Man acquires but stays volatile

Man Group (EMG) was one of the few asset management companies to prosper over the past 18 months as the popping of the tech bubble, combined with its value long-only strategies, meant that it consistently outperformed the rest of the industry in the performance fees it generated. From the evidence of these results, that purple patch is now over as the conclusion of the value rotation, higher interest rates, and the end of the brief flowering of absolute return funds capped its overall performance. Indeed, the slide in performance fees was the single biggest change in the income statement, falling to just $32mn (£25mn) from a high of $404mn year-on-year.  

The positives were that, in common with most players in the sector, inflows have stabilised and shown signs of growth. For Man, net inflows of $2.6bn over the half contributed to the increase in assets-under-management (AUM) to $152bn, which will yield higher recurring net management fees in the medium term. Meanwhile, the core net management fee was only marginally lower at $460mn for the half.

The company has also been trying to diversify its offering. Its latest acquisition is US-focused direct lender Varagon Capital Partners. The $183mn deal gives Man exposure to the private credit markets.

The problem with Man is that the share price can be as volatile as the company’s performance fees, the immediate level of which influences the market’s short-term view. For instance, the current price-to-earnings ratio of 13, based on broker Numis’ estimates, falls rapidly to 7.8 in 2024. Still too uncertain and volatile for an upgrade. Hold.

Last IC view: Hold, 264p, 28 Feb 2023