Man Group Surges After Profit Beats Estimates on Higher Fees

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Man Group Plc, the world’s largest publicly traded hedge fund firm, reported profit for the first half that beat analysts’ expectations as performance fees almost doubled. The shares jumped.

Adjusted pretax profit rose to $280 million from $148 million a year earlier, the London-based firm said on Wednesday. That exceeded the $220 million average estimate of seven analysts in a Bloomberg survey.

“Man delivers,” said Peter Lenardos at RBC Capital Markets in London, adding that earnings were “well ahead of our above-consensus forecasts.”

Man Group is among hedge fund firms seeking to boost earnings as the crisis in Greece and a selloff in China hurt returns for the industry. The HFRX Global Hedge Fund Index, which measures asset-weighted performance across funds around the world, rose 0.7 percent this year compared with gains of 2.4 percent for the MSCI World Index of stocks.

Revenue from performance fees climbed to $200 million from $101 million in the first six months of 2014, spurred by a more than twofold increase for the main AHL unit, the majority of which was earned in the first quarter, Man Group said.

The shares advanced as much as 8.5 percent in London trading and gained 8.3 percent to 163.6 pence at 12:22 p.m., valuing the company at 2.8 billion pounds ($4.3 billion).

Man Group said it will pay an interim dividend for 2015 of 5.4 cents a share compared with 4 cents a year earlier.

Japan Effect

The company posted an increase in profit even as net outflows from its funds totaled $1.3 billion in the three months to June, a second consecutive quarter of withdrawals. Redemptions of $7.6 billion offset sales of $6.3 billion.

Flows for the half were skewed by $3.4 billion of redemptions from the Japan CoreAlpha fund, Chief Executive Officer Emmanuel Roman, 51, said in the statement. “Some investors redeemed following a long period of strong absolute and relative performance.”

The main AHL Diversified fund dropped 6.4 percent in the first six months, Man Group said. AHL Alpha, which trades derivatives, declined 2.8 percent, while AHL Evolution rose 2.5 percent and AHL Dimension climbed 0.5 percent.

Roman said the firm saw “solid flows” into quant funds, which use computer models to trade securities, including one large institutional mandate into the AHL unit.

“Elsewhere investor appetite remained muted,” he said. “Markets remain very challenging and accordingly we remain cautious in our outlook for the remainder of the year.”

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