ii view: hedgie Man Group suffers under Covid-19

Assets under management have fallen at the hedge fund firm but the dividend survives. 

First-quarter trading update to 31 March 2020

• Funds under management (FUM) down 11.5% to $104.2 billion
• Negative investment movement of $10.7 billion
• 2019 final dividend & share buybacks proceeding as planned

Chief executive Luke Ellis said:

"Given the extreme volatility in all markets, we are pleased to have outperformed peers on an asset weighted basis across the firm by 2.5% in the first quarter, and to see our absolute return strategies make gains for clients despite the large sell off seen. We saw net inflows in the quarter and continue to win mandates but we have seen a recent increase in redemptions as clients adjust their allocations in response to the market moves and heightened economic uncertainty.

"Our balance sheet and liquidity position remain robust, and we will proceed with our dividend as announced and continue with our share buyback as planned."

ii round-up:

UK hedge fund manager Man Group (LSE:EMG) today reported an 11.5% drop in assets under management to $104.2 billion (£83.4 billion) as the corona crisis hit. 

The quarterly update, coming a day after announcements from fellow asset managers Schroders (LSE:SDR) and Ashmore (LSE:ASHM), highlighted a $10.7 billion fall in investment performance, more than the $10.1 billion gain made over 2019. 

Man shares rose by more than 6% in early afternoon trade, aided by gains across European stock markets as hopes of drugs to help combat Covid-19 rose

The group, whose funds include long-only computer-driven and discretionary strategies, has seen its shares year-to-date give back the near 20% gain made last year. 

Investment losses suffered by its clients over the quarter came almost entirely from its long-only positioned funds, with funds pursuing hedge or alternative strategies flat to marginally lower.

Net inflows of $0.5 billion of client monies over the quarter helped compensate for a net outflow of $1.3 billion over 2019.

A total of $570 million of net financial assets including $253 million of cash were held as of 31 March, with previously announced dividend payments and share buybacks still continuing.    

ii view:

With a history dating back to 1783, Man Group today has 15 international offices outside of its London headquarters. It operates across multiple jurisdictions. 

An ultra-low interest rate environment pushing investors away from cash and into other assets looks to provide a supportive backdrop for all asset managers. Man’s differing styles of management have helped set it apart from other asset managers. 

In addition, the hunt for income by investors and the massive asset buying programmes being executed by central banks following the financial crisis, and now reactivated under Covid-19, are all supportive of the asset management industry. 

But despite these trends remaining, a shutdown of economies under lockdown now sees horrid economic data battling vast government and central bank support schemes. In all, a dividend yield of over 5% needs to be weighed against asset managers' broad gearing toward the direction of markets, with some caution clearly warranted.  

Positives: 

• Ongoing share buy-back programme and dividend payment
• Managing costs and diversifying product offering

Negatives:

• Factors outside of its control such as foreign exchange movements can hinder performance 
• Dividend payment linked to adjusted management fee EPS which can fluctuate

The average rating of stock market analysts:

Buy