Man Group Sees Profit Decline on Largest Fund Drop

Date: Wednesday, March 24, 2010
Author: Bloomberg

Man Group Plc, the largest publicly traded hedge-fund firm, said it expects to post a drop in full- year profit after its largest fund posted its first annual loss, cutting performance fees by three-quarters.

The firm expects to report profit before tax and adjusted items of $510 million in the year through March, down from $743 million a year ago, the London-based firm said in a statement today. Analysts had estimated the company to report a $555 million pretax profit for the year, according to 11 surveyed by Bloomberg. Assets under management fell 7.7 percent since December to $39.1 billion, missing the $40.4 billion estimate of nine analysts.

“The market will probably be disappointed with what they published today,” said Gurjit Kambo, an analyst at Numis Securities Ltd. in London who has an “add” recommendation on the shares. “Redemptions seem to be slowing, but sales aren’t really picking up.”

Man AHL Diversified Plc, the trading program that accounts for about half of Man’s assets, dropped 17 percent in 2009 and is little-changed this year, according to data compiled by Bloomberg. Reversals in fixed-income, currency and metals markets made 2009 the worst year since l987 for funds similar to AHL, according to Fairfield, Iowa-based BarclayHedge, which has tracked so-called trend-following funds for 25 years.

Shares Fall

Man Group fell 2.4 percent to 236.8 pence as of 8:14 a.m. in London trading today, for a market value of about 4.1 billion pounds ($6.1 billion). The stock is down 21 percent this year.

“The fourth quarter of the financial year has seen a decline in funds under management, driven principally by negative performance of AHL in December,” Chief Executive Officer Peter Clarke said in the statement. “The catalyst for improved sales will be material positive performance in the managed futures style and from AHL.”

Man Group said yesterday that AHL Diversified Futures rose 1.6 percent for the week ending March 22, bringing its gain for the month to 5 percent.

“This is maybe the catalyst we’re waiting for on sales, but it does need to be sustained,” Clarke said today.

AHL’s losses helped cut performance fees by 77 percent to $80 million, and management fees fell by half to $450 million for the year. Performance fees are a percentage of profits Man Group keeps from the funds it manages.

Hedge funds are private, lightly regulated pools of capital whose managers can buy or sell at assets, bet on falling as well as rising asset prices and participate in profits from money invested.