Q3 Interim Management Statement

RNS Number : 4390U

Man Group plc

16 October 2014

 



Press Release

16 October 2014

INTERIM MANAGEMENT STATEMENT for the quarter ended 30 September 2014

Key points

·     Funds under management (FUM) up 25% to $72.3 billion at 30 September 2014 (30 June 2014: $57.7 billion) with the acquisition of Numeric and Pine Grove adding $16.2 billion of assets, net inflows and performance adding another $1.3 billion of FUM and negative FX movements reducing FUM by $2.9 billion

o  Net inflows in the quarter of $0.4 billion, comprising sales of $4.5 billion and redemptions of $4.1 billion with net inflows into quant alternatives and long only strategies being partially offset by net outflows from discretionary alternatives, fund of funds alternatives and guaranteed products

o  Overall investment movement of positive $0.9 billion in the quarter with positive investment performance in quant alternatives, fund of fund alternatives and discretionary long only being partially offset by negative investment performance in discretionary alternatives and quant long only

o  FX translation effects of negative $2.9 billion in the quarter, driven by the strengthening of the US dollar against the Euro ($1.3 billion), Yen ($0.8 billion) and Sterling ($0.5 billion)

o  Guaranteed product regears of $0.3 billion offset by Pemba maturities of $0.3 billion

·     $150 million lower tier 2 debt issuance on 16 September 2014 at a rate of 5.875% giving a current regulatory capital surplus of around $450 million before planned usage for seeding activity of up to $75 million

Manny Roman, Chief Executive Officer of Man, said:

"We have continued to make progress against our strategic objectives in Q3 2014, completing the acquisitions of US-based Numeric and Pine Grove and achieving another quarter of net inflows.  AHL's traditional momentum strategies have continued their strong run of absolute and relative performance which led to a significant new institutional mandate and offset the impact of a slowdown in sales at GLG.

Looking forward, whilst there is a solid sales pipeline in place, and we are seeing increased appetite in long only strategies and for managed accounts, our outlook for flows is mixed and will depend on performance. We continue to focus on delivering superior risk-adjusted returns for clients across the business."

Conference call

A conference call for investors and analysts will be held at 08:00 UK time this morning.

Audio Details
UK Toll Number: 020 3427 0662
UK Toll-Free Number: 080 8237 0033
US Toll-Free Number: 18778414558

Playback details
UK Playback Number: 020 3426 2807
UK Playback Toll Free Number: 0808 237 0026

US Playback Toll Free Number: 18665358030
Playback Pin Code: 650669#

THIRD QUARTER FUM COMMENTARY

Alternatives

Funds under management in alternative strategies increased by $1.0 billion in the quarter to $39.2 billion.

Quant alternative (AHL / MSS / Numeric) strategies grew by 28% during the quarter driven by the inclusion of $1.1 billion of Numeric assets and net inflows of $1.0 billion. Sales of $1.6 billion included a significant investment by a large institutional Asia-Pacific investor into a bespoke AHL mandate,  $0.2 billion into AHL Evolution which is now at capacity and $0.3 billion into various of Numeric's alternative strategies. The majority of the redemptions of $0.6 billion continued to be from Asian retail clients in AHL Diversified. Diversified and Alpha strategies had the strongest quarterly returns since 2008 and were up 9.1% and 6.1% respectively in the three months to September 2014 with the bulk of the gains coming from long dollar, long bond and short agriculturals positions. Evolution was down 1.7% in the quarter and Dimension was up 3.1%. As at 30 September 2014 85% of AHL open ended funds were at high watermark and 10% were within 5% of high watermark. In addition 54% of AHL guaranteed funds were at high watermark and 3% were within 5% of high watermark. Negative FX movements of $0.2 billion in the quarter were driven by the dollar strengthening against the Euro.  As at 30 September 2014, 60% of quant alternative FUM was denominated in Dollars and 19% was in Euro.

Discretionary alternatives (GLG) FUM fell 9% in the quarter to $16.3 billion, primarily due to negative FX movements of $0.8 billion as the dollar strengthened against the Euro and Sterling. Sales of $1.0 billion included $0.4 billion into equity long short strategies and $0.5 billion into credit and convertibles strategies. Redemptions of $1.5 billion consisted of $1.0 billion from equity long short strategies and $0.5 billion from credit and convertibles strategies. Negative investment movement of $0.1 billion reflected negative performance in credit and convertibles strategies while performance in equity long short was broadly flat in the quarter. As at 30 September 2014 23% of GLG performance fee eligible FUM was at high watermark and 39% was within 5% of high watermark. As at 30 September 2014, 44% of discretionary alternative FUM was denominated in Dollars, 47% was in Euro and 5% was in Sterling. Pemba maturities were $0.3 billion in the period.

Alternative fund of fund (FRM) FUM remained broadly flat in the quarter. The Pine Grove acquisition completed on 4 August 2014, adding $1.0 billion of FUM. Sales of $0.2 billion were from Japanese clients into FRM Diversified funds. Redemptions of $0.7 billion included $0.4 billion from FRM Absolute Alpha and Sigma strategies and $0.2 billion from legacy Multi Manager products. Performance at FRM was positive overall which increased FUM by $0.3 billion in the

THIRD QUARTER FUM COMMENTARY (CONTINUED)

quarter with FRM Diversified II up 1.0%. Negative FX movements of $0.6 billion were due to the dollar strengthening against the Yen and Euro.  As at 30 September 2014, 42% of alternative fund of fund FUM was denominated in Dollars, 36% was in Yen and 17% was in Euros. 

Long Only

Funds under management in long only strategies increased by $13.3 billion to $31.4 billion driven by the acquisition of Numeric which completed on 5 September 2014, adding $14.1 billion of long only FUM.

Quant long only (AHL / MSS / Numeric) FUM increased to $15.6 billion in the quarter. Sales of $0.3 billion were into Numeric's Global Core product and redemptions of $0.1 billion were from the MSS Europe Plus strategy. The majority of the negative investment movement of $0.5 billion was primarily due to negative market performance in Numeric's International strategies which performed broadly in line with relevant indices. Negative FX movements of $0.3 billion were predominantly due to the dollar strengthening against the Euro. As at 30 September 2014, 54% of quant long only FUM was denominated in Dollars and 14% was in Euro.

Discretionary long only (GLG) FUM remained broadly flat in the period with net inflows and performance being offset by negative FX movements. Sales of $1.4 billion included $1.0 billion from UK retail clients into Japan CoreAlpha strategies and $0.2 billion from European clients into the Strategic Bond strategy. Redemptions of $1.1 billion included $0.8 billion from Japan CoreAlpha strategies. Positive investment performance of $0.4 billion was driven by Japan CoreAlpha which was up 3.8% in the quarter. Negative FX movements of $0.9 billion were due to the dollar strengthening against Sterling and Yen. As at 30 September 2014, 52% of discretionary long only FUM was denominated in Sterling, 30% was in Yen and 11% was in Dollars.

Guaranteed products

Guaranteed product funds under management increased by $0.3 billion in the quarter to $1.7 billion. There were no guaranteed product launches and redemptions were $0.1 billion. Positive AHL performance added $0.2 billion to FUM and FX movements were negative $0.1 billion driven by the strengthening of the US dollar against the Australian dollar. The routine rebalancing of investment exposure in guaranteed products drove a net regear of $0.3 billion in the quarter and there was an additional regear of $0.2 billion on 1 October.

       FUNDS UNDER MANAGEMENT ANALYSIS

       FUM movements by product type

$bn	FUM at 30 June 2014	Sales	Redemptions	Net inflows / (outflows)	Investment movement	FX	Acq.	Other	FUM at 30 September 2014
Alternative	38.2	2.8	(2.8)	0.0	0.8	(1.6)	2.1	(0.3)	39.2
Quant (AHL / MSS / Numeric)	9.0	1.6	(0.6)	1.0	0.6	(0.2)	1.1	0.0	11.5
Discretionary (GLG)	18.0	1.0	(1.5)	(0.5)	(0.1)	(0.8)	0.0	(0.3)	16.3
Fund of funds (FRM)	11.2	0.2	(0.7)	(0.5)	0.3	(0.6)	1.0	0.0	11.4
Long only	18.1	1.7	(1.2)	0.5	(0.1)	(1.2)	14.1	0.0	31.4
Quant (AHL / MSS / Numeric)	2.1	0.3	(0.1)	0.2	(0.5)	(0.3)	14.1	0.0	15.6
Discretionary (GLG)	16.0	1.4	(1.1)	0.3	0.4	(0.9)	0.0	0.0	15.8
Guaranteed	1.4	0.0	(0.1)	(0.1)	0.2	(0.1)	0.0	0.3	1.7
Total	57.7	4.5	(4.1)	0.4	0.9	(2.9)	16.2	0.0	72.3

FUM by manager

$bn	30 September 2014	30 June 2014	31 March 2014
Quant styles* - AHL - MSS	28.4 10.8 2.5	12.1 9.4 2.7	11.3 9.0 2.3
- Numeric	15.1	-	-
GLG Alternatives*	16.4	18.1	18.2
- Equity
-     Europe	5.8	6.4	6.4
-     North America	2.0	2.2	2.5
-     UK	0.3	0.3	0.3
-     Other equity alternatives	0.7	0.8	1.0
- Credit and Convertibles
-     Convertibles	4.3	4.4	3.9
-     Market Neutral	1.1	1.2	1.1
-     Ore Hill	0.8	0.8	0.7
-     Pemba	1.1	1.5	1.6
- Macro       -     Emerging markets	0.1	0.2	0.5
-     Macro	0.2	0.3	0.2
GLG Long only	15.8	16.0	14.5
-     Japan	10.5	10.6	9.7
-     Other	5.3	5.4	4.8
FRM*	11.7	11.5	11.0
Total	72.3	57.7	55.0

*The difference between the FUM by product and the FUM by manager relates to guaranteed product FUM which is split $1.3bn of AHL, $0.3bn of FRM and $0.1bn of GLG.

Investment performance

	Total return		Annualised return
	3 months to 30 Sep 2014	9 months to 30 Sep 2014	3 years to 30 Sep 2014	5 years to 30 Sep 2014
AHL/MAN SYSTEMATIC STRATEGIES
AHL Diversified1	9.1%	18.6%	2.0%	2.9%
AHL Alpha2	6.1%	12.5%	2.2%	3.6%
AHL Evolution3	-1.7%	11.4%	n/a	n/a
AHL Dimension4	3.1%	10.0%	4.7%	4.2%
MSS TailProtect5	-0.5%	-7.3%	-14.0%	n/a
MSS Europe6	-0.3%	3.2%	17.3%	n/a
GLG ALTERNATIVES
Equity
Europe
GLG European Long Short Fund7	0.4%*	-5.0%*	3.1%*	4.3%*
GLG European Equity Alternative UCITS Fund8	-0.1%	-5.8%	3.0%	n/a
GLG European Alpha Alternative UCITS Fund9	-2.0%	-0.6%	3.2%	3.1%
North America
GLG North American Opportunity Fund10	-1.4%*	-1.0%*	1.4%*	2.4%*
GLG North American Equity Alternative UCITS Fund11	-2.7%	-3.6%	-1.7%	n/a
UK
GLG Alpha Select Fund12	1.3%	0.4%	4.8%	2.4%
GLG Alpha Select UCITS Fund13	1.4%	0.6%	4.4%	n/a
Other equity alternatives
GLG Global Opportunity Fund14	-2.8%*	-4.2%*	0.3%*	0.9%*
Credit and convertibles
Convertibles
GLG Global Convertible Fund15	-2.1%	-0.9%	6.3%	3.8%
GLG Global Convertible UCITS Fund16	-2.5%	0.0%	8.1%	5.3%
Market Neutral
GLG Market Neutral Fund17	-4.2%*	-0.4%*	8.6%*	13.9%*
GLG European Distressed Fund18	-6.1%*	-0.6%*	7.4%*	14.7%*
Macro and special situations
GLG Atlas Macro Fund19	6.8%	-11.3%	-7.8%	1.3%
GLG Atlas Macro Alternative UCITS Fund20	7.1%	-11.0%	-7.2%	n/a
Multi-strategy
GLG Multi-Strategy Fund21	-1.0%*	-2.9%*	1.8%*	3.9%*
GLG LONG ONLY
GLG Japan Core Alpha Equity Fund22	3.8%	2.3%	23.1%	9.7%
GLG Global Equity UCITS Fund23	1.3%	3.3%	18.7%	9.1%
GLG Strategic Bond Fund24	-1.2%	4.2%	n/a	n/a
GLG Undervalued Assets Fund25	-0.4%	2.9%	n/a	n/a
FRM
AA Diversified26	1.1%	2.1%	1.6%	2.2%
FRM Diversified II27	1.0%	2.4%	3.0%	3.6%
FRM Dynamic Selection28	-0.2%	2.2%	1.6%	1.5%

Investment performance continued

	Total return		Annualised return
	3 months to 30 Sep 2014	9 months to 30 Sep 2014	3 years to 30 Sep 2014	5 years to 30 Sep 2014
NUMERIC ALTERNATIVES29,30
US Market Neutral	0.5%	2.1%	3.9%	5.5%
World Market Neutral	2.7%	2.7%	6.7%	4.4%
NUMERIC LONG ONLY29,30
Global & International
Global Core (USD)	-2.1%	6.4%	n.a.	n.a.
MSCI World	-2.2%	3.9%	n.a.	n.a.
Relative Return	0.1%	2.5%	n.a.	n.a.
Europe Core (EUR)	1.0%	9.7%	24.1%	13.4%
MSCI Europe	0.8%	7.0%	17.9%	10.1%
Relative Return	0.2%	2.7%	6.2%	3.4%
Japan Core (JPY)	3.8%	2.5%	25.0%	12.9%
MSCI Japan	5.8%	2.7%	22.8%	9.8%
Relative Return	-2.0%	-0.2%	2.2%	3.1%
International Small Cap	-7.9%	-2.0%	19.4%	n.a.
Custom MSCI World Ex-US(5)	-8.3%	-2.0%	14.4%	n.a.
Relative Return	0.4%	0.1%	5.0%	n.a.
Emerging Markets Alpha	0.2%	14.0%	18.8%	n.a.
MSCI Emerging Markets Alpha	-3.5%	2.4%	7.2%	n.a.
Relative Return	3.7%	11.6%	11.7%	n.a.
Emerging Markets Core	-4.2%	6.2%	n.a.	n.a.
MSCI Emerging Markets Alpha	-3.5%	2.4%	n.a.	n.a.
Relative Return	-0.7%	3.8%	n.a.	n.a.
US Large Cap
Core	2.2%	10.0%	27.1%	17.9%
Russell 1000	0.7%	8.0%	23.2%	15.9%
Relative Return	1.6%	2.0%	3.9%	2.0%
Value	1.1%	9.4%	27.2%	17.2%
Russell 1000 Value	-0.2%	8.1%	23.9%	15.3%
Relative Return	1.3%	1.4%	3.3%	1.9%
All Cap Core	0.4%	8.3%	28.2%	19.0%
Russell 3000	0.0%	7.0%	23.1%	15.8%
Relative Return	0.4%	1.3%	5.1%	3.2%
Large Cap Core	2.0%	10.2%	27.6%	17.8%
S&P 500	1.1%	8.3%	23.0%	15.7%
Relative Return	0.8%	1.9%	4.6%	2.1%
US Small Cap
Small Cap Core	-7.2%	-2.0%	27.2%	19.0%
Russell 2000	-7.4%	-4.4%	21.3%	14.3%
Relative Return	0.1%	2.4%	5.9%	4.7%
Small Cap Value	-6.6%	-1.2%	26.8%	18.4%
Russell 2000 Value	-8.6%	-4.7%	20.6%	13.0%
Relative Return	2.0%	3.5%	6.2%	5.4%
Small Cap Growth	-6.1%	-2.6%	27.7%	18.7%
Russell 2000 Growth	-6.1%	-4.1%	21.9%	15.5%
Relative Return	0.1%	1.5%	5.8%	3.2%

	Total return		Annualised return
	3 months to 30 Sep 2014	9 months to 30 Sep 2014	3 years to 30 Sep 2014	5 years to 30 Sep 2014
Indices
World stocks31	0.8%	6.3%	19.6%	11.5%
World bonds32	1.5%	5.5%	3.6%	3.8%
Corporate bonds33	1.0%	10.7%	5.2%	8.1%
Hedge fund indices
HFRI Fund Weighted Composite Index34	0.4%	2.3%	5.1%	3.4%
HFRI Fund of Funds Composite Index34	0.3%	3.4%	6.6%	5.2%
HFRX Global Hedge Fund Index	-0.6%	1.2%	3.6%	1.8%
Style indices
Barclay BTOP 50 Index35	3.8%	4.3%	0.2%	0.6%
HFRI Equity Hedge (Total) Index34	-1.2%	2.0%	8.4%	5.5%
HFRI EH: Equity Market Neutral Index34	0.5%	2.1%	4.5%	2.4%
HFRI Macro (Total) Index34	3.0%	4.1%	0.6%	1.5%
HFRI Relative Value (Total) Index34	0.3%	5.1%	7.9%	7.6%

Source: Man database, Bloomberg, MSCI and Source. There is no guarantee of trading performance and past or projected performance is not a reliable indicator of future performance. Returns may increase or decrease as a result of currency fluctuations.
1) Represented by Man AHL Diversified plc from 26 March 1996 to 29 October 2012, and by Man AHL Diversified (Guernsey) USD Shares - Class A from 30 October 2012 to date. The representative product was changed at the end of October 2012 due to legal and/or regulatory restrictions on Man AHL Diversified plc preventing the product from accessing the Programme's revised target allocations. Both funds are valued weekly; however, for comparative purposes, statistics have been calculated using the best quality price that is available at each calendar month end, using estimates where a final price is unavailable. Where a price, either estimate or final is unavailable on a calendar month end, the price on the closest date prior to the calendar month end has been used.
2) Represented by AHL Alpha plc from 17 October 1995 to 30 September 2012, and by AHL Strategies PCC Limited: Class Y AHL Alpha USD Shares from 1 October 2012 to 30 September 2013. The representative product was changed at the end of September 2012 due to the provisioning of fund liquidation costs in October 2012 for AHL Alpha plc, which resulted in tracking error compared with other Alpha Programme funds. Both funds are valued weekly; however, for comparative purposes, statistics have been calculated using the best quality price that is available at each calendar month end, using estimates where a final price is unavailable. Where a price, either estimate or final is unavailable on a calendar month end, the price on the closest date prior to the calendar month end has been used. Both of the track records have been adjusted to reflect the fee structure of AHL Alpha (Cayman) Limited - USD Shares. From 30 September 2013, the actual performance of AHL Alpha (Cayman) Limited - USD Shares is displayed.
3) Represented by AHL (Cayman) SPC - Class A1 Evolution USD Shares.
4) Represented by AHL Strategies PCC Limited: Class B AHL Dimension USD Shares until 31 May 2014, and by AHL Dimension (Cayman) Ltd - Class F USD Shares from 1 June 2014 to date.
5) Represented by TailProtect Limited Class B.
6) Represented by the official performance of Man GLG Europe Plus Source ETF net of a 0.75% p.a. management fee and no performance fee. Provided by Source.
7) Represented by GLG European Long Short Fund - Class D Unrestricted - EUR.
8) Represented by GLG European Equity Alternative IN EUR.
9) Represented by GLG European Alpha Alternative IN EUR.
10) Represented by GLG North American Opportunity Fund - Class A Unrestricted - USD.
11) Represented by GLG North American Equity Alternative IN USD.
12) Represented by GLG Alpha Select Fund - Class C - EUR.
13) Represented by GLG Alpha Select Alternative IN H EUR.
14) Represented by GLG Global Opportunity Fund - Class Z - USD.
15) Represented by GLG Global Convertible Fund - Class A - USD.
16) Represented by GLG Global Convertible UCITS Fund - Class IM USD.
17) Represented by GLG Market Neutral Fund - Class Z Unrestricted - USD.
18) Represented by GLG European Distressed Fund - Class A - USD.
19) Represented by GLG Atlas Macro Fund - Class A - USD.
20) Represented by GLG Atlas Macro Alternative IN USD.
21) Represented by the gross return of Man GLG Multi-Strategy Fund - Class A - USD Shares until 31 December 2012. From 1 January 2013 the actual gross performance of Man GLG Multi-Strategy Fund - Class G - USD Shares is displayed.
22) Represented by GLG Japan CoreAlpha Equity Fund - Class C to Class I JPY (28/01/2010).
23) Represented by GLG Global Equity Fund - Class I T USD to Class I USD (13/05/2011).
24) Represented by GLG Strategic Bond Fund Class A.
25) Represented by GLG Undervalued Assets Fund - C Accumulation Shares.
26) Represented by Absolute Alpha Fund PCC Ltd Diversified - USD.
27) Represented by FRM Diversified II Fund SPC - Class A USD.
28) Represented by FRM Dynamic Selection USD I.
29)The reference index listed by Numeric is intended to best represent the strategy's universe. Investors may choose to compare returns for their accounts to different reference indices, resulting in differences in relative return information.  International Small Cap used MSCI EAFE Small Cap as reference index until Aug 2013 and MSCI World ex-U.S. Small Cap thereafter. Comparison to an index is for informational purposes only, as the holdings of an account managed by Numeric will differ from the securities which comprise the index and may have greater volatility than the holdings of an index. Please refer to the Glossary for further information about the indices. 30) Returns are based on the performance of only unrestricted accounts within each strategy.  Performance is net-of-fees. Returns of accounts with client restrictions may differ. 31) Represented by MSCI World Net Total Return Index hedged to USD.
32) Represented by Citigroup World Government Bond Index hedged to USD (total return).
33) Represented by Citigroup High Grade Corp Bond TR.
34) HFRI index performance over the past 4 months is subject to change.
35) The historic Barclay BTOP 50 Index data is subject to change.
Please note that the dates in brackets represent the date of the join in the linked track records.
*Estimated

Enquiries

Fiona Smart

Head of Investor Relations

[phone]

[e-mail]

Rosanna Konarzewski

Head of Communications

[phone]

[e-mail]

Finsbury

James Bradley

[phone]

About Man

Man is a leading alternative investment management business with a diverse offering in hedge funds and long only products across equity, credit, managed futures, convertibles, emerging markets, global macro and multi-manager solutions. At 30 September 2014, Man managed $72.3 billion. The original business was founded in 1783. Today, Man is listed on the London Stock Exchange and is a member of the FTSE 250 Index with a market capitalisation of around £2.0 billion. Man also supports many awards, charities and initiatives around the world, including sponsoring the Man Booker literary prizes. Further information can be found at www.man.com.

Forward looking statements and other important information

This document contains forward-looking statements with respect to the financial condition, results and business of Man Group plc. By their nature, forward-looking statements involve risk and uncertainty and there may be subsequent variations to estimates. Man Group plc's actual future results may differ materially from the results expressed or implied in these forward-looking statements.

The content of the websites referred to in this announcement is not incorporated into and does not form part of this announcement. Nothing in this announcement should be construed as or is intended to be a solicitation for or an offer to provide investment advisory services.

 

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