August 1, 2017 / 9:07 AM / 2 years ago

Hedge fund Man Group's assets jump in first half, flags slower second-half

LONDON (Reuters) - British hedge fund firm Man Group (EMG.L) said assets under management rose 19 percent in the first half of 2017, sending its shares higher on Tuesday, but cautioned growth was set to slow over the next six months.

Total assets under management at the end of June were $95.9 billion, up from $80.9 billion at the end of December, it said in a statement.

While the rise in assets boosted profits during the period, helped by the acquisition of real estate investment manager Aalto, which added $1.8 billion, its revenue margin had slipped after it won several large mandates at lower margins.

Fee pressure is part of a multi-year trend for hedge funds, with start-ups charging a management fee of 1.25 percent on average, well below the traditional 2 percent, according to a study by industry body AIMA and prime broker GPP.

“The first half was unusual in both the scale of net inflows, and the level of margin compression,” said Luke Ellis, Man Group Chief Executive.

“We would expect both to moderate in the second half, particularly given the uneven nature of institutional flows.”

Adjusted profit before tax increased by 48 percent to $145 million compared to the first six months of 2016, helping drive the share price up 4.4 percent to 167.1 pence at 0810 GMT.

The number of investors putting cash to work with hedge funds has been rising in 2017, with $55 billion allocated in the first half of the year, data from industry analyst Eurekahedge showed, after investors pulled $70 billion in the second half last year, the data showed.

Man Group’s long-only funds, which aim to profit when markets rise, and its alternatives strategies took in the majority of new assets, adding $4.5 billion and $3.7 billion, respectively, over the first six months.

The company’s flagship long-only fund, the emerging market debt total return fund, made 3.5 percent while its continental European equity strategy was up 13.6 percent.

Equities hedge fund managers grew assets by $23.5 billion overall in the first half of the year, with the average fund making 5.2 percent, Eurekahedge data showed.

The only strategy to lose money was the alternatives strategy at its stock-picking unit GLG, from which investors pulled $900 million during the same time period, although GLG’s long-only funds took in $3.5 billion in net new money.

“While the one negative is the level of revenue margin compression, it is our opinion that the company has been crystal clear on this point, as is evidenced by our 2017 net management fee forecast being almost exactly in line with company guidance,” said an analyst note from RBC.

Most of Man Group’s funds posted a positive performance with the exception of quantitative unit AHL, which racked up losses in three of its four funds.

Poor performance for AHL comes at a time when many other computer-driven trend-following strategies have been struggling, with the average fund down 3.5 percent, data from investment bank Societe Generale showed.

(The story corrects to read $3.5 billion, paragraph 12)

Reporting by Maiya Keidan; Editing by Rachel Armstrong/Keith Weir

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