Man Group's revival hinges on flagship fund
LONDON (Reuters) - Man Group (EMG.L), trying to turn around the fortunes of its flagship fund AHL, will report its first set of results under new CEO Emmanuel Roman on Thursday.
Man, with $60 billion in assets, is trying to stem persistent client withdrawals and reverse the poor fund performance that has contributed to a fall in its share price by around two-thirds since the start of 2011.
Hopes of a rebound at Man have been triggered by the departure of CEO Peter Clarke and appointment of Roman, who takes over on Thursday. The change at the top plus more buoyant market sentiment have helped to drive a 42 percent rise in the shares since mid-November.
Roman was CEO of hedge fund GLG which Man bought in 2010 partly to try and diversify away from AHL.
The group may report a goodwill write-off in its results of between $500 million and $1 billion, according to RBC Capital Markets, primarily on GLG, which it bought for $1.6 billion.
Roman has already made some changes, promoting Sandy Rattray, head of the Systematic Strategies Unit, to be the new head of AHL, replacing Tim Wong, while Luke Ellis, head of fund of funds unit FRM, has become Man's president.
But this has not fully addressed analyst concerns about the poor performance of AHL, a $16.3 billion computer fund named after 1980s founders Michael Adam, David Harding and Martin Lueck, which has been performing poorly.
"It (the reshuffle) doesn't address, at least in the short term, the fundamental problem, which is AHL," said Numis analyst David McCann, who rates the shares a sell.
In 2011, around 70 percent of Man's 2011 revenues came from AHL. Numis said it would become increasingly difficult to sell AHL funds to investors unless performance improves.
After losing money in three out of the past four years the fund would have to return almost 12 percent this year for its five-year track record - which is bolstered by strong returns during 2008's market turmoil - to stay positive.
"It made a lot of money in October (2008). Once that's popped out it's going to look pretty lacklustre on a five-year view," Numis's McCann said.
Last summer, Man embarked on a further $100 million a year of cost cuts, its third wave of savings since its controversial acquisition of rival GLG and its first move under finance director Jonathan Sorrell, son of WPP (WPP.L) chief executive Martin Sorrell, appointed in June.
Despite the changes, the firm has had net customer outflows in every quarter over the four years to September 2012, apart from two quarters in the first half of 2011.
RBC Capital Markets analyst Peter Lenardos forecast that Man is set to report that outflows accelerated to $3.1 billion in the fourth quarter.
(Reporting by Laurence Fletcher. Editing by Jane Merriman)