Hedge Fund Man Group's Assets at Record on Low-Cost ProductsBy
Large mandates with low margins boosted first-half inflows
Fund of funds, computer-driven investment attracted investors
Investors are falling in love with hedge funds again, just at a lower cost.
Man Group Plc, the world’s largest publicly traded hedge-fund firm, reported record assets under management on strong inflows and investment gains as the industry makes a comeback from years of mediocre performance. The London-based firm received net inflows of $8.2 billion in the first half as it won several large, low-margin mandates, according to a statement Tuesday.
“The first half was unusual in both the scale of net inflows, and the level of margin compression," Chief Executive Officer Luke Ellis said in the earnings statement. “We would expect both to moderate in the second half, particularly given the uneven nature of institutional flows."
Man Group is benefiting from a rise of investors’ interest in hedge funds. Investors are returning to bet on the industry after pulling $112 billion last year in a revolt against high fees and mediocre industry performance. Net inflows in the first six months of this year totaled almost $21 billion, according to eVestment.
Man Group shares rose as much as 5 percent in London trading to 168 pence, the highest since January 2016. The stock was priced at 167.4 pence as of 8:10 a.m.
Funds under management rose to $95.9 billion from $80.9 billion at the end of December, the money manager said in the statement. Investment gains boosted assets by $3.8 billion. Man Group reported a 7 basis-point reduction in its net management fee margin from last year.
Adjusted first-half pretax profit rose to $145 million from $98 million a year earlier as earnings from net performance fees rose to $51 million from $8 million, according to the company.
The first-half inflows were spread across Man Group’s quantitative and discretionary divisions. Fund of funds unit FRM led with $3 billion in net inflows as investors allocated money to low-margin investment funds. The firm’s computer-driven division added a net $2.3 billion, while the GLG unit, which uses fundamental analysis to bet across asset classes, received $2.6 billion.
“There remain many short- to medium-term uncertainties at Man, including inconsistent performance and performance fees, volatile flows and significant fee margin pressure," David McCann, an analyst at Numis Securities Ltd said in a note. “Upside could come from the surplus capital, which could be distributed and/or used for mergers and acquisitions."