Man Group (EMG) has given further indication that an inflection point has been reached. The hedge fund manager gained $3bn (£2.3bn) in net inflows during the first three months of the year - the largest haul since 2011. Discretionary long-only strategies and fund-of-funds products were the most popular, attracting $1.4bn and $1.2bn respectively.
Emerging market debt became more popular with investors during the period, which benefited the manager's discretionary long-only funds. The fund of funds inflows represented a single mandate, with cash in traditional higher-margin strategies declining. However, previously awarded infrastructure mandates worth $1.9bn are yet to be funded, and should come in later this year. Overall investment returns also picked up. Gains of $2.2bn, assisted by currency effects, helped push assets under management to $88.7bn at end-March.
Man Group's performance fees are linked to its long-only funds outperforming their relevant benchmarks, and on the proportion of alternative strategies exceeding their high water mark - the highest level achieved by the assets.
Man's AHL strategies, judged on the latter basis, have become increasingly important to overall performance during the past three years. These funds are by far the biggest contributors to performance fees, with 94 per cent of funds under management eligible to earn these fees. That's because the division consists entirely of quantitative alternative strategies, whereas the Numeric and GLG businesses both have a significant portion of long-only assets, where performance fees are less common.
AHL put in a mixed performance last year, with its diversified, dimension and alpha funds generating negative returns. That meant it earned just £50m in performance fees, less than a quarter of that earned during the previous two years. This pushed down group performance fee profit to just $27m, from $206m in 2015.
By the end of March 64 per cent of AHL's performance-fee-earning funds were at or within 5 per cent of their high water mark, compared with 72 per cent in 2015 and 96 per cent in 2014.
Shore Capital analyst Paul McGinnis has forecast performance fees of $120m for this year. He examines the proportion of funds at or within reach of their high water mark, as well as average performance fees during the past five years ($200m), to help reach this forecast.
