Standard & Poor’s Ratings Services said today that the ratings and outlook on UK-based hedge fund manager Man Group PLC were unaffected by the 8.5% decline in assets under management (AUM) during the quarter ended 30 September, 2011.
Man’s preclose trading update, released on 28 September, 2011, indicated a decline in AUM from USD71 billion at June 30, 2011 to USD65 billion. This was due to weak investment performance, net outflows, and the impact of foreign exchange movements on reported AUM.
According to a statement released by S&P: "The quarterly decline in AUM is a result of market volatility and near-term macroeconomic uncertainty. While we expect the difficult operating environment to weigh on Man’s investment performance and net flows for the remainder of 2011, our ratings on Man, as well as other hedge fund managers, recognise the potential for some volatility in investment performance and investor flows. Man acquired hedge fund manager GLG Partners Inc. in 2010. Notwithstanding our expectation of near-term volatility, we continue to view the acquisition as a net positive for its business profile.
"Almost half (USD2.9 billion) of the quarter’s fall in AUM was caused by negative investment performance and net outflows on lower-margin, long-only products, which tend to follow broad market movements. A further one-third of the decline in AUM stemmed from foreign exchange movements, which could reverse in subsequent quarters. While GLG’s negative contribution to net flows has reversed recent trends at GLG, we view the decline in the context of general investor risk aversion and Man’s focus on liquid investment formats.
"We consider that Man continues to maintain strong balance sheet liquidity. Its total available liquidity resources stand at USD3.4 billion and capital in excess of regulatory requirements is USD1 billion. Furthermore, we expect Man’s debt service metrics and leverage ratio to improve over the medium term because it has recently bought back some of its debt to reduce its gross interest expense and leverage."
