Moody’s Corporation (NYSE:MCO) has put the Man Group Plc (LON:EMG) up for review as the ratings agency sees the firm’s earnings being impacted by several factors that could lead to the company performing badly in the future. Moody’s highlighted several weaknesses in the company that led it to today’s decision.
The report said the company’s future earnings would be negatively effected by general market pressures as well as weaknesses in sales of the firms guaranteed products.
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The release was particularly critical of the firm’s continued underperformance in light of the improving market conditions and the rise in equity. The downgrade would see all of the company’s debt downgraded from its current level of Baa2.
The report also cited the declining debt coverage ratio at the group in the last few years and the sustainability of the hedge fund model. That last supposition by Moody’s which waxes philosophical about the ability of hedge funds to attract high fees in a market where investors perceive there to be lower performance. That comment will certainly be a controversial one as hedge funds recover from 2011, the worst year ever for the funds.
Back in February we ran an article on the Man Group’s badly underperforming Man Multi Manager fund the firm started in 2009. That article pointed to the continuous decline of the value of that fund and the lack of benefit investing in it had to offer investors.
The group’s poor management of the Man Multi Management fund was such a problem that it became an issue at a group and not a department level. The group failed to respond adequately and today they are on the precipice of a downgrade. The funds under management by the company are not the only source of the company’s woes as Moody’s reports shows though they do represent
The Man Group is well known as the titular sponsor of the Man Booker prize. The company operates out of London and invests its clients money in three different ways, the Man Multi Manager Fund, Man AHL, a managed futures fund and GLG which is encompasses longer term and hybrid investments. The company famously lost over $350 million to Bernie Madoff’s Ponzi scheme in 2008.
Moody’s move to review the company’s rating did not seem to have a huge effect on the company’s stock. On the London exchange, which opened at 04:00 EST the company was up over 2% at time of writing to 116.15.