Industry Updates

Man Group's management step changes transformation as tough environment persists

Thursday, October 25, 2012

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Beverly Chandler, Opalesque London: Man Group’s October presentation for investors reveals that the company continues to struggle to realign its business as the “tough performance environment persists.”

It summarises its latest position as:

Funds under management down 10% to $52.7 billion
Adjusted PBT of $121 million (H1 2011: $231 million)
Statutory loss before tax of $164 million (H1 2011: profit of $70 million)
$233 million impairment of Multi-Manager ($142 million) and GLG ($91 million) goodwill
Interim dividend of 9.5 cents per share, as announced in May
Proposal to create new holding company to access distributable reserves

“Today’s presentations…mark a step change in our business transformation” the company says, giving examples of management decisions that they had made which have come out well, and those that haven’t. Planning assumptions that went well included assuming demand for regulated alternatives; a declining demand for guaranteed funds and the need to shape the business to match evolving investor demands.

Things that haven’t gone so well include expecting AHL performance to perform in line with its track record, instead the firm says: “Politically driven markets have negatively impacted absolute returns for trend followers”. Another expectation was that Man’s guaranteed product inventory would erode gradually, in line with its maturity profile whereas, in fact, the firm says negative AHL performance and c$6 billion of related de-gear since 2011 has significantly accelerated this process.

In a range of actions the firm is to align costs to reshaped business; integrate FRM; optimise AHL performance, which is running at 0.3% to June 2012; organically build-out GLG; market strong performance and thematic products and build their talent base.

Man compares the volatility of its flagship AHL funds, both Alpha and Diversified with its CTA peers, including David Harding (the ‘H’ of AHL)’s Winton Capital’s Diversified Trading Program. AHL Alpha’s annualised volatility over the past two years has been 10.5% while Winton’s Diversified Trading Program has had annualised volatility over the past two years of 8.0%.

Man’s AHL Diversified has had annualised volatility over the past two years of 14.0% while Aspect Capital’s Aspect Diversified Program has had annualised volatility over the past two years of 13.2%. BlueCrest Capital Management’ BlueTrend Fund Limited has had annualised volatility over the past two years of 12.7%.

The firm is also expecting to save $100m by 2013 by reducing the layers of management and complexity of group functions; eliminating unprofitable products and structures and being ‘disciplined’ on general day to day expenses and practices.

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