ii view: outflows at hedge fund Man Group

Third-quarter trading update to 30 September

ii round-up:

Investment manager Man Group (LSE:EMG) today detailed a decline in assets under management (AUM) compared to the previous quarter, blamed on a single client in its systematic long-only fund.

Third-quarter AUM totalled $174.9 billion as of 30 September, down from $178.2 billion as of 30 June. That marginally missed City expectations for $175 billion. 

Shares in the FTSE 250 company fell 1% in UK trading having come into this latest news down around 8% year-to-date. That’s similar to rival M&G Ordinary Shares (LSE:MNG) and better than a 14% fall for industry giant Schroders (LSE:SDR). The FTSE 250 index is up 8%.  

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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 net outflow of $5.5 billion during the quarter included a previously highlighted client loss. An investment performance gain of $2.4 billion for its long-only funds outshone a $2 billion performance loss for the alternative focused funds.  

A 6.7% quarterly gain for its core Emerging Market fund contrasted with an 8.9% loss for the alternative strategy focused AHL Diversified fund. 

On a year-over-year basis, total AUM had risen from $161.2 billion as of the third quarter 2023 to the latest $174.9 billion.  

Broker UBS reiterated its ‘buy’ stance on the shares, 

ii view:

Man Group has a history dating back over 200 years. Today, headquartered at Riverbank House, London, it has more than 25 years of experience in global investment management. Bosses believe that technology will play a key role in the future of active management. Its commitment to research in this area is highlighted by a collaboration with the University of Oxford on machine learning techniques.  

For investors, the rise of AI is likely to see more rivals adopting computers to help manage money. Competition across the asset management industry remains intense. AUM have fallen during this latest period compared to the prior quarter, while costs for businesses generally, and including wages, are now elevated. 

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To the upside, product variation and the use of computers to help manage active funds help set it apart from rivals. Performance fees sit alongside more standard management fees. A robust balance sheet includes net tangible assets of $779 million as of late June, while shareholder returns have included periodic share buyback programmes. 

A forecast dividend yield of around 6% combined with a consensus analyst fair value estimate above 275p will likely keep fans of this differentiated fund manager loyal. However, the shares are trading just above the 200p level where they've previously found support, which is something for investors to be aware of. 

Positives: 

• Diversity of investment strategies
• Attractive dividend yield (not guaranteed)

Negatives:

• Intense industry competition 
• Foreign exchange movements can hinder 

The average rating of stock market analysts:

Buy