LONDON (Reuters) - Hedge fund firm Man Group announced a share buyback and bumped up its dividend on Thursday, sending its stock price soaring, after it drew more new investment in the last quarter of 2013 that help it beat full-year profit forecasts.
The results cap a year of upheaval at one of the world’s biggest hedge fund managers that saw it cut staff, replace a host of managers including the chief executive, and merge some strategies to boost the fund and company performance and stop clients taking their money elsewhere.
The company said it took in $700 million in fresh cash in the three months to December 31, matching a performance in the previous quarter that had broken two straight years of outflows.
Man announced a final dividend of 5.3 cents a share, taking the 2013 total to 7.9 cents, as well as a $115 million share buyback, and while it cautioned on a “challenging” outlook, investors piled in to send its shares up 11.1 percent by 9:41 a.m.
“It’s positive on the share repurchase and dividend with good flows in Q4, although the outlook is still uncertain,” RBC Capital Markets analyst Peter Lenardos said.
That uncertainty had been reflected by analyst ratings heading into the numbers, with 17 out of 21 views either “hold”, “sell” or “strong sell”, although more recent analyst revisions had been positive, Thomson Reuters data showed.
Man reported a mixed 2014 performance up to February 21, with several of its flagship computer-driven AHL strategies down, although its stock-picking GLG unit was doing better, with the European Equity Alternative strategy up 2.5 percent.
As at the end of January, nearly three-quarters of its performance fee-eligible GLG funds were above the high water mark - the level above which it can earn lucrative performance fees - and 20 percent were within 5 percent of performance fee highs.
Early demand to buy into Man shares was substantial, with traded volumes nearly twice the three-month daily average after less than half an hour of trade.
The second-half pick-up helped to slow the decline in full-year funds under management, down 5 percent to $54.1 billion, and lifted pretax profit 8 percent to $297 million, easily beating a consensus estimate of $228 million.
The delivery of some cost savings ahead of schedule and higher-than-expected second-half performance fees at GLG of $103 million had helped underpin the profit beat, analysts at Goldman Sachs said in a note.
Those two factors had meant second-half pretax profit was “materially stronger than we expected”, at $158 million against a forecast $73 million, they added.
Commenting on the results, Chief Executive Manny Roman said in a statement: “Investment performance in 2013 was reasonable on a relative basis and flows showed modest recovery towards the end of the year after a weaker first half.”
Editing by David Goodman and Hugh Lawson