Fri, 01/06/2007 - 06:55
The assets under management of Man Group, the world's largest publicly traded hedge fund manager, rose by 24 per cent to USD61.7bn in the year to the end of March and net income rose by 27 per cent to USD1.29bn, the company has reported.
Man says that nearly 60 per cent of its total assets, at USD36.6bn, came from private investors. Since the group's year-end on March 31 its assets under management have continued to grow and are currently estimated to be more than USD65bn.
The financial year saw record fund sales totalling USD15.9bn, including private investor sales of USD8.6bn. The group's profit before tax on asset management business rose 13 per cent to USD1,301m, with net management fee income rising 34 per cent to USD943m, while performance fee income dropped 20 per cent to USD358m.
Says group chief executive Peter Clarke: 'These record results underscore the strength of our business franchise. The record level of sales in the period reflects high levels of demand for our products from both institutional and private investors, and the power of our distribution network in accessing investors worldwide.
'The strong growth in assets under management in the year has continued into the current year, with performance and sales combining to drive assets under management up USD3.5bn in the first two months, to a total of more than USD65bn. Together with new initiatives in our product offering and continued development in our range of investment managers, we are very confident about the prospects for the year ahead.'
According to Clarke, the growth in turnover reflected both a record share of institutional sales and of guaranteed products for private clients. 'The standout number was the record level of sales, at USD15.9bn and within that the record level of institutional sales, and the importance of the private client guaranteed format content at USD6.9bn, which was 80 per cent of private investor sales.
'That guaranteed component is a key driver in terms of growth and stability of management fees, which were up 35 per cent to USD943m. Finally, the 69 per cent increase in pre-tax profits from the brokerage division, before exceptionals, speaks for itself in terms of the performance of that business.'
Clarke says the drop in Man's performance fees was down to the market turbulence last summer, which resulted in the performance of many managers falling away from their high water markets, levels to which they are only now returning. 'In the second half [of the financial year], most of them did not regain those high water marks,' he says.
'We earned more performance fees in the first half than we did in the second half, which meant that, overall, performance fees were lower, particularly from AHL. But all of our managers did earn performance fees during the year, and most of them have recently seen strong performance, particularly AHL, so they are now back at or close to high water marks.'
The group has also announced that the flotation on the New York Stock Exchange of a majority stake in its Man Financial brokerage arm, which is to be renamed MF Global, is expected to take place in the third quarter of this year, subject to shareholder approval and favourable market conditions. A registration statement relating to the proposed IPO of MF Global is being filed with the US regulator, the Securities and Exchange Commission.
Says Clarke: 'The two businesses are very successful with strong market positions in their own right. They are both regulated businesses and yet have quite different capital requirements, so I believe there's a compelling logic in separating them, allowing management to focus on the growth opportunities specific to each business, and with a capital structure that's appropriate to the evolution of that business.'
Separating from the brokerage business will enable the market to focus on the growth prospects and franchise value of the asset management activities, he believes, and will also bring other benefits, such as the need for less capital. 'It is clear that we will have incremental capital to return to shareholders in due course,' Clarke says, 'and we will also be able to revisit our distribution policy in terms of our dividend payout ratio.'
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