Man Group Plc (EMG), the world’s biggest publicly traded hedge fund manager, jumped the most in a year in London trading after saying it plans to redeem all debt and may buy back shares.
Repurchasing the debt will reduce surplus capital by as much as $470 million, leaving the company with about $450 million by January 2014, Man Group said in a statement today. The firm may use the remainder to “benefit” investors through stock buy-backs, special dividends or takeovers, Chief Executive Officer Emmanuel Roman said.
“We will look at the three options and do what makes the most sense,” Roman, 49, told reporters on a conference call.
After taking the reins in February, Roman is trying to appease shareholders who have seen the stock slide 61 percent since the end of 2010. London-based Man Group said today clients pulled a net $3.7 billion from the firm’s investment funds in the first quarter, the seventh consecutive quarterly outflow.
The stock jumped 13 percent to 120 pence, the biggest increase since April 2012, for a market value of about 2.2 billion pounds ($3.4 billion).
The Financial Conduct Authority in April approved a regulatory change that almost tripled Man’s surplus capital. Calling or redeeming all Tier 1 hybrid, Tier 2 and senior debt will lead to about $78 million of savings in annual interest charges, the company said today.
Redemptions from Man Group’s funds reduced assets under management by 3.8 percent to $54.8 billion over the first three months of the year, the company said in a statement. That was in line with the $3.8 billion estimate of Peter Lenardos, an analyst RBC Capital Markets who rates Man Group a perform.
Roman is trying to reduce outflows by overhauling Man Group’s fund management teams and adding more investment products tied to AHL Diversified, the company’s biggest fund. The stock has advanced 37 percent in 2013 after the $14 billion AHL pool reversed losses suffered over the previous two years.
“We have seen a somewhat more stable market environment” that contributed to “solid investment performance,” Roman said. “However, this was a disappointing quarter from a flows perspective with sales at a similar level to the previous quarter and increased redemptions, chiefly due to the loss of three sizeable low-margin mandates.”
AHL, which relies on computer algorithms to spot profitable trends in the prices of stocks, currencies and oil, has risen 9.9 percent this year through April 29, boosted by the fall of the Japanese yen and rising equity values, according to data compiled by Bloomberg.
Hedge funds tied to AHL are now 3 percent on average below their high-water marks, the level at which Man Group can charge lucrative performance fees for positive investment performance, Lenardos said in a note to clients.
Investors pulled money from AHL after it underperformed rivals in 2011 and 2012. So-called trend-following hedge funds were hurt over the past two years as markets swung based on investors’ optimism or pessimism about the European sovereign- debt crisis.
The slide in Man Group’s stock over the past two years prompted the company to remove former CEO Peter Clarke and replace him with Roman, who had been chief operating officer.
Roman joined Man Group in 2010 as part of the company’s $1.6 billion acquisition of GLG Partners Inc., a London-based hedge fund and investment firm. Man Group wrote down the value of GLG by $746 million last year after determining that the outlook for the unit’s asset growth had worsened, according to a February statement.
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