European redemptions help reduce Man’s assets to $64.5bn

Heavy redemptions by European investors from Man last quarter, plus investment losses over summer, more than reversed buoyant second quarter sales, leaving Man’s total assets down 7.5% at $64.5bn over six months to September.

At the end of March Man’s funds under management were $69.1bn.

Then, from April to June, Man took in $3.7bn of net new assets, including $1bn in Japan for a GLG EM FX overlay for Nikko and $2.5bn fresh capital for an onshore vehicle of Man’s computer-driven trading platform, AHL.

Commenting on the record $2.5bn net outflows that followed since June, chief executive Peter Clarke (pictured) said: “As markets turned more volatile into the summer, we saw a progressive deterioration in investor sentiment, which accelerated markedly in September.

“In Europe in particular, the risk of sovereign default spreading to banks negatively impacted confidence in financial counterparties and we saw investors sourcing liquidity in size as extreme risk aversion took hold and cash levels spiked.”

Clarke said he held a “cautious near term outlook”, although the six month outflows slowed into October, when AuM fell by a further $1bn, to $63.5bn.

Man highlighted its ability to produce “liquid alternative investment return streams”, including Ucits, as a competitive advantage.

“Through the daily liquidity now being offered across most of our managers, including AHL, we can expand our onshore offerings in many markets. This opens completely new investors and channels for us. Recent examples include Australia as well as Japan, and new opportunities are being worked on. We continue to work with regulators as well as local partners to explore the distribution possibilities for tomorrow as well as today.”

Some $32bn of Man’s $64.5bn assets are in products offering daily or weekly liquidity to investors, with a further $25.1bn monthly.

But such frequent illiquidity is clearly a double-edged sword, as the group added outflows from its alternatives funds were “focused on funds with short notice periods”.

And over 60% of the total $2.5bn investment losses the group suffered, and 30% of redemptions, came from its long-only strategies

Man’s computer-driven AHL Diversified rose 8.4% over the six months, and AHL’s funds under management grew from $13.7bn to $16.6bn. Other variants of AHL rose by between 6.7% and 4.1%.

Man has 95 people working in the UK on AHL, and 11 more working on it in Hong Kong. AHL trades about $4bn a day across 49 Asian markets. Clarke noted the Asian team had cut trading costs by more than 20%, and 98% of regional trading can now be processed electronically.

In Asia Man has hired David Mercurio from the Government of Singapore Investment Corp to head its Asia equities, and co-head its global equity strategies operations. In addition, co-founder of GLG Pierre Lagrange has become chairman of Man Asia, as well as still managing GLG’s global long-only and long/short equity portfolios from London. When Mercurio joins later this year, the duo will build out Man’s Asian discretionary trading capabilities.

Man’s TailProtect systematic volatility trading strategy rose 34.3% in the latest six month reporting period. For more on TailProtect, see the latest edition of Investment Europe. Global shares fell 15.4% over six months.

GLG’s discretionary products generally did less well than the systematic funds over six months, though the GLG Atlas Macro Alternative Ucits fund rose 9.4%.

The GLG Emerging Markets Ucits fund fell 16.1%; GLG Global Convertible Ucits fund declined 11.5%; the MLIS GLG European Opportunity Ucits fund fell 12.5%; and the GLG Alpha Select Ucits fund was 12.6%.

Total funds under management in open-ended alternatives at GLG fell overall from $13.6bn to $12bn.

Overall Man’s performance fee revenue from March to September fell to $39m, from $152m over the preceding six month period. Management fee revenue dropped mildly, from $242m to $202m.

Man reported six-month profit before tax of $154m, up on the pre-close estimate of $145m. It is maintaining its interim dividend at 9.5 cents per share, and expecting to return up to $150m capital to shareholders by year’s end, via share buybacks.

It has about $1bn of surplus regulatory capital, net cash of $733m and total liquidity resources of $3.4bn.

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