Man Group Jumps Most in Six Years After Net Inflows Surprise

  • Net inflows, assets under management beat analysts’ forecasts
  • Man Group buys company managing real estate equity and debt

Man Group Plc, the world’s largest publicly traded hedge-fund firm, climbed the most in almost six years in London after third-quarter net inflows beat estimates as investors poured money into its quantitative funds.

Net inflows were $1.3 billion in the period as investors allocated money to Man Group’s computer-driven hedged and long-only funds, the firm said in a statement on Friday. Sales of $6 billion exceeded $4.7 billion in redemptions. Investment performance added $2.5 billion during the quarter, boosting assets under management to $80.7 billion from $76.4 billion at the end of June.

“The shares are cheap and the business is performing better than anticipated, so the large share price increase at the open is warranted and has further room to run,” said Peter Lenardos, an analyst at RBC Capital Markets with an outperform rating on the shares. There was “stronger than anticipated organic growth in terms of ongoing net inflows," he said.

Flows into Man Group’s funds contrasts with a net $51.7 billion pulled from the global hedge funds industry through August this year, according to data from eVestment. Man Group is riding a wave of investors’ interest in quantitative hedge funds, with mathematical model-driven managed futures funds raising $20.3 billion in the first eight months of the year.

Hedge funds are recovering from their worst start to the year since the financial crisis, leading Dan Loeb’s Third Point LLC in April to describe it as a “catastrophic period.” Hedge funds returned almost 3 percent on average in the third quarter, their best quarterly performance since 2013, according to Hedge Fund Research Inc.

Luke Ellis, who replaced Emmanuel “Manny” Roman as chief executive officer of Man Group on Sept. 1, said during a call with analysts that he expects the flows to continue to be “lumpy.”

Man Group climbed as much as 16.8 percent in London, the biggest gain since November 2010, and was up 13.8 percent at 123.7 pence as of 12:33 p.m. That pared the decline for this year to 30 percent.

Net inflows were well ahead of Goldman Sachs analysts’ forecast of $500 million, while assets under management were 4.1 percent more than their estimate, according to a research note on Friday. Numis Securities Ltd. and RBC also said asset growth and net inflows beat their estimates.

Man Group also announced the purchase of Aalto Invest Holding AG, which oversees $1.7 billion and specializes in managing real estate equity and debt including direct investment in U.S. single-family homes and commercial and residential properties in Europe, the company said in a separate statement.

Man Group’s hedge funds added $500 million in net inflows, while a net $800 million flowed into its long-only funds that bet on asset prices rising. The GLG unit, which uses fundamental analysis to bet across asset classes, suffered $800 million in net outflows.

"The net inflows were driven largely by the appetite of institutional clients for our quant alternative and quant long only strategies," Ellis said in the statement.

The investment firm named Sandy Rattray its chief investment officer as part of a reshuffle last month and said Mark Jones will become chief financial officer after Jonathan Sorrell gives up the role.

Share Buyback

Man Group also announced a share buyback of up to $100 million over the next year and said it will continue to explore acquisition opportunities. Aalto will be a central part of the company’s Man Global Private Markets business that its creating to provide investors access to longer-term investments. It expects the acquisition to be completed in January.

"Man Group further signaled its willingness to deploy surplus capital by acquiring Aalto," Goldman Sachs Group Inc analysts Chris Turner and Vishal Agarwal said in a note. "Although there is no immediate EPS impact, we see this as supportive of flows and it further diversifies the group’s activities."

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