ii view: Man Group shares surge near to 10-year high

Record funds under management and a forecast dividend yield of over 4.5%. Buy, sell or hold? 

Third-quarter trading to 30 September

• Funds under management (FUM) up 3% from previous quarter to $139.5 billion (£102 billion)

Chief executive Luke Ellis said:

"We are pleased to report a further increase in funds under management in the third quarter, reaching a new peak of $139.5 billion driven by very strong net inflows of $5.3 billion and solid investment performance for our clients.

“We continue to invest in our talent and technology, which underpin our growth and ability to deliver superior risk-adjusted investment performance for our clients and generate value for our shareholders."

ii round-up:

UK hedge fund manager Man Group (LSE:EMG) today detailed a strong inflow of $5.3 billion (£3.87 billion) to take its funds under management (FUM) to a record $139.5 billion at the end of September. 

That’s up 3% on the end of the second quarter and compares to analyst expectations of a fund inflow nearer to $2 billion. 

Man Group shares rose by more than 7% in UK trading, bringing the gain in its shares since pandemic induced market lows back in March 2020 to almost 100%. Shares for larger rival fund managers Schroders (LSE:SDR) and abrdn (LSE:ABDN) are up by around 57% and 45% respectively.

Cash inflows into Man’s alternative funds led the way, with its total return funds adding $2.6 billion in new monies and its absolute return funds a further $2.1 billion. 

Man Group’s managed funds are split roughly 60:40 between alternative investment strategies, some with the ability to go short, and more traditional long-only, or buy and hold funds. 

A positive investment performance of $0.4 billion during the quarter also contributed to the overall rise in FUM, with its alternative funds gaining by $0.5 billion and its long-only funds losing by $0.1 billion. Currency and other moves contributed towards a $1.5 billion loss in fund value during the period. 

Accompanying management outlook comments pointed to positive momentum continuing into the fourth quarter with a high level of institutional client engagement.

Results for the full year to 31 December are scheduled for 1 March. 

ii view:

The company has a history dating back over 200 years. Today it has more than 25 years of experience in global investment management. Institutional investors contribute around four-fifths of its funds under management. 

For investors, elevated inflation and concerns about interest rates rising sooner and faster than expected offers a broadly cautious backdrop. Moves to low-cost ETFs and high levels of competition across the asset management sector also need to be remembered. 

But an ultra-low interest rate environment pushing investors away from cash and into other assets has been supportive for all asset managers. And product variation and the use of computers to help manage Man's active funds helps set it apart from some rivals. A discounted valuation to traditional European asset managers is also attractive, while an ongoing share buyback programme offers support. In all, and with the shares sat on an estimated dividend yield of over 4.5%, investors are likely to stay interested. However, it is worth noting that the shares have, historically, struggled to make a break above 220p stick. It will be significant if they can do it this time. 

Positives: 

• Ongoing share buy-back programme
• Attractive dividend yield (not guaranteed)

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