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October 17, 2013 8:00 am
Man Group, the world’s second-largest hedge fund, has revealed an additional $90m in restructuring charges, with $30m set aside to dismiss staff over the course of the next three months – drawing out an already long and painful series of cutbacks.
Although the company reported stable assets under management, with a modest increase from $52bn to $52.5bn over the third quarter – beating analysts expectations of a further decline – performance for the company’s flagship hedge fund, the computer-driven AHL, was poor.
Shares in Man rose 2.6 per cent to 85p in early morning trading in London.
AHL lost 6.6 per cent over the past three months, putting it down 8.5 per cent for the year and taking it even further away from its critical “high watermark” – the point of peak performance past which it can charge its clients lucrative fees.
In just two years, AHL’s assets under management have halved, from just under $25bn in October 2011 to $12.5bn currently.
Performance at Man’s other largest division, GLG, was mixed but broadly more positive. The firm’s main “macro” fund, Atlas, lost just over 10 per cent in the third quarter, but equity-focused funds did well. The flagship GLG equity long/short fund rose 2.6 per cent putting it up 7.4 per cent for the year.
Overall, clients invested a further $700m in Man funds over the past quarter. While much of the inflow came from crucial institutional investors – a key target client base for Man as it reorients itself away from wealthy individuals towards longer term mandates – the company warned that most new money has gone to lower fee, lower margin funds.
“Despite better flows in the third quarter we remain cautious in our outlook for asset flows going forward in the light of continued uncertainty in the macroeconomic environment,” said chief executive Emmanuel Roman.
Analysts warned that the inflows were also unlikely to be easily repeatable without stronger performance.
“Our negative stance on Man Group is unchanged,” said Peter Lenardos, analyst at RBC in a note to clients on Thursday morning. “We believe the net inflow was a one-off driven by flows from price-sensitive customers into lower margin products.
“Our thesis is supported by Man’s cautious outlook that indicated that flows in Q3 were driven by stronger investment performance in H1, investment performance that has since moderated. The business mix continues to deteriorate.”
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