Man Group returns more capital to shareholders

The market will always struggle to assign an adequate value to Man Group’s (EMG) selection of volatile, unpredictable, but undeniably profitable fees. But the money manager/hedge fund has launched another round of share buybacks worth $125mn (£103mn), and with dividends included, shareholders received over $400mn of returned capital for the year.

That performance looks solid given that assets under management fell slightly by 4 per cent to £143bn. In short, Man’s contrarian strategies paid off at the end of a volatile year, in what looks like a reasonable sales case for active fund managers over their passive brethren.

Man also looks to be earning a decent margin on its fees, with a run rate net fee margin of 65 basis points only marginally lower than 2021 as more funds flowed into lower-margin strategies. Core performance fee generation was $779mn compared with $569mn in 2021. Management is confident enough in the immediate future to launch another round of buybacks. However, overall, the statement was notably short on specifics when it came to the outlook, which is probably a reflection of how little visibility the company has traditionally had over its fee income.

Analysts at broker Panmure Gordon were generally effusive about Man’s performance. The broker described Man as “continuing to retire its equity on the cheap, while the market frets over how to value performance fee”, which reflects the contradictions of its business model. Panmure values the company at an upgraded forward price/earnings ratio of 10. Given the volatility of its underlying revenues that looks about right. Hold.

Last IC view: Hold, 252p, 2 Aug 2022