Opalesque Industry Update - Man Group today published its interim management statement for the quarter ended 31st March 2013.|
Key points - operating
- Funds under management (FUM) at 31 March 2013 of $54.8 billion (31 December 2012: $57.0 billion)
- Positive investment movement of $2.8 billion in the quarter:
- AHL Diversified programme up 4.2% in the quarter. As of 29 April 2013, AHL Diversified programme is up 10.4% for the year to date and AHL open ended FUM of $9.5 billion is approximately 4.5% away from high water mark on a weighted average basis with over 70% at or within 5% of high water mark
- The majority of GLG alternative strategies had positive performance in the quarter and over 71% of GLG performance fee eligible FUM was at high water mark and 20% was within 5% of high water mark at the end of March
- GLG long only strategies contributed positive investment movement of $1.6 billion in the quarter with the strongest performance coming from the Japan Core Alpha fund which was up 24.0%
- Positive performance at FRM added $0.4 billion to FUM in the quarter
- Net outflows in the quarter of $3.7 billion, comprising sales of $2.5 billion and redemptions of $6.2 billion
- FX movements of negative $1.6 billion in the quarter, driven by the strengthening of the US dollar against the Yen, Euro and Sterling
- Other movements of $0.3 billion driven by guaranteed product regears of $0.5 billion partially offset by institutional product maturities and other movements of $0.2 billion
- Previously announced cost saving programmes remain on track
Key points – capital
- To optimise the efficiency of the Group’s capital and liquidity structure, we intend to call or redeem, with cash, all tier 1 hybrid, tier 2 and senior debt securities (subject to bondholder consent where necessary)
- Total annualised pre-tax interest and coupon saving of up to $78 million from 2014. These actions will be slightly accretive to earnings per share after upfront costs in 2013
- Relative to the Group’s capital position pro forma for CRD IV, these actions will result in a reduction in surplus capital of up to $470 million giving pro forma surplus capital at 1 January 2014 of at least $450 million
Manny Roman, Chief Executive Officer of Man, said:
“The world economy still faces significant challenges but with reduced correlation between major asset classes and the reassertion of trends, we have seen a somewhat more stable market environment. Against this background, we saw solid performance across our three investment engines.
However, this was a disappointing quarter from a flows perspective with sales at a similar level to the previous quarter and increased redemptions, chiefly due to the loss of three sizeable low margin mandates.
Investment performance is the lifeblood of our business and in time we expect good performance to translate into flows. However, we remain cautious in our outlook as we will need a more sustained period of performance, particularly from AHL, before we see an improvement in net flows. We continue to make good progress against our key business priorities and the recently announced improvement in our capital position, together with our announcement today of the intended buyback of our debt securities, has delivered value for shareholders.”
Capital and liquidity update
Following the announcement of our change in regulatory status from being a Full Scope Group to Limited Licence Group and the subsequent increase in surplus regulatory capital of up to $550 million, the Group intends to use cash to make the following changes to its capital and liquidity structure:
- Redemption of all of the $174 million senior 2013 fixed rate bonds on 1 August 2013;
- Buyback of all of the €216 million senior 2015 fixed rate bonds on 7 May 2013;
- Redemption of all of the $168 million tier 2 subordinated 2015 floating rate notes at the next call date on 24 June 2013;
- Buyback of up to all of the $232 million tier 2 subordinated 2017 fixed rate bonds by 14 June 2013 subject to bondholder consent;
- Redemption of all of the $300 million tier 1 perpetual subordinated capital securities at the next call date on 7 August 2013.
These changes will result in annualised pre-tax interest and coupon savings of up to $78 million from 2014 and are expected to have a slightly accretive impact on earnings per share in 2013 with a pre-tax adverse impact on the net finance expense line of up to $4.6 million and a pre-tax saving in the hybrid coupon of $8.3 million. Pro forma for the position post CRD IV implementation the changes will reduce surplus regulatory capital by up to $470 million at 1 January 2014. The impact on gross cash and net cash will be a reduction of up to approximately $1,190 million and $330 million respectively, however, the Group has a $1,525 million committed revolving credit facility (currently undrawn) available until July 2016, with $1,320 million extending to July 2017 and the possibility of a further extension to July 2018.
The impact of the changes on 2013 and 2014 interest costs and surplus regulatory capital is summarised in the table below:
*Assuming required bondholder consent