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Shares in the world’s largest listed hedge fund manager Man Group tumbled on Tuesday as performance fees and profits collapsed.
Shares fell 9 per cent to 216.70p by late morning after the group said fees from fund returns had dropped 92 per cent to $32mn in the first half of the year. That in turn hit pre-tax profits, which tumbled 65 per cent to $137mn.
However, assets under management at the London listed group grew 6 per cent to $152bn in the six months to the end of June, slightly beating analyst expectations.
The lower fees were partly due to bets on market direction failing to deliver — but chief financial officer Antoine Forterre stressed they followed two “very strong years”.
“Q1 was a bit more difficult for some of our strategies but if we look at where we are now, most of our funds are back flat or slightly up for the year,” he said.
“The truth is that clients care about longer-term performance and that is what they assess us on.”
About two-thirds of Man Group’s $152bn under management are in hedge fund-style strategies that try to make money when markets are both up and down. The remaining third are in traditional long-only strategies that perform best when markets are up.
Man Group is hoping a more unpredictable investing climate as rates increase will tempt potential customers away from popular index trackers and towards its own funds.
Analysts at JPMorgan said the shares were still “attractive”, given a favourable price-to-earnings ratio.
However, Numis analyst David McCann said it was not a stock to buy and hold over the long term due to “volatile performance fees” undermining earnings.
The news comes after Man Group acquired US specialist credit fund Varagon in early July, adding $11.8bn in assets under management to its existing $3.2bn private credit business.
But Man wants to grow its credit offering even further, and is considering more acquisitions. “We are still somewhat underweight and we think that our large clients continue to allocate more to credit,” said Forterre.
“So to the extent we can find businesses that have the same characteristics as Varagon, strategies that don’t really overlap with what we do, with a good investment team, a good investment record, a good culture and some ability to cross sell with our clients, we will certainly look at it.”
He added that the firm was “quite flexible and open as to where to look” for potential acquisitions whether it was in the US or Europe.
Man Group’s core strategy is to be a one-stop investing shop for large institutional clients. Through Man’s solutions business, clients can create a custom portfolio with a mix of long-only managers, traditional equity hedge funds, quantitative hedge funds and private credit.