ii view: Man Group in favour again

Fund differentiation and dividend yield above 6% have investors looking again at this asset manager. 

Third-quarter trading to 30 September

• Assets under management up 4.4% from previous quarter to $113.1 billion
• Net inflows of $1.7 billion
• Positive investment performance of $1.7 billion

Chief executive Luke Ellis said:

"We are pleased to report good performance in the third quarter and strong growth in funds under management. Engagement with clients remains good, although there is increasing uncertainty due to upcoming political events and current Covid-19 trends.

"Our diversified range of strategies, our people and technology and a sustainable business model, underpinned by our strong and liquid balance sheet, allow us to manage the firm for the long term."

ii round-up:

UK hedge fund manager Man Group (LSE:EMG) reported a 4.4% gain in Assets Under Management (AUM), as markets recovered from pandemic induced lows and clients sought to prosper from its alternative fund strategies. 

AUM rose to $113.1 billion in late September from $108.3 billion in late June, pushed higher by $1.7 billion of both fund inflows and investment gains along with a tailwind from currency movements. The increase surpassed analyst forecasts of rise in assets to around $111 billion.

Man Group shares rose by more than 5% in UK trading, leaving them down around a fifth so far in 2020. The update came in contrast to rival fund manager Jupiter (LSE:JUP) which reported a £1 billion outflow of funds. Its shares fell by more than 1.5% in early trading and are down by over 40% in 2020.

Man’s $113.1 billion of managed funds are split between $72.4 billion or 64% of the total pursuing alternative investment strategies. And the balance of $40.7 billion managed on a more traditional long-only or buy and hold basis. 

Overall gains made by both alternative and long-only assets were made relatively evenly, with each up around 4% during the quarter. 

In mid-September, Man announced a new share buyback programme of $100 million. Dividend payments have to date continued, with first-half results seeing it declare a payment of 4.9 US cents per share (3.7p), up from the 4.7 cents interim payment made in 2019.  

Full-year results to 31 December are scheduled for 26 February. 

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 also help it stand out from other investment managers. 

For investors, the Covid clouded outlook and impact on global stock markets over coming months cannot be ignored. A return to March lows if vaccine hopes were to fade would likely see AUM reducing, potentially weighing on the share price. But Man shares trade on a forward 2021 price/earnings ratio of about eight times compared to broader European managers at around 12 times. An estimated forward dividend yield of over 6% is also tough to ignore in the current low interest rate environment. In all, those investors taking a higher risk long-term approach might be prepared to take advantage of current weakness. 

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:

Strong hold