Man Group plc

Interim Management Statement

RNS Number : 9304D
Man Group plc
03 May 2013
 



3 May 2013

 

INTERIM MANAGEMENT STATEMENT for the quarter ended 31 March 2013

 

Key points - operating

 

·     Funds under management (FUM) at 31 March 2013 of $54.8 billion (31 December 2012: $57.0 billion)

·     Positive investment movement of $2.8 billion in the quarter:

AHL Diversified programme up 4.2% in the quarter. As of 29 April 2013, AHL Diversified programme is up 10.4% for the year to date and AHL open ended FUM of $9.5 billion is approximately 4.5% away from high water mark on a weighted average basis with over 70% at or within 5% of high water mark

The majority of GLG alternative strategies had positive performance in the quarter and over 71% of GLG performance fee eligible FUM was at high water mark and 20% was within 5% of high water mark at the end of March

GLG long only strategies contributed positive investment movement of $1.6 billion in the quarter with the strongest performance coming from the Japan Core Alpha fund which was up 24.0%

Positive performance at FRM added $0.4 billion to FUM in the quarter

·     Net outflows in the quarter of $3.7 billion, comprising sales of $2.5 billion and redemptions of $6.2 billion

·     FX movements of negative $1.6 billion in the quarter, driven by the strengthening of the US dollar against the Yen, Euro and Sterling

·     Other movements of $0.3 billion driven by guaranteed product regears of $0.5 billion partially offset by institutional product maturities and other movements of $0.2 billion

·     Previously announced cost saving programmes remain on track

Key points - capital

·     To optimise the efficiency of the Group's capital and liquidity structure, we intend to call or redeem, with cash, all tier 1 hybrid, tier 2 and senior debt securities (subject to bondholder consent where necessary)

·     Total annualised pre-tax interest and coupon saving of up to $78 million from 2014. These actions will be slightly accretive to earnings per share after upfront costs in 2013

·     Relative to the Group's capital position pro forma for CRD IV, these actions will result in a reduction in surplus capital of up to $470 million giving pro forma surplus capital at 1 January 2014 of at least $450 million

 

Manny Roman, Chief Executive Officer of Man, said:

 

"The world economy still faces significant challenges but with reduced correlation between major asset classes and the reassertion of trends, we have seen a somewhat more stable market environment. Against this background, we saw solid performance across our three investment engines.

 

However, this was a disappointing quarter from a flows perspective with sales at a similar level to the previous quarter and increased redemptions, chiefly due to the loss of three sizeable low margin mandates.

 

Investment performance is the lifeblood of our business and in time we expect good performance to translate into flows. However, we remain cautious in our outlook as we will need a more sustained period of performance, particularly from AHL, before we see an improvement in net flows. We continue to make good progress against our key business priorities and the recently announced improvement in our capital position, together with our announcement today of the intended buyback of our debt securities, has delivered value for shareholders."

 

Capital and liquidity update

 

Following the announcement of our change in regulatory status from being a Full Scope Group to Limited Licence Group and the subsequent increase in surplus regulatory capital of up to $550 million, the Group intends to use cash to make the following changes to its capital and liquidity structure:  

·     Redemption of all of the $174 million senior 2013 fixed rate bonds on 1 August 2013;

·     Buyback of all of the €216 million senior 2015 fixed rate bonds on 7 May 2013;

·     Redemption of all of the $168 million tier 2 subordinated 2015 floating rate notes at the next call date on 24 June 2013;

·     Buyback of up to all of the $232 million tier 2 subordinated 2017 fixed rate bonds by 14 June 2013 subject to bondholder consent;

·     Redemption of all of the $300 million tier 1 perpetual subordinated capital securities at the next call date on 7 August 2013.

 

These changes will result in annualised pre-tax interest and coupon savings of up to $78 million from 2014 and are expected to have a slightly accretive impact on earnings per share in 2013 with a pre-tax adverse impact on the net finance expense line of up to $4.6 million and a pre-tax saving in the hybrid coupon of $8.3 million. Pro forma for the position post CRD IV implementation the changes will reduce surplus regulatory capital by up to $470 million at 1 January 2014. The impact on gross cash and net cash will be a reduction of up to approximately $1,190 million and $330 million respectively, however, the Group has a $1,525 million committed revolving credit facility (currently undrawn) available until July 2016, with $1,320 million extending to July 2017 and the possibility of a further extension to July 2018.

 

The impact of the changes on 2013 and 2014 interest costs and surplus regulatory capital is summarised in the table below:


2013 Pre-tax

Interest and coupon savings

$m

2013

Pre-tax

upfront cost

 

 

$m

2013

Pre-tax

net impact

 

 

$m

2014

Pre-tax

Interest and coupon savings

$m

Regulatory capital impact

as at 01/01/2014

 

$m

Senior 6.5% fixed rate bonds due 2013

5.3

n/a

5.3

12.6

n/a

Senior 6.0% fixed rate € bonds due 2015

11.4

(25.0)

(13.6)

17.2

n/a

Tier 2 subordinated floating rate notes due 2015

1.8

n/a

1.8

3.4

(60)

Tier 2 subordinated 5.0% fixed rate bonds due 2017*

 6.5

(4.6)

1.9

11.8

(170)

Tier 1 perpetual subordinated capital securities

8.3

n/a

8.3

33

(240)

Total

33.3

(29.6)

3.7

78.0

(470)

*Assuming required bondholder consent

Conference call

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


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FIRST QUARTER FUM COMMENTARY

 

Guaranteed products

Guaranteed product funds under management increased by $0.3 billion in the quarter to $6.0 billion. There were no guaranteed product launches in the quarter. Redemptions were $0.3 billion, in line with the previous quarter. The routine rebalancing of investment exposure in guaranteed products drove a regear of $0.5 billion, with AHL up 4.25% in the rebalancing period. There were further regears of $0.2 billion on 1 April and $0.2 billion on 1 May.

 

Open ended alternatives

Sales of open-ended alternatives were $1.3 billion and redemptions were $2.5 billion giving a net outflow of $1.2 billion for the quarter. Within this category, AHL had net outflows of $0.6 billion. GLG Alternatives recorded a net outflow of $0.6 billion, with net inflows into European long/short and Credit and Convertibles strategies being more than offset by outflows from Emerging markets and North American long/short equity strategies.  

 

AHL Diversified was up 4.2% for the quarter with long stock index futures positions contributing the majority of the positive performance. Trading in credit, currencies and commodities also contributed positively while positions in bonds and interest rates detracted from performance. As at 29 April 2013, AHL open ended funds were approximately 4.5% below high water mark on a weighted average basis with $2.5 billion above high water mark and $4.4 billion up to 5% from high water mark.

 

The majority of GLG's range of alternative investment styles showed positive performance in the quarter and 71% of GLG performance fee eligible FUM was at high watermark and 20% was within 5% of high water mark at the end of March.

 

FX movements reduced open ended alternatives FUM by $0.4 billion due to the strengthening of USD against the JPY and EUR.

 

Institutional fund of funds

Funds under management in this category reduced by $1.3bn to $17.6bn.  Sales were $0.4 billion and redemptions of $1.5 billion included $0.9 billion of redemptions from managed account mandates, where FRM provides risk assessment only, due to an asset allocation decision made by the relevant clients.

 

Positive investment performance across all funds added $0.4 billion to FUM.

 

Negative FX movement of $0.5bn was driven by the strengthening of the USD against the JPY and EUR.  21% of FUM in this product category is denominated in JPY and 28% is denominated in EUR.  Included in other movements is $0.2 billion of roll-offs of Pemba assets.

 

Long only

Long only styles saw a net outflow of $1.1 billion, comprising $0.8 billion of sales (mainly into Japan Core Alpha) and $1.9 billion of redemptions, over half of which came from two large lower margin institutional mandates.

 

Japan Core Alpha was up 24.0% in the quarter adding $1.2 billion of investment movement to FUM and all other long only styles were up on average over 9% contributing $0.4 billion of investment movement in the quarter.

 

GLG Long only funds are denominated in GBP (44%), JPY (25%) and EUR (16%) which combined to give a negative FX movement of $0.6 billion in the quarter.

 

 

FUNDS UNDER MANAGEMENT ANALYSIS

 

Three months to 31 March 2013

 


Guaranteed

$bn

Open-ended

Institutional FoF and other

$bn

Alternatives total

$bn

Long only

$bn

Total

$bn

AHL

$bn

GLG

$bn

FUM at 31 December 2012

5.7

10.1

10.9

18.9

45.6

11.4

57.0

Sales

-

0.4

0.9

0.4

1.7

0.8

2.5

Redemptions

(0.3)

(1.0)

(1.5)

(1.5)

(4.3)

(1.9)

(6.2)

Net inflows/(outflows)

(0.3)

(0.6)

(0.6)

(1.1)

(2.6)

(1.1)

(3.7)

Investment movement

0.2

0.3

0.3

0.4

1.2

1.6

2.8

FX

(0.1)

(0.2)

(0.2)

(0.5)

(1.0)

(0.6)

(1.6)

Other

0.5

(0.1)

-

(0.1)

0.3

-

0.3

FUM at 31 March 2013

6.0

9.5

10.4

17.6

43.5

11.3

54.8

 

 

FUM by manager

 

$bn

31 March 2013

31 December 2012

30 September 2012

Quant styles1

16.3



-     AHL

14.1

14.4

16.3

-     MSS

2.2







GLG Alternatives

14.2

15.2

15.1

- Equity




-     Europe

3.2

3.1

2.9

-     North America

1.7

1.9

1.9

-     UK

0.6

0.6

0.7

-     Other equity alternatives

0.4

0.5

0.3

- Credit and Convertibles




-     Convertibles

2.9

2.6

2.4

-     Market Neutral

0.9

0.8

0.8

-     Ore Hill

0.9

0.9

0.9

-     Pemba

2.2

2.4

2.4

 - Macro




     -      Emerging markets

0.9

1.4

1.5

     -      Macro

0.5

1.0

1.3





Long only

9.9

11.4

11.2

-     Japan

6.1

5.7

5.6

-     Other

3.8

5.7

5.6





FRM

14.4

16.0

17.4

Total

54.8

57.0

60.0

1 Following the combining of AHL and MSS, at 31 March 2013 MSS assets have been re-classified from GLG Alternatives - Macro ($0.5 billion), Long only ($1.4 billion) and FRM ($0.3 billion) to a separate category under Quant styles 

 

 

 

Investment performance

 


Total return

Annualised return


3 months to 31 Mar 2013

12 months to
31 Mar 2013

3 years to
31 Mar 2013

5 years to
31 Mar 2013

AHL





AHL Diversified1

4.2%

2.0%

2.5%

1.3%

AHL Alpha2

3.2%

2.0%

2.9%

2.1%

Man AHL Diversity3

2.9%

2.9%

1.2%

n/a

Man AHL Trend4

3.6%

3.0%

0.9%

n/a






MAN SYSTEMATIC STRATEGIES





TailProtect5

-5.9%

-14.9%

n/a

n/a






GLG ALTERNATIVES





Equity





Europe





GLG European Long Short Fund6

2.4%

0.2%

7.6%

5.7%

GLG European Equity Alternative UCITS Fund7

2.5%

0.9%

n/a

n/a

GLG European Alpha Alternative UCITS Fund8

2.4%

5.6%

3.0%

n/a

North America





GLG North American Opportunity Fund9

4.7%

1.7%

2.0%

4.5%

GLG North American Equity Alternative UCITS Fund10

3.7%

-2.5%

n/a

n/a

UK





GLG Alpha Select Fund11

3.0%

-1.1%

-1.1%

4.6%

GLG Alpha Select UCITS Fund12

2.7%

-1.5%

-1.9%

n/a

Other equity alternatives





GLG Global Opportunity Fund13

1.4%

0.0%

-0.6%

-0.5%

Credit and convertibles





Convertibles





GLG Global Convertible Fund14

3.1%

5.9%

2.5%

4.1%

GLG Global Convertible UCITS Fund15

3.6%

6.4%

3.7%

n/a

Market Neutral





GLG Market Neutral Fund16

3.3%

11.2%

11.9%

9.1%

GLG European Distressed Fund17

4.2%

11.8%

10.1%

n/a

Ore Hill





GLG Ore Hill Fund18

1.6%

13.0%

7.8%

4.9%

Emerging markets 





GLG Emerging Markets Fund19

-1.0%

1.8%

-2.8%

-2.0%

GLG Emerging Markets UCITS Fund20

-0.9%

-0.6%

-4.3%

n/a

Macro and special situations





GLG Atlas Macro Fund21

0.9%

0.5%

5.3%

n/a

GLG Atlas Macro Alternative UCITS Fund22

1.1%

-0.3%

n/a

n/a






GLG LONG ONLY





GLG Japan Core Alpha Equity Fund23

24.0%

19.5%

2.4%

2.0%

GLG Global Equity UCITS Fund24

10.1%

11.2%

n/a

n/a

 

 

 

 

 

 

 

Investment performance continued

 


Total return

Annualised return


3 months to 31 Mar 2013

12 months to
31 Mar 2013

3 years to
31 Mar 2013

5 years to
31 Mar 2013

FRM





AA Diversified25

2.7%

3.9%

1.8%

-1.2%

FRM Diversified II26

3.0%

4.1%

2.6%

-0.4%

Man Dynamic Selection27

2.2%

2.4%

1.1%

0.4%

Man GLG Multi-Strategy Fund28

2.9%

2.3%

3.5%

1.6%






Indices





World stocks29

9.7%

14.3%

8.2%

3.2%

World bonds30

0.8%

4.8%

4.4%

4.3%

Corporate bonds31

-2.4%

8.7%

12.1%

10.2%






Hedge fund indices





HFRI Fund Weighted Composite Index32

3.9%

5.4%

4.0%

3.0%

HFRI Fund of Funds Composite Index32

3.5%

4.9%

2.1%

-0.2%

HFRX Global Hedge Fund Index

3.1%

3.5%

0.2%

-1.7%






Style indices





Barclay BTOP 50 Index33

2.8%

1.5%

0.7%

0.9%

HFRI Equity Hedge (Total) Index32

5.5%

6.2%

3.8%

2.2%

HFRX Equity Hedge Index

5.1%

6.0%

-1.1%

-3.0%

HFRI Event Driven (Total) Index32

3.8%

7.0%

5.1%

4.2%

HFRX Event Driven Index

5.3%

5.5%

1.9%

0.3%

HFRI Macro (Total) Index32

1.5%

0.5%

1.7%

2.0%

HFRX Macro/CTA Index

0.0%

0.3%

-2.7%

-4.0%

HFRI Relative Value (Total) Index32

3.3%

9.4%

7.0%

6.3%

HFRX Relative Value Arbitrage Index

1.7%

1.7%

2.0%

0.5%

 



Source: Man database, Bloomberg and MSCI. 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 last weekly valuation for each month.

2) Represented by AHL Alpha plc from 17 October 1995 to 24 September 2012, and by AHL Strategies PCC Limited: Class Y AHL Alpha USD Shares from 25 September 2012 to date. 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 last weekly valuation for each month.

3) Represented by Man AHL Diversity GBP DB. Please note that Man AHL Diversity GBP DB was valued weekly until 2 May 2011. Prior to this date, the last weekly valuation of the month has been used.                                      

4) Represented by Man AHL Trend EUR I. Please note that Man AHL Trend EUR I was valued weekly until 2 May 2011. Prior to this date, the last weekly valuation of the month has been used.

5) Represented by TailProtect Limited Class B.

6) Represented by GLG European Long Short Fund - Class D Restricted to Unrestricted (29/06/2007) - EUR.

7) Represented by GLG European Equity Alternative IN EUR.

8) Represented by GLG European Alpha Alternative IN EUR.

9) Represented by GLG North American Opportunity Fund - Class A Restricted to Unrestricted (29/06/2007) - USD.

10) Represented by GLG North American Equity Alternative IN USD.

11) Represented by GLG Alpha Select Fund - Class C - EUR.

12) Represented by GLG Alpha Select Alternative IN H EUR.

13) Represented by GLG Global Opportunity Fund - Class Z - USD.

14) Represented by GLG Global Convertible Fund - Class A - USD.

15) Represented by GLG Global Convertible UCITS Funds Class IM USD.

16) Represented by GLG Market Neutral Fund - Class Z Restricted to Unrestricted (31/08/2007) - USD.          

17) Represented by GLG European Distressed Fund - Class A - USD.               

18) Represented by Ore Hill International Fund II Ltd.

19) Represented by GLG Emerging Markets Fund - Class A Restricted to Unrestricted (31/08/2007) - USD.     

20) Represented by GLG EM Diversified Alternative IN H USD.

21) Represented by GLG Atlas Macro Fund - Class A - USD.                                              

22) Represented by GLG Atlas Macro Alternative IN USD.                                                    

23) Represented by GLG Japan CoreAlpha Equity Fund - Class C to Class I JPY (28/01/2010).         

24) Represented by GLG Global Equity Fund Class I USD.   

25) Represented by Absolute Alpha Fund PCC Ltd Diversified - USD.

26) To highlight the performance and risks associated with FRM Diversified II Fund SPC - Class A USD ('the fund') prior to Jan 2004, FRM has created the FRM Diversified II pro forma using the following methodology: i) for the period Jan 1998 to Dec 2003, by using the returns of Absolute Alpha Fund PCC Limited - Diversified Series Share Cell ('AA Diversified - USD') adjusted for fees and/or currency, where applicable. For the period Jan 2004 to Feb 2004, the returns of the fund's master portfolio have been used, adjusted for fees and/or currency, where applicable. Post Feb 2004, the fund's actual performance has been used, which may differ from the calculated performance of the track record. There have been occasions where the 12-months' performance to date of FRM Diversified II has differed materially from that of AA Diversified. Strategy and holdings data relates to the composition of the master portfolio.

27) Represented by Man Dynamic Selection USD I.

28) Represented by Man GLG Multi-Strategy Fund - Class A - USD Shares, adjusted to reflect a standard institutional fee rebate of 1% until 31 December 2012. From 1 January 2013, the actual performance of Man GLG Multi-Strategy Fund - Class G - USD Shares is displayed.

29) Represented by MSCI World Net Total Return Index hedged to USD.             

30) Represented by Citigroup World Government Bond Index hedged to USD (total return).                                

31) Represented by Citigroup High Grade Corp Bond TR.                                                      

32) HFRI index performance over the past 4 months is subject to change.

33) 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.

 

 

 

 

 

 

 

 

Enquiries

Fiona Smart

Head of Investor Relations

+44 20 7144 2030

[email protected]

 

David Waller

Head of Communications

+44 20 7144 2121

[email protected]

 

RLM Finsbury

James Bradley

Ryan O'Keeffe

+44 20 7251 3801

 

 

About Man

 

Man is a world-leading alternative investment management business. It has expertise in a wide range of liquid investment styles including managed futures, equity, credit and convertibles, emerging markets, global macro and multi-manager, combined with powerful product structuring, distribution and client service capabilities. As at 31 March 2013, Man managed $54.8 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 is a signatory to the United Nations Principles for Responsible Investment (PRI). 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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