Hedge fund giant Man Group sees funds under management hit record high as alternative strategies rise

Luke Ellis, Man Group

Man Group, the publicly-quoted London-headquartered global hedge fund group, has seen its funds under management hit record highs, with its hedge funds and alternative strategies posting strong performances amid 2020’s unprecedented coronavirus-fuelled turbulence, despite a fall in annual pre-tax profits for the company.

The FTSE250-listed group’s funds under management surged to a new high of USD123.6 billion last year - a USD5.9 billion rise from the USD117.7 billion recorded at the end of 2019.

While its investment performance totalled USD3.3 billion in 2020, down from USD10.1 billion the previous year, Man attracted net investor inflows of USD1.8 billion, which reversed 2019’s outflows of USD1.3 billion. However, the firm’s core profit before tax fell USD100 million from USD384 million to USD284 million, as statutory profit before tax dropped from USD307 million to USD179 million.

Man CEO Luke Ellis said the “strong set of financial results” demonstrate the group’s growth and resilience during what he described as a “challenging environment” in 2020. In a statement, he struck an optimistic tone for the year ahead, pointing towards national and global vaccine progress as well as developments on ESG and technology within Man Group.

“We saw net inflows last year and we’ve seen that positive engagement with clients continue into 2021,” he added. “We are confident in our growth trajectory and enter the year with good momentum, with the combination of our talented team and leading technology driving our strong competitive position.”

The group’s alternative funds under management – which span absolute return, total return and multi-manager solutions – rose to USD77.2 billion by 31 December 2020, up sharply from the previous quarter’s USD72.4 billion, and from 2019’s annual total of USD71.5 billion. Over the course of last year, Man’s alternatives range generated USD1.5 billion of investment performance, and drew USD4.3 billion of positive investors flows. FX and other movements dropped USD100 million.

Meanwhile, Man’s long-only strategies increased annually from USD46.2 billion in 2019 to USD46.4 billion in 2020, driven by USD1.8 billion of investment performance, and USD900 million of FX and other movements, as outflows totalled USD2.5 billion.

Within Man’s alternatives range, its absolute return strategies – managed under the AHL and GLG brands – increased to USD34 billion in 2020 from USD30.5 billion the previous year. Total return strategies – which include alternative risk premia, private markets, CLOs and emerging market total return funds – added USD2 billion year-on-year, from USD27 billion in 2019 to USD29 billion last year. Its multi-manager solutions meanwhile rose from USD14 billion to USD14.2 billion.

Often seen as a bellwether for the broader UK alternative asset management industry, Man Group’s alternative funds – which include an assortment of discretionary and quantitative hedge fund strategies focused on a variety of asset classes and markets – were mostly in positive territory last year.

In terms of individual strategy performance, AHL Diversified, the long-running systematic CTA strategy, led the pack with an 11 per cent annual return in 2020. The GLG Global Multi-Credit Strategy advanced 8 per cent in 2020, while AHL Alpha added 7.9 per cent in the 12-month period.

The GLG European Long/Short Fund, GLG Alpha Select Alternative, and AHL Target Risk each generated returns of more than 5 per cent last year. AHL Evolution was up almost 4 per cent, and GLG Global Emerging Markets Debt Total Return gained 3.5 per cent, while FRM Diversified II, the multi-manager hedge fund vehicle run under Man’s FRM unit, made 2.6 per cent.

On the downside, Alternative Risk Premia proved to be an outlier in 2020’s choppy markets, tumbling 10.6 per cent annually, while AHL Dimension lost 8.5 per cent last year.

The group raised its total dividend for 2020 to 10.6 cents per share, an increase of 8 per cent from the previous year’s 9.8 cents.

“Last year was an exceptionally difficult time for much of the world, with Covid-19 fundamentally changing our day-to-day lives and how businesses operated,” Ellis observed.

“We have increased our management fee profits and our dividend to shareholders, and grown client assets to end the year at a new record high for funds under management.”