Man Group Posts Strong Results Despite Futures Vol

LONDON ( Group plc* reported strong sales and good performance for the first quarter of the year, with assets under management now exceeding US$25 billion up from US$23 billion at the end of 2002.

Of this total, US$11.2 billion is in RMF Investment Group, the Swiss firm fund of funds firm Man acquired last year Previous HedgeWorld Story. RMF sales since the acquisition were US$1.8 billion. Results for Man Group as a whole at the end of this month will be significantly ahead of market expectations, the company stated.

Sales are stronger than expected, confirmed Joanna Nader, a Lehman Brothers International analyst who does equity research on Man Group. She upgraded her forecast yesterday, increasing the target price for Man shares to 1,400 pence (US$22) from 1,350 pence. By contrast, the market price was fluctuating around 965 pence today.

"Despite strong relative performance, we continue to regard the Man Group shares as substantially undervalued," Ms. Nader wrote in yesterday's company update. She revised her forecasts upward for both management and performance fees, partly reflecting higher anticipated fund sales and slightly lower redemptions.

"As an asset class hedge funds should continue to have a bright future, with Man one of a small number of hedge fund providers with a high likelihood of sustaining a leading position as the industry matures," according to the update. Lehman Brothers will issue another revision on Man Group tomorrow, to take account of today's report from the company.

War Troubles

The positive overall picture emerged in spite of heavy losses at the company's AHL managed futures business in the past couple of weeks. AHL Diversified Futures fund lost more than 10% in the second week of March and then another 3.6% last week. The sudden trend reversal in many markets, caused by the Iraq war, has hit other futures managers as well.

That is to be expected in such volatile markets, Ms. Nader commented. "I don't think it means anything about AHL," she said. AHL returns were very robust until March, topping 30% in the 12 months ending Feb. 28.

She expects that an educational process will help people better understand Man's unique business model. Shares of other public hedge fund companies also have been substantially undervalued .

AHL, once Man's main business, now represents less then one-fourth of the company's assets due to the growing importance of hedge fund of funds operations RMF and Chicago-based Glenwood, but it still accounts for a large share of fees.

*Man Group plc is a minority investor in HedgeWorld.

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