Money managers under the microscope
Man and AHL
Rightly or wrongly, the short-term performance of Man Group’s largest fund, AHL, has been closely watched by Man investors as an indicator of the firm’s fortunes.
However, according to a Numis note this week, the fact that AHL is so close to its high-water mark (the point above which a fund can earn performance fees) at the moment gives it extra weight.
“…In the short term AHL will continue to be the principal driver of the P&L in our view,” write analysts David McCann and James Hamilton. “…We believe it still accounts for a disproportionately large (>50 pct) part of the P&L.
“Moreover, given that AHL is now close to HWM (we estimate 1 pct away), the performance fee dynamic means the P&L for the next 12-18 months will look a bit like an at-the-money call option just before expiry — i.e. a small movement in the underlying will have a disproportionately large impact on the performance fee line.
“Assuming an initial FuM of $25 bln, all of which assumed at HWM, a 20 pct performance fee and 20 pct staff share, we estimate each 1 pct movement in AHL is equivalent to $40 mln PBT.”