LONDON (HedgeWorld.com)–Detailed first quarter results for Man Group plc* indicate a fast-growing fund business that has succeeded in boosting profits despite a loss at its Man-Glenwood fund of funds unit.
Man Chief Executive Stanley Fink said at a presentation that clients are becoming more risk averse and, in response, the firm is increasing style diversity and reducing the targeted volatility of investment products. It also is continuing to reduce allocation to its futures manager AHL Diversified Futures because of the manager’s capacity constraint.
Regarding Man’s recent entry into the U.S. market Previous HedgeWorld Story, he said the product range is expected to expand. The firm has signed on 30 key intermediaries to market Man products in the United States and expects to conclude agreements with another 40. Mr. Fink added that new structured products probably would be developed for U.S. investors. These are likely to be privately placed, but there is a chance they could be registered.
Assets under management were more than US$26 billion as of March 31 and are estimated to be at US$28 billion currently, up from about US$23 billion at the end of 2002. Excluding RMF Investment Group, the Swiss fund of funds firm Man acquired last year Previous HedgeWorld Story, assets were US$15 billion, up 40% from 2002.
Of the US$26.1 billion, more than US$13.8 billion is in funds of funds while almost US$10 billion has been allocated to individual managers. The remainder, about US$2.3 billion, is in assets other than hedge funds, like high-yield bonds and convertibles. Mr. Fink said these were low margin businesses that are not expected to be a large source of future growth.
The firm’s diversified funds for private clients have done very well in the past 12 months. Man-AHL returned 31.7% and Man-IP 220 Ltd. was up by 27.6%, one year to March 31. The picture for institutional funds was not quite as bright during this period. RMF Four Seasons returned 5.7%, but Glenwood was down 1.9%. “Most hedge funds you allocate to have a positive correlation to the stock market,” Mr. Fink explained. The S&P 500 stock index lost almost 25% during the first quarter.
Asset management fee revenues showed substantial increases during the quarter. Net income from management fees was up 54% and income from performance fees rose by a hefty 108%.
Man shares were trading around 1,152 pence today. Although it has been rising in recent months, the stock is still undervalued according to a Lehman report that pegs the target price at 1,400 pence (US$22) Previous HedgeWorld Story.
*Man Group plc is a minority investor in HedgeWorld.