Man 's (EMG) AHL funds have put in a patchy performance during the past five years. This could be why the market responded so positively to the acquisition of property investment manager Aalto Investments. The shares rose by as much as 14 per cent on the news, which also said the purchase would sit in a newly launched division, Man Global Private Markets.
Aalto, which has $1.7bn (£1.4bn) of assets under management, invests via four strategies, specialising in real estate equity and debt strategies, including direct investments in single US family homes and lending to commercial and residential real estate in Europe and the US.
Diversification should be a good move for Man as its flagship AHL Diversified fund has lost money in four of the full years between 2011-15 as well as in 2016's half year and third quarter.
Man benchmarks the performance of its AHL strategies by comparing the total returns of AHL Diversified against that of three relevant peers. To achieve its benchmark, AHL Diversified must beat the performance of two out of three of these peers (see table), meaning it can suffer losses but achieve its benchmark.
| Year to 31 December | AHL Diversified 12-month total returns (%) | Gross performance fees (£m) | Benchmark |
| 2011 | -6.5 | 38* | - |
| 2012 | -1.3 | 14 | Achieved |
| 2013 | -3.1 | 30 | Achieved |
| 2014 | 33.8 | 272 | Achieved |
| 2015 | -2.7 | 218 | Missed |
| 2016 half-year | -0.9 | 35 | Missed |
| *Nine months to the end of December | |||
But, more recently, the addition of its AHL institutional product plus net inflows into its Dimension and Alpha strategies meant total AHL funds under management increased $1.1bn to $19bn year on year.
Investors were also cheered by news the world's largest listed hedge fund manager generated its best investment gains in 18 months during the period. As such, total funds under management grew 6 per cent to $81bn.
Investment performance and inflows have been inconsistent during the past two years, though (see chart). Shore Capital analyst Paul McGinnis says the continued poor performance of the majority of AHL assets under management during the period means the prospect of "meaningful performance fees" during the second half now looks doubtful.
He has pared back forecasts for net performance fees for 2016 and downgraded gross performance fee forecasts for 2017 to $170m (19 per cent of total revenue) from $262m (27 per cent of total revenue). But he now expects funds under management to hit $82bn from $77.8bn in 2015.
However, Numis analyst David McCann reckons the group is fairly valued, balancing the declining-to-flat outlook for management fee profits with the potential for capital returns.
Volatile funds under management
