Man Group remains cautious despite restructuring on track

Man Group enjoyed strong investment performance in the first quarter as the world's biggest listed hedge fund underlined it is no longer the laggard in the sector.

Funds under management increased 7 per cent to $78.1bn at the end of March as the restructuring gamble of chief executive Manny Roman appears to be paying off.

Mr Roman has made a number of acquisitions since he took over in 2013, boosting the group's share price and diversifying the business so that it no longer relies as heavily on its computer-driven AHL arm.

However, Mr Roman remained cautious about the outlook for the group as equity and bond markets have both come under pressure in the past two months, which analysts warned may undermine the London-listed hedge fund's performance.

The group suffered net outflows in the quarter of $1.3bn, which is a concern for some analysts in markets that were generally favourable for asset managers in the three months ending on March 31.

A strengthening US dollar against both the euro and sterling also hurt the group's performance, with foreign exchange movements amounting to a negative $2bn.

Mr Roman said: "We retain a degree of caution on the outlook for first-half flows. As ever, the outlook for the rest of the year will depend on performance. While we have a reasonable pipeline of sales, recent market volatility reminds us of the uncertain macro environment in which we operate."

Positive investment performance added $4.3bn to funds under management (FUM) in the quarter with a strong performance in the group's AHL range of strategies, which led to $1.3bn in positive investment performance in quant alternative strategies.

The group added $3.8bn to FUM after the completion of its acquisition of Silvermine on January 24. Mr Roman also pointed to the completion of the NewSmith and BAML fund of funds acquisitions, which have helped to broaden the group's product offering and footprint in the US.

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However, although this recent under performance could continue to impact the share price, the correlation between AHL and Man's performance should be much lower as the group diversifies.

Man is also relatively cheap, trading at a significant discount below the sector average.

In February, the group raised its dividend and shareback plans as it beat full-year profit forecasts because of reduced costs and a rise in performance fee income.

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