Money managers under the microscope
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.
Man Group shares were down this morning after last night’s news that AHL dropped 1.76 pct last week, taking losses since Nov 1 to nearly 4 percent. Broker Oriel estimates this leaves AHL 8 percent off its high-water mark.
“November’s performance will disappoint those who expected AHL to string together a good run of investment returns. The company have blamed central bank interventions since the credit crisis for AHL’s poor returns,” Oriel said.
Asset levels were actually down since the end of March (from $39.4 bln to $39 bln), but such have been the outflows from Man’s funds that these figures imply a stabilisation of assets and, according to Credit Suisse, zero net outflows.
In our investor profile of GLG’s Pierre Lagrange, we highlight two very different sides of London’s hedge fund industry and a potential culture clash in Man Group’s surprise takeover of GLG this month.
In many ways, Lagrange symbolises the informal, star manager culture that GLG has based its growth on (although also suffered from after Greg Coffey’s departure and Philippe Jabre’s FSA fine).
Hedge fund stories from the past 24 hours from Reuters and elsewhere:
Will ETFs replace hedge funds?…. No – Seeking Alpha
Hintze the Prince’s philanthropist – Bloomberg
Hedgies to top stocks, bonds in 2010 – Reuters
Calpers probes hedge fund advisors – LA Times
Managed futures on the rack – Reuters
There has been plenty of bad news surrounding Man Group in recent months.
Assets at end-June were $43.3 bln, compared with $79.5 bln a year before. Flagship managed futures strategy AHL, which not so long ago was boasting some superb-looking performance figures in spite of the credit crisis, is down 5.1 percent over the past year after a poor first half of 2009.
And Man Group’s shares have underperformed the market by 44 percent over the past year, though they have outperformed during 2009.
Last year’s record poor year for the hedge fund industry was a boom period for managed futures.
A year ago in its final results Man Group – the world’s biggest listed hedge fund firm — was able to report assets under management of $78.5 billion and a 60 percent rise in profits.
The firm’s shares took a pounding this morning, although have since made up some ground, after the firm revealed assets are now down to $44 billion, while profits almost halved.