Hedge-fund giant Man says expect more demand for liquid alternatives this year as stock surges on results
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Executives at one of the largest publicly traded hedge funds are expecting more demand for liquid alternative strategies this year, after they delivered positive returns for investors from the strategy last year.
Shares in Man Group PLC
EMG,
rose almost 9% in London markets on Tuesday after it reported higher pretax profit in 2022, from a rise in management and performance fees.
The U.K.-based asset manager said pretax profit in the financial year to Dec. 31, 2022, was $745 million, a jump from $590 million in 2021. It also raised its core net revenue by 14% to $1.73 billion.
While investors poured a net $3.1 billion during the year, it also said its assets under management had dropped almost 4% to $143.3 billion, down from $148.6 billion from the December 2021. The hedge fund chalked the decline down to FX headwinds and market beta.
“Our investment strategies delivered valuable alpha for our clients, generating 1.4% of relative outperformance overall,” said Man Group CEO Luke Ellis.
Liquid gold
Ellis added that 2023 provides a strong case for investing in liquid alternatives, due to the “difficulties” traditional assets and traditional portfolios had during 2022.
Man Group is one of the largest liquid alternative providers globally — around 41% of its alternatives assets under management have daily or weekly liquidity terms.
“All things being equal, that should naturally lead to more demand in 2023 for liquid alternatives, especially as so many other investments lost money last year, and that’s certainly reflected in the client conversations I’ve had going around the world this year,” he told analysts on a morning earnings call on Tuesday.
He added that the U.K. government’s mini-fiscal budget last September was a “perfect manifestation” of the role liquid alternatives can play in an investment portfolio.
Read: Hedge funds made huge gains before the pound crash
Man Group’s full-year results “exceed expectations on a number of different levels,” said Jefferies equity analyst team led by Tom Mills in a flash note to clients on Tuesday morning. It raised its price target to 285p, up from 244.30p.
The price target was lifted mainly due to the company’s adjusted pretax profit being 9% above consensus, from a 5% rise in management fees and 12% better performance fees.
The firm announced it would reload its $125 million share buyback when its current program finishes. It has so far repurchased around $114 million of the program, which was launched in early December 2022.
Ellis said in its investor presentation that high inflation was a “real test for active investment management” but it had returned $2.9 billion of alpha for clients. Man Group’s investment is spread across a variety of systematic and discretionary
strategies, including equity long/short, fundamental macro and credit.
Shareholders will receive a final dividend of 10.1 cents per share for the year.
Meanwhile, chairman John Cryan, who has been in the post in January 2020 and on the board since 2015, will step down to retire at the end of the year. Non-executive director Anne Wade will replace him.
Also: This is what Warren Buffett, a self-described ‘so-so investor,’ says is his ‘secret sauce’
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