MAN GROUP PLC (PINK:MNGPF), the world’s largest publicly-traded hedge fund established a new corporate structure for AHL, its $17 billion flagship fund in an effort to improve its financial performance.
According to a report from Financial News, MAN GROUP PLC (PINK:MNGPF) incorporated AHL Partners LLP based on the documents filed with Companies House in United Kingdom. The employees of AHL are now listed under AHL Partners LLP on the UK Financial Services register.
Analysts believed that MAN GROUP PLC (PINK:MNGPF) created a new partnership structure for its flagship fund in order to fix the differences in compensation and to increase transparency in the firm’s business segments. Some also speculated that the move could the first step to split the group.
MAN GROUP PLC (PINK:MNGPF) stock price declined by 40 percent due to weakening performance of its flagship fund last year. The group exited the FTSE 100 list, which triggered BlackRock, Inc. (NYSE:BLK) to reduced its stockholding in the group to 5 percent. In December, the group hired a new executive chairman, John Rohal to expand its business and find new investments in North America.
AHL Diversified slightly recovered this year. Its assets were up by 5.9 percent, but it was down by 16.9 percent in 2009. This means the fund still have more than 10 percent to recoup its losses. AHL represents 25 percent of the assets of Man Group and represents two-thirds of its total earnings.
Man Group’s CEO, Sandy Rattray said the AHL Partners was incorporated to retain and incentivize the most senior staffs of AHL, and to make the group more competitive. In addition, Rattray explained that the new corporate structure of AHL is part of the group’s initiative to achieve its objective to “make AHL the best place in Europe for quants [quantitative analysts] to work, based on its broad research platform across different asset classes and strategies.”
Rattray said, “We want to increase the range of backgrounds of people we hire. We are trying to deepen and mix up the gene pool of people and trying to hire people a little bit not like ourselves. This is designed to bring more creativity and more opportunity for interesting ideas.”
Jefferies analyst, Jason Streets commented, “The LLP structure could be a response to the problem of having GLG staff and AHL people in the same business. GLG people get paid a fortune whereas historically AHL quants weren’t paid a lot.” According to him, the cost-to-revenue of AHL staff was 20 percent compared with GLG’s 55 percent to 60 percent.
“There would be a certain amount of jealousy once you put these businesses in the same company. It becomes more relevant once AHL starts performing better – as it has been since October – and the funds get closer to their high-water marks,” added Streets.
On the other hand, Peter Lenardos, an analyst at RBC Capital Markets opened that the Man Group’s move aims to increase transparency to determine the profitability of AHL’s product line.
In addition, Lenardos said, “Most interestingly, it could also provide the ability for Man Group to break itself up, which could deliver significant shareholder value.”