London (HedgeWorld.com)--Man Group, the world's biggest listed hedge fund operator, saw its shares rise 3% after it beat market expectations with a 51% rise in year-to-March 31 pre-tax earnings to $1.306 billion. The strong earnings growth was in tandem with a rise to around $54 billion in current assets under management from the $48 billion Man Group estimated in a trading statement released two months ago.
"With positive performance across our core managers over the two month period since year end, and an exciting range of new product launches in the pipeline, momentum in asset raising looks set to continue," Stanley Fink, chief executive said in a statement. "This positive performance has also generated substantial performance fee income across the first two months of the current year."
Separately, Mr. Fink said that he expects hedge fund assets to grow between 15% and 20% in 2006. The industry is currently estimated to manage around $1.5 trillion in assets.
The upbeat comments and strong performance helped Man Group stock rise over 4% to 2450p before an early afternoon sell off in the London market reduced the stock to 2403p, up 2.7%. The result also led Credit Suisse, in a note entitled 'Asset gathering machine' to raise its 12-month target price to 2800p from 2670p. This was on the back of a 6.2% upgrade in year-to-March 2007 ex-performance fee earnings per shares to $2.65.
On the acquisition of Refco for $323 million in November 2005, Man Group said: "The integration ?? 1/2 is running on track in terms of cost and timing, and the acquired activities are performing ahead of expectations. Activity levels remain high across the markets and volumes are strong."
Recurring net management fee income grew 18% to $700 million. Excluding Refco, which recorded a small loss, Man Group said brokerage profits jumped 20% to $177 million. Net performance fee income soared to $450 million from $119 million in fiscal 2005.
The volatile trading conditions in equity markets during May saw Man Group shares dip sharply from the record high of ?? 1/2 27.63 recorded in April. Today's gains continue the rebound in the stock since it fell to a three month low of ?? 1/2 21.23 in late-May.
Credit Suisse noted that "the strong investment performance in April was greater than any losses in May." The investment bank added: "Man group's focus on market neutral managers and limited exposure to long/short equity and emerging markets managers has somewhat insulated it here."
However, some market watchers express concern about the prospects for the flagship AHL Fund in volatile markets. It uses computer programs to deal in bonds, commodities, stocks and futures, and had lost 5.79% in the second and third week of May before recovering 0.31% in the last week of the month.
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