ii view: Man Group outlook disappoints

First-quarter trading update to 31 March

ii round-up:

Hedge fund manager Man Group (LSE:EMG) today detailed a gain in assets under management (AUM) compared to the previous quarter, driven by a net inflow of funds.

First-quarter AUM totalled $172.6 billion as at 31 March, up from $168.3 billion on 31 December, boosted by demand for the group’s long-only discretionary funds. The City had expected an AUM of $171 billion. 

However, following recent market turbulence, Man estimated an AUM of $167 billion as at 14 April. That is estimated by the company to generate net management fees of $1,020 million in 2025, below analysts' hopes of $1,079 million.

Shares in the FTSE 250 company fell 2% in UK trading having come into this latest news down by around a quarter year-to-date. That’s far worse than falls of under 5% for more traditional fund manager rivals M&G Ordinary Shares (LSE:MNG) and Schroders (LSE:SDR). The FTSE 250 index itself is down 7% so far this year.

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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 inflow of $3.6 billion during the quarter was all into long-only funds, which generate lower profit margins than their alternative fund counterparts.

A $1.5 billion investment loss for alternative funds contrasted with a $0.4 billion quarterly gain for the long-only funds.

On a year-over-year basis, total AUM had fallen from $175.7 billion to $172.6 billion.  

First-half results are likely to be announced mid-to-late July. 

ii view:

Man Group has a history dating back over 200 years. Today, and with more than 25 years of experience in global investment management, it employs over 1,700 people. Management believes 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 has fallen on a year-over-year basis, while a forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap.  

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More favourably, 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 $867 million as of late December, while shareholder returns have included periodic share buybacks. 

Man Group shares have had a terrible month and now sit at multi-year lows, so investors are clearly not seeing a buy case here, despite the positive analyst consensus view. However, patient investors who like big dividend yields and those willing to back a recovery from a low share price, might add Man to their watch list.

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