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Man Group: long story falls short for UK hedge fund with go-go algos

Investors won’t forget the first half of 2022 in a hurry. It was the worst six-month period for a traditional 60-40 portfolio in 90 years. But volatile markets lend themselves to computer-driven hedge funds. On Tuesday, London-listed Man Group, which makes heavy use of algo to identify trends, reported record fees for performance – up 42% from the first half of 2021.

It’s a shame, then, that it is Performance dragged by the long-only funds – about a third of the managed assets. They decreased in value by 12.5%. Total assets under management fell 4% in the half year, as negative currency movements exacerbated investment losses.

Moreover, there has been an increase in redemptions since May. Net customer flow amounted to only $100 million in the quarter to June. The explanation, Mann says, was that clients needed to raise cash to meet requirements elsewhere in their portfolio. They left the door open on their way out: 90 percent of redemptions were partial.

Maintaining AUM matters for management fees, which have grown at a steady 8 percent per year for the past five years. But the performance fees vary more. They have averaged 20 percent over the past 10 years, but have sometimes dipped as low as 5 percent, according to Panmure Gordon.

The person’s policy is to buy back shares with capital generated from performance fees. It has returned nearly half of its market value in the past six years. The volatility in earnings explains why Mann’s shares trade at a low price/earnings ratio of 9, a third less than Shredders, which specializes in long funds. This is despite the increase in the share price of more than a quarter in the last year

Investors treat hedge funds with caution. Last year’s net flows were partially reversed in 2022. But the first half of the year proved the value of liquid alternatives. Another bout of market turmoil could once again weigh on Mann Group’s strengths.

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Man Group: long story falls short for UK hedge fund with go-go algos Source link Man Group: long story falls short for UK hedge fund with go-go algos

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