LONDON Hedge fund manager Man Group Plc reported a sharp fall in net inflows in the second quarter and its chief executive said on Friday he was cautious on the outlook for the rest of the year, sending its shares sharply lower.
Man, whose shares have collapsed to a fraction of their 2008 peak, has been restructuring to reduce dependence on the computer-driven AHL fund that took a heavy battering from the fallout from the financial crisis which began six years ago.
However the company, which is buying asset managers Numeric and Pine Grove to increase its presence in the United States, remains at the mercy of unpredictable market volatility from factors such as tensions in Ukraine.
Man said funds under management (FuM) rose 7 percent to $57.7 billion in the first half, helped by net inflows of $2.8 billion. But net inflows in the June quarter plunged to $800 million, a 60 percent drop from the previous three months.
"Whilst it has been a positive first half for the firm and we recorded another quarter of net inflows in Q2, we remain cautious as we look to the second half of the year," said Chief Executive Manny Roman in a statement.
While the group, is on course to reduce dependence on its AHL funds and strengthen its business in the United States, the world's biggest market for hedge funds, a dip in margins in the second half also weighed on the stock.
The group's net margin was down to 121 basis points in the first half from 150 basis points at the end of last year.
"Management was a bit downbeat on the flows in the second half and also the revenue margins going forward," said David Mccann, an analyst at brokerage Numis Securities.
The continued volatile market environment, fueled by a debt default by Argentina for the second time in 12 years, also helped pressure Man stock.
At 0853 GMT, the shares were trading down 4.3 percent, extending a decline from a more than 12-month peak set earlier this week, against a 1.3 percent fall in the FTSE midcap 250 Index. The shares had risen 40 percent in the first half of 2014.
Man also said a majority of its GLG alternatives funds, which aim to profit in both rising and falling markets, had lost money in the June quarter. They raised significantly less money than in the first quarter, raising concerns that flows may slow there in coming quarters.
The company's "long-only" products, which unlike the GLG alternative funds do not make active bets on prices falling, saw funds under management rise 18 percent to $18.1 billion on net inflows of $2.4 billion in the six months to end-June. However these are lower-margin products.
"This product mix shift and consequent reduction in overall margin is likely to continue as we sell more open-ended alternative product, particularly to institutions," Man said.
The GLG unit recorded positive performance in credit strategies, but equity strategies had a below-average performance on trend reversals in certain parts of the equity market, Man said in a statement.
Group adjusted profit before tax rose by a tenth to $148 million as a result of cost savings, but both management and performance fees fell in the first half from a year ago period.
The money manager said it would pay an interim dividend of 4 cents per share, up from 2.6 cents a year ago, and said the acquisition of Pine Grove, a U.S. fund of fund manager, was due to complete shortly.
The acquisition of Numeric, a U.S.-based quant manager that supplements its AHL strategies with $14.7 billion of FuM, is also on track for completion the second half of the year.
(Editing by David Holmes)