Man Advances After Analysts Raise Earnings Estimates

Date: Wednesday, January 7, 2009
Author: Tom Cahill, Bloomberg.net

Man Group Plc, the largest publicly traded hedge-fund manager, rose the most since selling shares to the public in 1994 after analysts at Credit Suisse Group and Evolution Securities raised earnings estimates.

London-based Man Group surged 17 percent after Credit Suisse analysts led by Rupak Ghose raised 2009 earnings estimates by 19 percent to 59.1 U.S. cents a share because of increased fees from its biggest fund, the $25 billion Man AHL Diversified Futures Ltd. program. Evolution Securities analyst Jason Streets boosted his estimate for second-half performance fees nearly 10 times to $225 million, citing AHL’s “astonishingly” strong performance.

AHL rose 25 percent in 2008, outperforming most so-called managed futures funds, beating the 23 percent drop for hedge funds overall, as measured by Hedge Fund Research Inc.’s HFRX Global Hedge Fund Index.

“The returns of AHL have paced significantly ahead of other managed-futures funds in the past 12 months with AHL showing outstanding returns,” Credit Suisse’s Ghose wrote, adding the fund manager’s share valuation “is cheap.”

Man advanced 42.5 pence to close at 287 pence, for a gain this year of 21 percent. The shares fell 58 percent last year.

Man Group had its counterparty credit ratings cut one level last month and was given a negative outlook by Standard & Poor’s, which cited the fund manager’s overdependence on AHL.

AHL, which uses computer programs to trade on more than 200 futures markets, benefits during times of market volatility. The fund’s best monthly performance was the 14 percent gain it posted in September 2001, when terrorists destroyed the World Trade Center in New York, followed by a 13 percent gain in August 1998, when Long-Term Capital Management LP collapsed.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profit from speculation on whether the price of assets will rise or fall.

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