Hedge fund giant Man Group sees assets fall 8 per cent in first half, as coronavirus crisis creates performance challenges

Coronavirus impact

Man Group has seen its funds under management tumble 8 per cent this year, as investment performance took a hit and investor redemptions spiked during the coronavirus crisis - but CEO Luke Ellis says the London-headquartered publicly-traded hedge fund group remains well-positioned despite 2020’s ongoing challenges.

Man’s funds under management fell to USD108.3 billion in the first six months of the year, down from USD117.7 billion at the start of January. The drop stemmed from investment performance losses of USD5.4 billion, together with USD1.2 billion of investor outflows. Negative FX translations and other movements wiped off another USD2.8 billion.

Man CEO Luke Ellis conceded the first half of 2020 was a “challenging time” for the group.

Man, which runs a wide assortment of discretionary and systematic investment funds across hedge fund and long-only strategies, is often considered a barometer for the UK’s broader alternative asset management industry.

It generated outperformance during the coronavirus-driven market volatility, particularly within several of its absolute return strategies. But the business faced twin pressures in Q2 as short positions faltered in the rapid market rebound and many institutional investors fled with their assets in response to the Covid-19 crash.

“As anticipated, redemptions increased in Q2, but it is pleasing to see flow momentum normalising as we enter the second half,” Ellis said in a statement on Thursday morning.

But the group said it is “well placed” to deal with the continuing economic turbulence heading into H2, pointing to the firm’s balance sheet strength and hailing its diverse product offering and relatively uncorrelated performance.

On the downside, Man Global Private Markets – its real estate- and private markets-focused specialist unit formed following the 2016 acquisition of Aalto Holdings – continues to struggle with slower-than-expected growth, exacerbated by the weaker environment following the Covid-19 crisis.

In terms of performance, Man’s absolute return hedge fund strategies – managed under the AHL and GLG brands – saw decidedly mixed results over the six-month period. They generated positive gains in the first quarter, but as markets rebounded many of their bearish bets went into a tailspin, pulling H1 performance down.

The long-running systematic CTA AHL Dimension lost 7.2 per cent, while AHL Evolution was down 3 per cent. But AHL Alpha gained 1.7 per cent during the same period, as AHL Diversified rose 0.8 per cent.

The Man GLG Global Credit Multi-Strategy made a 3.2 per cent return, as GLG Alpha Select advanced 2.8 per cent. GLG European Long Short was up 0.6 per cent.

Within the total return products, GLG Global EM Debt Total Return surged 9.3 per cent in H1, though Alternative Risk Premia SP shed 7.7 per cent. The multi-manager strategy FRM Diversified II lost 6.5 per cent.

Ellis said Man outperformed peers by 2.5 per cent on an asset-weighted basis in Q1, with gains driven chiefly by its absolute return funds and net inflows. Although it gave back some outperformance during Q2, it still outperformed by 1.3 per cent over the six-month period.

Overall, Man’s alternative funds under management – which includes absolute return, total return and multi-manager strategies – fell to USD69.4 billion in the six months to 30 June, down from USD71.5 billion at the start of the year. While alternative funds drew positive inflows of about USD1 billion, that was outweighed by performance losses of USD1 billion and negative FX of USD2.1 billion.

The group’s long-only products – spanning both systematic and discretionary strategies – fared worse.

Investment losses of USD4.4 billion, outflows of USD2.2 billion, and negative FX and other movements of USD700 million meant that long-only FUM dropped from USD46.2 billion in January to USD38.9 billion by the end of June.

As the group switched to home-working as the pandemic spread, Ellis said protecting its employees’ health and wellbeing and the performance of client assets were its chief priorities.

"I am proud of what we achieved on both counts," Ellis said. "Investing in our talent and technology, combined with our deep relationships with clients, is what will drive our future growth as the recovery develops."