Hedge fund Man Group shares bounce after assets rise in first half

By Maiya Keidan

LONDON (Reuters) - Shares in British hedge fund firm Man Group <EMG.L> rose more than 5 percent on Wednesday after it generated higher returns from fees and saw assets under management climb by 4.2 percent in the first half.

Gross management and other fees rose 26 percent to $423 million at June 30, compared to $378 million in the first six months of 2017.

Man Group's total assets under management by end June rose to $113.7 billion from $109.1 billion at the end of December, above analyst forecasts, with net inflows of $8.3 billion offset by performance losses and the impact of a stronger U.S. dollar.

Adjusted profit before tax rose 5 percent year on year to $153 million.

"Management fees were a strong part of the mix of the adjusted profit before tax, and management fees are more persistent than performance fees," an analyst told Reuters.

A note from Credit Suisse also said there was a better-than-expected mix, biased towards higher quality management fees.

"These results also provide some reassurance that Man is reaching the point of improved core fee margin stability," said the note.

Man Group shares were up 5.2 percent at 0905 GMT, making it one of the biggest movers on the mid cap FTSE 250 index.

Headwinds included investment losses of $1.7 billion and negative currency movements of $2 billion as the dollar strengthened against most major currencies.

"Given the difficult market backdrop and weaker performance in the first half, funds under management and adjusted profit growth were more limited," Chief Executive Officer Luke Ellis said in a statement.

Over $1 billion of negative performance was driven by losses in Man Group's Japanese long-only and emerging market long-only strategies, partially offset by gains in European and UK-focused discretionary strategies.

Trade tensions between the United States and China weighed on sentiment and a stronger dollar and higher U.S. interest rates contributed to pressure on emerging markets, the company said.

REDEMPTIONS UP

Redemptions rose 25 percent to $11.6 billion from $9.3 billion in the first half of 2017. Investors pulled their cash from Man Group's multi-manager strategies, which saw $400 million in net outflows.

They also withdrew cash from the hedge fund manager's discretionary convertibles strategy, which saw $300 million in net outflows.

Absolute return and discretionary long-only strategies added $2.1 billion and $2 billion of net assets from investors respectively. Systematic emerging market and international small cap strategies also took in cash.

Ellis said third-quarter flows will be hit by the withdrawal of a $2.2 billion redemption from a very low margin infrastructure mandate, with the client continuing other holdings with Man Group.

"Management point to continued good underlying business momentum across the product range, which may partially insulate Man from the weakening industry flow trends that have become apparent in (the second quarter/early third-quarter)," said the note from Credit Suisse.

(Reporting by Maiya Keidan; editing by Sinead Cruise, Jason Neely and Jan Harvey)