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Man Group constrained by Japanese strategies

The hedge fund manager continued to drive inflows in the face of uncertain markets
August 1, 2018

We posited that Man (EMG) has turned the corner in 2017, as the hedge fund booked turnover growth for the first time in six years – quite a turnaround from the previous year when accounting write-downs fed through to a pre-tax loss of $272m (£208m). By and large, that progress has been maintained in the period under review, with profits, ex M&A effects, non-cash and other one-off items, up 5 per cent to $153m. Throw in a marked increase in management fees, together with record net inflows of $8.3m, and it’s clear that while comparisons with the 2017 half year were tainted by negative investment movements and currency translations, the group is delivering against a difficult market backdrop.

IC TIP: Hold at 177p

Performance metrics were held in check by $1bn in negative returns from Man’s Japanese long-only and emerging markets long-only strategies, offset to an extent by gains in European and UK-focused discretionary strategies. Europe, Middle East, & Africa (EMEA) still constitutes Man’s largest market, accounting for 55 per cent of funds under management (FUM), although it seems the Americas is now the growth engine, with its proportion of managed assets more than tripling since 2012 to 27 per cent.

JPMorgan Cazenove guides for adjusted trading profits of $327m for the December year-end, giving EPS of 16¢, rising to $429m and 22¢ in 2019.

MAN GROUP (EMG)   
ORD PRICE:177pMARKET VALUE:£2.83bn
TOUCH:177-177.4p12-MONTH HIGH:219pLOW: 159p
DIVIDEND YIELD:5.3%PE RATIO:14
NET ASSET VALUE:100¢*NET CASH:£208m
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)† Dividend per share (¢)
2017461763.85.0
2018506904.66.4
% change+10+18+21+28
Ex-div:9 Aug   
Payment:5 Sep   
†The 2018 half-year dividend will be paid at a rate of 4.88p a share.  £1=$1.31. *Includes intangible assets of $1.01bn, or 63.6¢ a share.