With Numeric, Man Group Would Get Strategies, Investors

With Numeric, Man Group Would Get Strategies, Investors
See page for author [Public domain], via Wikimedia Commons

Man Group PLC (OTCMKTS:MNGPF) (LON:EMG), one of the world’s largest hedge funds that made famous as an early pioneer in managed futures trend following, is in talks to acquire the long only investment boutique of Numeric Holdings.

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Man would acquire new strategies and investor, marketing benefits

Boston-based Numeric is an institutional asset manager serving corporate and public pensions, foundations, endowments and sovereign wealth funds, which mimic’s London-based Man Group PLC (OTCMKTS:MNGPF)’s primary customer base and indicates significant synergies exist between the firms.  It might be in their investing strategies where differences can be found. While both are quantitative investment firms where investment decisions are based solely on technical factors found in the movement of the asset’s price, Numeric is primarily a long only shop while Man takes both long and short positions, both buying and selling.

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Is Man Group paying $719 million?

The potential price Numeric may be getting in the deal is nearly $719 million, according to Espirito Santo Investment Bank analyst Phil Dobbin, as quoted in the New York Times. Dobbin used a formula that primarily considers assets under management and related revenues, a common tactic to value funds and on used to value Man’s stock price as well.  Man Group has nearly $55 billion in assets under management and close to 1,000 employees while Numeric has over $13.9 billion under management with 74 employees, the report noted.

Man Group PLC (OTCMKTS:MNGPF) has been seeking to diversify its investment offerings from mostly trend following quantitative vehicles.  A significant debate has taken place regarding trend followers sticking to their primary strategy during the recent times and or employing additional strategies.  For instance, former Man founder David Harding now of Winton Capital Management is said to have significantly adjusted their trading algorithms from focusing on what is known as basic trend following to including overlay strategies for relative value and carry trades.  The acquisition of Numeric offers a slightly different strategy set than that of Winton in focusing on the long side of the equation only.

Man Group’s stock price slide highlights dependence on trend following

Man Group PLC (OTCMKTS:MNGPF)’s stock price is down 67 percent since the end of 2010 following its lead trend following product, the $11.3 billion AHL Diversified fund, delivering negative returns during a market environment not well suited for the trend following strategy.  “This transaction would further diversify Man away from AHL and is consistent with Man’s strategy to acquire a U.S.- based asset manager,” Peter Lenardos, an analyst at RBC Capital Markets in London, said in a note to clients today that was reported on Bloomberg.

“These discussions are ongoing and may or may not lead to a transaction,” the Man Group PLC (OTCMKTS:MNGPF) said in a statement reported in the Times.  They did not indicate much they would be willing to pay for privately held Numeric, however.

Man Group PLC (OTCMKTS:MNGPF)’s stock price rose nearly 6.4 percent on the news.

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com
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