The shares of the largest hedge fund manager in the world, Man Group, fell on Tuesday after performance fees and profits plummeted.
Early afternoon, shares fell 7.4 percent after the group announced that fees for fund returns dropped by 92 percent to $32 million in the first six months of the year. This in turn affected pre-tax profit, which fell 65 per cent to $137mn.
The London-listed group’s assets under management grew by 6 per cent, to $152bn, in the six months ending June. This was slightly above analyst expectations.
The fees are lower partly because bets made on the direction of the market failed to materialize. But chief financial officer Antoine Forterre said they were after two “very good years”.
He said that “Q1 has been a little more difficult for certain of our strategies, but when we look at our current position, we see that most of our funds have returned to flat or slightly higher for the year.”
The truth is, clients are more interested in our long-term performance. This is how they evaluate us.
Around two thirds of Man Group’s $152bn in assets under management is managed by hedge funds, which employ strategies to try and make money both when the markets are up and down. The remaining third is in traditional long only strategies, which perform better when markets are rising.
Man Group hopes that a more volatile investing climate, as rates rise, will lure potential customers away popular index trackers towards its own funds.
Analysts at JPMorgan stated that the shares are still “attractive” due to a favorable price-to earnings ratio.
Numis analyst David McCann, however, said that the stock was not one to hold for a long time due to “volatile fees”, which undermine earnings.
Man Group has announced that it has acquired US specialist fund Varagon, which added $11.8bn of assets under management to the $3.2bn currently managed by its private credit business.
But Man is looking to expand its credit offerings and considers more acquisitions. Forterre said, “We’re still underweight but we believe that our larger clients will continue to spend more on credit.”
We will look into it if we find businesses with the same characteristics and strategies as Varagon. They should have a strong investment team with a proven track record of success, a positive culture, and the ability to cross-sell with clients.
He said that the company was “quite open and flexible” in its search for possible acquisitions, whether they were in the US or Europe.
Man Group’s strategy is to provide a single-stop shop for institutional investors. Man Group’s solutions division allows clients to create a customized portfolio that includes a combination of long-only managers and traditional equity hedge fund, quantitative hedge fund, and private credit.