Man Group funds hit by market turbulence

Date: Thursday, October 2, 2008
Author: Paul Sandle,

Hedge fund manager Man Group Plc (EMG.L: Quote, Profile, Research, Stock Buzz) said on Monday first-half earnings would fall as market turbulence hit its funds, sending its shares plunging 10.6 percent.

Funds under management fell by $5 billion (2.8 billion pounds) to $70.3 billion in the six months to end-September -- 12 percent down on the $79.5 billion at end-June, Man said in a trading update.

But sales remained strong, up by about 25 percent at $10 billion, it said, and net inflows for the period were up 14 percent at $4.1 billion.

The group said lower performance fee income, which it sees down 40 percent mainly due to falls in the value of assets in its flagship AHL fund, was expected to result in a 5 percent fall in diluted earnings per share.

Man shares, which have lost 32 percent of their value over the last month, were down a further 10.6 percent at 334 pence in morning trade, valuing the group at about 5.69 billion pounds.

Jason Streets at Evolution Securities said the update was not positive, and he cut his earnings per share forecast for 2009 to 66.6 cents from 74 cents.

"Assets under management came in lower than expected and margins were lower too -- we can't remember the last time Man mentioned rising costs," he said in a note.

"The stark reality of the private investor performance is also poor and will undermine confidence in future net flows."


However, Chief Executive Peter Clarke said Man's cautious investment stance meant its funds were to some extent insulated from the worst of the market downturn.

"We have focused obviously and historically on having low beta investment styles -- those have paid off in terms of being ahead of or consistent with industry benchmarks across the vast bulk of our products," he said on a conference call with analysts.

He also said the group's strategy would help it withstand the ban on short selling certain banking stocks put in place by Britain's Financial Services Authority on September19.

"Our underweight position on short means we are less impacted than much of the industry by, but nevertheless there will be an impact on long-short strategies," he said.

The group, which was founded in 1783, said redemption rates were still low and it continued to hold excess regulatory capital of $1.5 billion.

"Private investment redemptions have remained consistent with last year -- low and stable," he said. "On the institutional side, redemptions overall, notwithstanding a single investor that redeemed in the second quarter, also remain at last year's level."

Clarke said the strong sales demonstrated the value of its investment approach.

"With surplus capital and a continued commitment to invest in people, products and innovation, we are strong positioned for the future," he said in the trading update.