* To use up to $470 mln to buy back debt
* Move will save up to $78 mln a year in interest, coupons
* Less shareholder hostility at AGM
* Clients withdrew a net $3.7 bln in Q1
* Company still has fundamental problems-analyst
(Updates with AGM results, analyst comments)
By Laurence Fletcher
LONDON, May 3 Hedge fund firm Man Group
cheered investors with plans to use surplus cash to buy back all
its debt securities, overshadowing a surge in client outflows to
the highest level since the onset of the credit crisis.
Man, which recently unlocked $550 million in capital when
its regulatory status was changed, will use up to $470 million
of cash to buy back the debt, saving up to $78 million a year in
interest and coupons from next year, it said on Friday.
At 1329 GMT Man's shares were up 11.8 percent. They are down
by around 60 percent since the start of 2011 on the back of
client outflows and poor fund performance.
The former FTSE 100 firm, whose new-look management faced
less hostility at Friday's annual general meeting (AGM) than a
year ago, said clients withdrew a net $3.7 billion during the
first quarter, slightly better than analysts had forecast.
"Whilst these savings (from the buyback) are clearly
beneficial to earnings in the short term, they do nothing to
address fundamental top line problems caused by poor
performance, weak flows and margin pressures," said Numis
analyst David McCann, who has a sell rating on the shares.
Man said open-ended funds in computer-driven flagship fund
AHL are around 4.5 percent away from the so-called 'high-water
mark', the point above which the firm can earn lucrative
In spite of a stronger recent performance from the $14.1
billion AHL fund - which has gained 10.4 percent so far this
year thanks to the re-emergence of the market trends from which
it can profit - Man's assets fell to $54.8 billion from $57
billion in December.
Other funds are performing well too. Evolution - a computer
fund that trades emerging markets and which contributes to AHL's
performance - is up more than 11 percent in April.
Meanwhile GLG Japan Core Alpha fund gained 24 percent in the
first quarter, as Japan's stock market rallied sharply on hopes
its aggressive economic policies would kick-start the economy.
"The debt tender programme and performance fee generation
... may indicate signs of stabilization in the business," said
RBC Capital Markets analyst Peter Lenardos in a note.
Shareholders at last year's AGM criticised the nearly $7
million pay package of then-CEO Peter Clarke.
New CEO Manny Roman, appointed in February to turn around
the fortunes of the company, has made a raft of changes,
including capping bonuses and appointing Sandy Rattray as head
Only 7 percent of shareholders failed to back Man's
remuneration report, compared with 15 percent a year ago.
But one small shareholder questioned whether Man may have to
take a further goodwill writedown on its $1.6 billion
acquisition of GLG in 2010, in addition to the $837 million
already written down, because the valuation still assumes GLG's
assets will grow by a compound annual rate of 8.5 percent.
"Is (Finance Director) Mr (Jonathan) Sorrell a genius for
having bamboozled the auditors ... or has he made a tremendous
error of judgment not taking the maximum write-off in one go?"
the shareholder said.
Man's outflows - the latest in a series stretching over
seven quarters - were predominantly driven by the loss of three
large, low-margin mandates, Roman said on Friday.
"Business conditions remain challenging for Man," he said.
"We remain cautious in our outlook as we will need a more
sustained period of performance, particularly from AHL, before
we see an improvement in net flows."
(Editing by Mark Potter and David Cowell)