Investment Column: Man Group can ride the storm

Click to follow
The Independent Online

Man Group - the world's largest listed hedge fund group - is more used to reaping the rewards of playing the stock market than being the victim of its sometimes capricious changes. Yet, for much of this year, Man, along with other members of the hedge fund community, has been wrong-footed by seemingly out-of-the blue changes in market conditions around the world.

Man Group - the world's largest listed hedge fund group - is more used to reaping the rewards of playing the stock market than being the victim of its sometimes capricious changes. Yet, for much of this year, Man, along with other members of the hedge fund community, has been wrong-footed by seemingly out-of-the blue changes in market conditions around the world.

Man's flagship AHL fund - which manages $10.3bn (£5.7bn) - has been hit particularly hard. Without any discernible trends to follow, AHL has performed well below historic levels.

And, because hedge funds charge much higher performance fees than traditional unit trusts, the knock-on effect when funds do not deliver is particularly severe.

But any doom-mongering about Man losing its golden touch is way off mark. Its shares shot up 8 per cent yesterday to £14.65 when it said that in the past four months, it has picked up $6bn of sales, bringing its fund under management to $39.5bn.

Particularly encouragingly, the strong sales were accompanied by a reasonably small number of customers cashing in their investments, with redemptions during the period standing at a lower than expected £600m.

While Man is the largest of the publicly owned hedge fund groups in the world, it believes that the focus in the industry is increasingly on the profitability of funds under management, rather than their total size. To that end, Man said it had managed to boost its profit margins by recycling nearly $2bn of capacity from low margin work into more profitable lines.

According to Teather & Greenwood, Man is set to make pre-tax profits of £485m this year. It is trading on a multiple of 15 times future earnings when performance fees are stripped out. However, Man has been able to pocket these fees fairly regularly and, if they are included, the multiple comes down to seemingly very manageable 12. Man has had a rocky ride, but it is time to tuck in for future growth. Buy.

Comments