I’m out shopping for shares again. Should I add Man Group (LSE: EMG) (NASDAQOTH: MGNPY.US) to my wishlist?
The descent of Man
Investors in hedge fund manager Man Group have had a rough ride in recent years, despite pocketing a mighty yield that has top 16% on occasions. Its recent interim statement included a rare piece of positive news, so is now a good time to buy it?
Man Group’s share price is down a dismal 65% over the past five years, against a 60% rise on the FTSE 100. Investors have been fleeing Man’s flagship AHL computer-traded fund in droves, following severe underperformance. Shareholders revolted last year, installing new chief executive Peter Clarke, only to boot him out six months later. He was replaced by Manny Roman, founder of hedge fund GLG, who amazingly, is still there almost one year later.
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Manny is Man’s man
It was another tough start to the year for Man and Manny, as AHL continued to stumble and yet more investors headed for the exits, with outflows topping £5 billion in the first six months of 2013. Yet there was finally some good news in October, with funds under management hitting $52.5 billion in the three months to 30 September, up from $52 billion on 30 June. Man’s discretionary GLG funds produce positive performance, although this was offset by continuing falls among the AHL and FRM funds.
Slightly stronger first-half performance did attract more institutional flows into Man’s discretionary alternatives and long-only strategies, but Roman complained that recent volatility has proved challenging for hedge funds. “Despite better flows in the third quarter we remain cautious in our outlook for asset flows going forward in the light of continued uncertainty in the macro-economic environment.”
Group off
The rare glimpse of good news did help to revive the share price, up 10% in the last month to today’s 86p. If you’re an optimist, you might see this as a turning point. After years of double-digit declines, earnings per share growth is forecast to hit a healthy 38% in 2014. Don’t invest expecting a 16% yield, by the way, Man is forecast to yield just 3.9% this year rising to 5.3% next, although the actual figure will depend on the amount of surplus capital the Group can generate over that time. Better analysts than I admit they don’t understand Man Group’s business, and that alone puts me off. In February, I dismissed this stock as a speculative gamble. Nothing has changed since then. The Ascent of Man may have finally begun, but it is still too big a gamble for me.
