Man Group reported a jump in assets and better-than-expected profits, as a big fundraising in Japan helped the world's largest listed hedge fund firm accelerate its belated recovery from the credit crisis. The firm - which now runs $71 billion in client assets, up 3 percent since March - attracted $2 billion alone for a new open-ended version of its flagship AHL fund in Japan, signalling a sharp rebound in confidence in Man's computer-led strategies.
The fundraising is above the $1.5 billion it said it had raised, which had smashed analysts' forecasts, and comes despite poor returns from AHL this month after a sell-off in commodity markets. "The strong fund flow momentum since year-end is a clear positive," Citi analysts said in a note, while pointing out that "unsustainable" factors had driven the forecast-beating profits.
Man Group shares were trading up 3.4 percent at 247.2 pence at 1024 GMT, among the top risers ahead in the FTSE 100 index, which was up 0.5 percent at the same time. "The phenomenal success of the Japan AHL launch demonstrates the concerns people had around the ... earthquake and ... tsunami around our asset-raising were completely unfounded," Man's CEO Peter Clarke said on a call to journalists.
Man Group said in March that clients had finally begun to return to its funds, helped by last year's $1.6 billion acquisition of GLG, ending a two-year streak of net outflows. In contrast the hedge fund industry began to see clients return as early as 2009, and this year saw total assets balloon above $2 trillion for the first time, according to Hedge Fund Research.
Yet data from hedge fund services firm GlobeOp this month indicated investor jitters had not entirely disappeared, after hedge funds saw an increase in the volume of redemption requests in the wake of the commodities sell-off. AHL, a "blackbox" fund named after 1980s founders Michael Adam, David Harding and Martin Lueck, is down 6 percent since May 2, after the commodity sell-off, and has fallen to end-March levels.
This takes the fund to around 12 percent, on average, below its so-called high-water mark, above which it can earn performance fees. Clarke said he didn't expect "recent performance to have any impact on immediate sales". Pretax profit for the year was $599 million, above Man's March forecast of $560 million, boosted by a rise in performance fees after strong returns from AHL in March and accounting adjustments.
However, management fee margins fell to 277 basis points from 304 basis points as sales of open-ended funds diluted margins from more lucrative guaranteed products. Clarke added that sales in the Middle East, Latin America and parts of Europe helped it raise $400 million from the launch of its first guaranteed fund to combine AHL and GLG funds. The firm is also launching an emerging markets currency fund, from which Clarke expects "a significant result". This month Clarke said the firm plans to expand the number of fund managers based in Asia.
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