Man Group Shares Fall On Report Of Slow Inflows

Aug 1 2014 | 7:43am ET

Lindsay Fortado (Bloomberg) -- Man Group Plc, the world’s largest publicly traded hedge-fund manager, dropped in London after inflows slowed and the company said it was guarded on performance after 7 percent growth in assets under management.

The shares fell as much as 6.6 percent to 111.2 pence, the biggest decline in five weeks, after rallying 13 percent in July. They dropped 5.2 percent to 112.8 pence at 11:06 a.m., valuing the company at 1.98 billion pounds ($3.4 billion).

“Whilst it has been a positive first half for the firm and we recorded another quarter of net inflows in the second quarter, we remain cautious as we look to the second half of the year,” Chief Executive Officer Emmanuel Roman, 50, said. “Investment performance in the first half was mixed amid a continued volatile market environment.”

Net inflows slowed to $800 million in the second quarter from $2 billion in the first three months. Sales of investment funds totaled $12.4 billion in the first half, offsetting $9.6 billion of redemptions, the firm said in a statement today. Assets under management rose to $57.7 billion from $54.1 billion on Dec. 31. Peter Lenardos, an analyst at RBC Capital Markets, estimated assets would increase to $57.4 billion.

Flows ‘Crucial’

The firm’s GLG Multi-Strategy fund declined 1.9 percent in the six months through June. AHL Diversified rose 8.7 percent and Japan CoreAlpha fell 1.4 percent, it said. Hedge funds rose 3.2 percent on average in the period, according to Chicago-based Hedge Fund Research Inc.

“Crucially, in terms of flows, the second quarter slowed versus the first quarter,” Espirito Santo Investment Bank analyst Owen Jones, who rates the company as sell, said in a note to clients from London. The mixed performance of GLG funds was also a negative, he said.

Panmure Gordon analysts Keith Baird and Jeremy Grime downgraded their recommendation on the shares to hold from buy, citing a rally this year and “lack of visibility on earnings.”

“Investment performance was mixed with AHL doing better, but other areas like equities disappointed,” they wrote.

The stock has gained 34 percent in 2014.

Man Group has benefited from cost-cutting by Roman and gains for AHL Diversified after three years of losses. Investors have also added money to funds managed by the firm’s GLG Partners unit over the past year, as they became less concerned that slow economic growth in Europe will hurt returns.

Adjusted pretax profit rose 10 percent to $148 million in the first half from a year earlier, the company said. The firm said it will pay an interim dividend of 4 cents a share.

Management Fees

Philip Middleton, an analyst at Bank of America Corp. who recommends buying Man Group, said he expects management fees to “edge up somewhat” in the second half.

“This shows the hard work the company has undergone over the past few years paying off,” he wrote in an e-mailed report. “We reiterate our buy with a 135 pence 12-month price objective.”

Lenardos said in a report that he expects analysts to start factoring in better-than-expected results and pending acquisitions.

Man Group said in June it would buy Boston-based Numeric Holdings LLC for as much as $494 million, and Pine Grove Asset Management LLC, a New Jersey-based investment firm that manages about $1 billion. The acquisitions of Numeric, which has $14.7 billion in assets under management, and of Pine Grove are on track to be completed this year, Man Group said.

Pending Acquisitions

The Pine Grove deal will be completed “shortly” and Numeric is on track for completion in the third or fourth quarter, the company said in today’s statement.

Investors began pulling money from AHL in 2011 after actions by politicians and central banks broke up trends in asset prices, contributing to losses for the hedge fund. Its gains in 2014 mark the best start to a year since it surged 16 percent over the first half of 2008.

Roman replaced former CEO Peter Clarke in February last year. He joined the company in 2010 as part of its acquisition of London-based GLG Partners.

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