On Monday, hedge fund manager Man Group plc (LON:EMG) announced in a prospectus details for its corporate restructuring plan. This includes a proposed new holding company called Man Strategic Holdings PLC, or New Man.
In addition, the plan will try to streamline the company’s overblown capital base while raising its financial flexibility and ability to continue its dividend policy, reported Reuters.
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The reorganization will be implemented through a scheme of arrangement; it is to become effective on November 6. But first, Man will consult its shareholders on the proposals.
They are scheduled to vote on them for the new structure on October 17. For the scheme to be approved, it will need a 75 percent approval from the shareholders.
Regulatory approval will also be necessary and this will also include Court approval. A Court Meeting and General Meeting will be held on the same day, October 17.
From New Man, it will issue ordinary shares to Man Group plc (LON:EMG) shareholders on a one-for-one basis. Its shares will trade on the London Stock Exchange identical to the current Man ordinary shares; they will subsequently be de-listed.
New Man will be the new holding company of the group, which will then reclaim the old Man Group name.
For the restructure, Merrill Lynch is acting as the adviser for the company.
Monday’s news comes on the heels of the July 24 announcement by Man Group to employ a corporate reorganization plan that would include a newly-listed holding company. Also on this day, the company announced its first-half results ending June 30, 2012.
It included a decline in Man’s funds under management and its underlying profitability which resulted in a statutory loss.
Additional change for the company ensued when it hired Sudi Mariappa, the former global head of portfolio management at Pimco, earlier this month in an effort to expand its bond investments.
We wrote that Mariappa will oversee a series of bond funds in the Man Group plc (LON:EMG)’s GLG unit. The London-based hedge fund bought GLG Partners in 2010 for $1.6 billion to diversify its investment funds.
The group also runs numerous credit funds and the Atlas Macro Fund, which invests in sovereign bonds.
Man’s investors have not been happy with funds’ performance and the GLC acquisition. They have been pulling money out of the firm and only a few days earlier, Man’s Systematic Strategies unit announced the launch of a computer-driven bond fund.
On a recent conference call last week, CEO, Peter Clarke has some interesting things to say about the hedge fund’s history:
Our assumption back in 2008/’09 was that investor demand would migrate towards open-ended onshore strategies and away from guaranteed offshore formats. This indeed has proved to be the case. Commentators estimate that the market for regulated alternatives more than doubled in the five years to 2011 in the US and Europe. As hedge funds become more mainstream this conversion has, per some analysts’ expectations, $2 trillion potential to the industry by 2016 and clearly Man is well placed if that were to be the case.
This view of the growth potential in liquid transparent onshore strategies was a key driver, as you will recall, behind our decision to acquire GLG, to broaden investment returns away from being managed-futures dominated. As a result, our wide range of investment strategies keeps us relevant to investors at different points in the market cycle and, as Jon has noted, allowed us to generate $7.2b of gross sales in the half despite the uncertain markets, virtually all of those close in open-ended formats.
We also anticipated that demand for structured products would decline. And it did. What we did not foresee was the speed of FUM decline, driven primarily by negative absolute performance of AHL as managed futures struggled in a risk-on/risk-off environment. And that drove degears in our structured products rather than net outflows or negative performance themselves. That of course has had a significant economic impact, which you can see from our results.
Given the market backdrop, our plans have accelerated to change the shape and structure of our business to withstand protracted periods of instability. Senior management team here and on our Executive Committee is totally committed to a program of changes to meet these issues head on and united in their focus on achieving each of these steps.
What’s next for Man Group plc (LON:EMG)?
On Monday, investors reacted to the news negatively as Man’s stock was down 2.15 percent to $86.60. For the year-to-date, shares are down 30.83 percent.