Man Group: Backing the wrong horse
Man Multi-Manager was launched in 2009 by combining three multi strategies operations of Man group, but since the launch Man Multi-Manager has witnessed continuous decline in funds under management (FUM). It seems that the new brand has failed to give any added benefit to the investors. Man group has initiated few efforts to retain investor interest in this operation, but it seems it is only backing the wrong horse.
Dawdling Man Multi-Manager’s assets:
In first half of 2009, Man Multi-Manager FUM were recorded at $39.7 billion which came down to $23 billion level by the end of 2009-a decline of 42%. Investors out flows and assets price erosion were the main reason to this decline.
The assets further eroded to $17.8 billion levels in H1’10. However, the total assets consolidated during H2’10 and FY’11. The current FY2012 has been a difficult year, as the funds are now decreasing on quarterly basis.
Following chart shows Man Multi-Manager FUM trend from 2009 till the third quarter of 2012.
The raw FUM trend implies that the investors do not seems to be satisfied with what the fund offers.
Moribund FUM is now a group level issue:
Man group is facing steep decline in funds under management. Total FUM dropped by 18% to $58.4 billion on December 31, 2011 from $71 billion level recorded at the end of June. In the third quarter ending Dec 31, 2011 the group recorded sales amounting $3.1 billion against the outflows of $5.6 billion, translating into a net outflow of $2.6 billion.
On the back of volatile and illiquid market the group has faced extreme challenges impacting investment performance among different investment styles.
FUMs are continuously declining and dawdling returns portraying managements failing efforts which are resulting in investors’ dissatisfactions and outflows. The reduction in overall FUM will hurt group productivity.
The media and management on the declining FUM:
Man Group’s stock witnessed selling pressure on bourses on the back of declining FUM. The investors expect poor performance and management fees, which will hurt group profitability. As evident from the above table, the declining FUM is a group level issue representing investors’ declining confidence in the group. The management and the media have been reporting the possible issues that have hurt the organization’s AHL and GLG division. However, we rarely see any discussions over the troublesome Man Multi-Manager operations, which started to witness decline in FUM way before AHL and GLG operations.
The group is well aware of this scenario and to overcome the issues, the company made some change in their management by hiring Luke Ellis as a head of Man Multi-Manager; he is focused to build up Man’s managed accounts (MAC) portfolio. Luke was able to generate some handsome amount of inflow for Man’s managed accounts, amounting EUR 1.2 billion fromGermany’s largest pension fund Bayerische Versorgungskammer (BVK).
Moreover, during 2011 the operation managed to win one more billion mandate from the UK Universities Superannuation Fund (USS).
Despite of promised inflows and due publicity, Man was unable to bring any significant change in the investors’ confidence.
Man multi manager impairment dented 2011 earnings:
During 2011, the company posted huge non-cash impairment of $375 million in Man Multi-Manager. The impairment was calculated after assessing the business value and future cash flows. At the end of financial year 2011, fair value derived from various methods was applied to bring Man Multi-Manager to a realistic value.
Moreover, as per the management decision, man multi structured products will not be following Man Multi-Manager content, instead they will be following GLG strategies in future. This shift is expected to slow down the sales and fee income, which will result in lower revenues and cash flows for this operation.
What will be the role of multi manager in 2012 earnings?
As per the nine months results for the period ended December 31, 2011, the firm informed its investors that they were able to generate some positive flows of over $1 billion in Man managed accounts (MAC). The funds are in pipeline and will be received in due course of time.
However, in the said period the over all performance was negative $0.6 billion in the quarter due to market reversals that impacted performance across a range of products.
Overall, the sales and performance fees will be on lower side with subdued funds under management.
One of he Man’s managers, in an interview toUKbased broadcast, made some abstract statements about man multi strategy fund. On one side it said that it is one the most import part of the group as it handles key institutional money and also money of some key private investors, offering composite products which AHL does not covers. For this the company has hired M. Luke Ellis who is focused on expanding the business. On the other hand it says that they have been shifting funds in GLG rather than putting them in multi manager. And accordingly the impairment charges are merely due to the shift of funds within internally managed operations. The impairment does not show any lack of confidence of the investor.
No new synergies by bringing 3 operations together
In 2009 Man combined its three operations, RMF, Glenwood and MGS to launch Man Multi-Manager. The key strategy was to develop and strengthen Man’s managed account (MAC) and expand it to a wide range of institutional and private investors.
However, post combination Man Multi-Manager has not been able to attain a decent position in the market as the institutions and private investors’ participation remained low.
Just to recall, before the takeover of Man Global Strategies (MGS) by Man-multi manager, MGS followed the phase of de-leveraging. MGS was highly leveraged with a strategy to increase its relative return and invest on event driven opportunities. However, due to financial market volatility, MGS witnessed unexpected investment losses. Resultantly, the management decided to remove leverage and de-risk the company. This led huge investment withdrawal by investors. Later, MGS was transferred to Man-multi manager after its poor performance.
What it offers to Investors:
Man Multi-Manager offers integrated hedge fund management to institutions and private investors. Its portfolios are constructed of discretionary, guided asset allocation and structured product mandate. The operation is said to have high quality senior management with an average of 16 years of experience in the field.
Funds performances remain week for financial year 2011. The following table elaborates over the period of time.
Investment performance of Man-Multi Manager
3 Months Dec’11
9 Months FY11
Cal.Year to Dec 31’11
3 Year to Dec 31’11
5 Year to Dec 31’11
|Man Absolute Return Strategies|
|Man Dynamic Selection|
|GLG Multi-Strategy Fund|