Man Group ends run of client exits with $700 million net inflow
LONDON (Reuters) - Hedge fund firm Man Group ended two years of client withdrawals with a surprise inflow of new money in the third quarter, helped by strong performance from its stock-picking GLG unit as equity markets rallied this year.
But the former FTSE 100 firm, whose clients have drawn down cash for the previous eight consecutive quarters, remained cautious in its outlook for asset flows due to "continued uncertainty in the macro-economic environment", CEO Manny Roman said.
The firm, one of the world's biggest hedge fund managers, reported net inflows of $700 million (436 million pounds) during the three months to end-September, lifting total assets to $52.5 billion.
Roman said the inflows were driven by large allocations from institutional investors into relatively low margin funds.
Clients, particularly Asian retail investors, continued to pull money out of $10.2 billion flagship computer-driven fund AHL, which is down 8.5 percent in performance terms in the first nine months of the year.
RBC Capital Markets analyst Peter Lenardos said Thursday's statement was "a step in the right direction" but added there is "a very long way to go".
"Our negative stance on Man Group (EMG.L) is unchanged. We believe the net inflow was a one-off driven by flows from price-sensitive customers into lower-margin products."
Man's shares, which are down sharply since late May after AHL was hit by a sell-off in bond and equity markets, were up 3.1 percent at 85.4 pence at 8:26 a.m. on Thursday.
Roman, who took over as chief executive from Peter Clarke earlier this year, has made a raft of management changes as he tries to revive Man's fortunes and win back clients.
Man clients had pulled out money in every quarter since the final quarter of 2008 - the epicentre of the credit crisis - apart from two quarters of inflows in the first half of 2011.
In August the firm posted lower-than-forecast client outflows, lifting its shares.
The firm said on Thursday it is taking a restructuring charge of around $90 million relating to savings announced in August. This consists of $60 million to write-off its future lease and other charges as it sub-lets part of its headquarters by London's River Thames, and around $30 million in redundancy provisions.
Analysts at Numis were less than satisfied with the bounce in net inflows.
"We remain sellers as AHL still accounts for the majority of recurring profit, it has performed poorly for the last 1, 3 and 5 years," David McCann said in a note to clients.
"We think management have only limited options in the short to medium term given these issues and actions already taken."
After losing money in three out of the past four years, AHL 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.
At the end of September AHL was on average around 17.7 percent below its so-called high-water mark - the level above which it can earn lucrative performance fees.
Roman also said on a call to investors and analysts that "you're going to see stocks a hell of a lot lower" if down-to-the-wire U.S. debt negotiations are repeated every three months.
(Editing by Sinead Cruise and David Cowell)