a third of Man's investments, rose 37 percent in the past fiscal year, five times the 7.3 percent gain of the Credit Suisse/Tremont Hedge Fund Index. CEO Peter Clarke said assets under management rose 4.7 percent since March 31 to $78.5 billion, showing Man Group's ``differentiation'' from hedge funds overall, which started 2008 with their weakest performance in two decades.

``AHL's recent strong performance during turbulence stands them in good stead for inflows,'' said Daniel Havercroft, an analyst at Investec Ltd. in London, who has a ``buy'' rating on the shares. ``They're going to be on the winning side'' for attracting investments.

Man Group set the dividend for the past fiscal year at 44 cents, up from 20 cents a year earlier. The London-based company also plans to resume share buybacks.

The dividend shows Man Group is ``going to push aggressively'' a policy of returning extra cash from performance fees to investors, said Jason Streets, head of research at Evolution Securities in London. He has a ``buy'' rating on the stock.

Best Performer

Man gained 14.5 pence to 603 pence at 11 a.m. in London, valuing the company at 10.3 billion pounds. The stock is up 5.7 percent this year, the best performance in the 60-member Bloomberg Europe Banks and Financial Services Index.

Man said net performance fees more than doubled to $936 million from $358 million, while management fees rose 21 percent to $1.14 billion.

Net income rose 55 percent to $1.7 billion, or 90 cents a share, from $1.1 billion, or 55 cents, Man said in the statement. For the second half, net income was $1.04 billion, double a year earlier, according to Bloomberg calculations based on today's full-year figures.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profit from their speculation on whether the price of assets will rise or fall. Hedge funds typically keep 20 percent of investment gains as performance fees.

`Flows Haven't Slowed'

Man is attracting new investors even as the hedge fund industry flows overall declined in the first three months of the year to the slowest pace since the end of 2005.

``As far as we're concerned, flows haven't slowed,'' Clarke said in an interview today. ``There's been a differentiation between those that have performed in these markets and those that haven't. We're pleased to be in the category that have.''

The company said Fink, the deputy chairman and former CEO, will not seek re-election as a director. He won't be replaced and the move was expected, Clarke said today.

``This is a process that we've been managing for years not days,'' said Clarke. ``It's a natural progression.''

Fink was the son of a grocer from suburban Manchester in northern England. He increased Man's assets under management more than 10-fold in his seven years as CEO.

He joined Man Group as head of mergers and acquisitions in 1987. Man Group bought its first stake in AHL from a trio of physicists two years later and bought full control in 1994.

`Sweet Spot'

Started as a sugar trader in 1783, Man Group uses a bank of computer servers to determine AHL's investments in more than 200 commodities futures markets around the world. Man and other so- called managed futures funds have profited as crude oil has risen 36 percent to $130 a barrel and the dollar has declined as much as 10 percent against the euro.

``AHL is in the sweet spot'' because of sustained trends in futures prices, Streets said in an interview with Bloomberg television. He estimates AHL probably generated about 90 percent of Man's performance fees, Streets said.

Analysts estimated Man would earn $1.94 billion, according to the median of 16 estimates compiled by Bloomberg.

Man Group in March said it would buy half of New York-based debt manager Ore Hill Partners Plc to profit from a ``significant opportunity'' to increase fixed-income investments.

It also is looking for an Asian fund manager and an equity multi-strategy fund, Clarke said today. ``We're building a business,'' he said. ``We need managers to place money with.''

Man Group last year sold MF Global Ltd., the world's largest broker of exchange-traded derivatives, in an initial public offering. Man retained a 19 percent stake in MF Global, whose shares have lost about half their value this year.

``That is not a long term holding for us, we do expect to sell that down,'' Clarke said. ``We are in no hurry.''

To contact the reporter on this story: Tom Cahill in London at tcahill@bloomberg.net.