UPDATE 3-Man Group says client exits slowing, unveils buyback

Thu Nov 3, 2011 5:42am EDT

Related Topics

* Assets under management $63.5 bln at end-Oct

* Says redemptions lower in Oct than in Sept

* Announces $150 mln share buyback plan, shares up 2.6 pct

* Pretax profit $154 mln, above earlier estimate of $145 mln

By Laurence Fletcher

LONDON, Nov 3 (Reuters) - Man Group Plc , the world's largest listed hedge fund manager, saw clients pull out cash at a slower pace in October than September, raising hopes it may be able to staunch withdrawals in spite of the euro zone's deepening debt crisis.

Man said assets under management -- on which fund firms earn fees -- fell by $1 billion to $63.5 billion in October, driven by poor performance of its flagship AHL fund. It declined to say exactly how much money investors had pulled out.

In September, Man shocked investors with news that clients pulled out money at the fastest pace since early 2009, principally from its GLG unit, sending its shares plunging 25 percent in a single day.

"The retail investor... who wanted to get out is now out," Chief Executive Peter Clarke said on a call with journalists. "When investor sentiment settles we'll be extremely well placed to pick up capital... There's an enormous amount of money on the sidelines ready to be (committed)."

At 0923 GMT Man shares, which have almost halved since the GLG deal closed a little over a year ago, were up 5.2 percent at 148.6 pence, while the FTSE 100 was up 0.3 percent.

Clarke, who replaced hedge fund industry 'godfather' Stanley Fink as CEO in 2007, said in a statement that he expected investor appetite to remain "subdued whilst markets remain volatile and uncertain".

Last month Luke Ellis, Man's head of multi-manager, said investors are likely to pull money out of hedge funds in the fourth quarter.

"(In October) certainly equity markets had a more solid feel to them, which helped some GLG strategies. (Retail investors) felt a bit more solid," Clarke added on the press call.

ANALYST IRE

September's shock outflows revived debate over the merits of its $1.6 billion 2010 takeover of manager-driven GLG and its fit with Man's long-established computer-driven AHL fund.

However, despite October's slowdown in outflows, some analysts were unconvinced.

Peel Hunt analyst Mark Williamson, who rated Man as one of his top picks in the fund management sector at the start of the year, told clients in a note that he had "lost all conviction" in the stock.

"Let's not split hairs, the recommendation has been a dog and I am truly sorry," he said. "At present I consider that the investment risks are just too high and therefore would not touch it."

Barclays analyst Daniel Garrod said recent share price underperformance offers a buying opportunity but added: "We estimate that GLG is currently loss-making and AHL contributes almost all of the group's profits."

Man, which has $1 billion of regulatory capital surplus, also announced a share buyback of up to $150 million by the end of the year, in an effort to placate frustrated investors and put a floor under its sagging market value.

Clarke said the group would announce full plans for the rest of its regulatory capital in March.

Meanwhile AHL, the $24.4 billion fund named after 1980s founders Michael Adam, David Harding and Martin Lueck, is now on average around 11 percent away from its so-called high-water mark, the level above which it earns lucrative performance fees.

Man also said pretax profit for the six months through September was $154 million, above its earlier estimate of $145 million.

It also announced a final dividend of 7 cents per share to give a total dividend, pro-rated for the nine month period, of 16.5 cents per share.

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