Man Group Plc, the world’s largest publicly traded hedge-fund manager, surged after regulators approved a change that could more than double its surplus capital.
The shares rose 6.7 percent to 104.3 pence in London, marking a three-day gain of 18 percent. That’s the biggest increase since April 2009. They have risen 42 percent since the company announced in December that Emmanuel Roman would replace Peter Clarke as chief executive officer, giving the company a market value of 1.9 billion pounds ($2.9 billion).
Under a new regulatory status approved by the U.K.’s Financial Conduct Authority, Man Group has become a limited license group instead of a full-scale group, the London-based firm said in a statement today. The change may boost capital to as much as $920 million from $370 million by January, it said.
Moody’s Investors Service cut Man Group’s credit rating last year after its biggest hedge fund posted losses and clients pulled a net $16 billion from the company’s investment pools since the end of 2010. The capital increase will give the new CEO more time to try to improve investment performance and stem client outflows, said Peter Lenardos, an analyst at RBC Capital Markets in London.
“Man has resolved any risk of a debt downgrade, for which they would have been lowered to below investment grade,” said Lenardos, who has a sector perform on Man Group. “They also bought themselves a significant amount of time to stabilize and turn around the business.”
Man Group has submitted a revised assessment for how much capital it should hold to regulators after the FCA approved its switch to a limited license group, according to the statement. The change in status means it no longer has to hold a “capital planning buffer” of about $300 million, it said.
“This reduction has been possible primarily in light of the less balance sheet intensive nature of the company’s activities relative to earlier years,” it said.
Regulators are expected to review Man Group’s capital submission by the third quarter, which could “result in higher or lower capital requirements in the future,” the company said.
Man Group shares have been under pressure since Sept. 27, 2011, when the firm announced clients had begun pulling money amid losses at its biggest hedge fund, AHL Diversified. The board said on March 18 that “deteriorated company performance” was reflected by a 20 percent drop in assets under management to $55 billion since the end of 2011.
AHL, which relies on computer algorithms to trade markets ranging from currencies to oil, has gained 5.4 percent this year, benefiting from trends such as a decline in the Japanese yen, according to data compiled by Bloomberg. AHL fell 2.1 percent last year and 5.5 percent in 2011.