Update on Man Group
On 4th November last year, I recommended buying Man Group at 315p for a trade immediately prior to the results on the basis that the dividend would be held and the shares would run to 370p. It worked a treat and the shares traded at 370p days later after an upbeat statement which showed net fund redemptions had halted after the rush for the exit in second half of the previous year.
The shares are now 220p,yielding 12.4%, significantly under performing what has been a dismal time for financials, so what went wrong and is it time to buy?
What went wrong is the performance of Man AHL Diversified Futures Ltd. This is Man’s flagship fund which accounts for half their total funds under management. AHL “seeks to capitalise primarily on upward and downward price trends in a diversified range of global stock index, bond, currency, short-term interest rate and commodity futures markets. The product offers the potential for returns independent of traditional forms of investment.”
AHL has now lost 16.6% of its value in 12 months with losses accelerating from October. Man recruits high powered boffins from Oxford University to run the fund which is based on computer programmes and they are working hard to fix the problem. The fund still averages an 11.1% annual growth rate since its inception in 1998, however and suffered a similar wobble in 2001.
Given that Man earned no performance fees from AHL in the six months to September 2009 any negative impact on future results will not be on these but on possible redemptions and declining NAV and therefore smaller management fees.
I suspect that Man’s near 40% fall in the last two months has been overdone and unless the wheels really have come off AHL (which has worked fine for twelve years ) the shares represent good value. I have bought in at 240p with a short term target of 300p but I will be keeping a keen eye on the AHL NAV number which is published weekly via an RNS.
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Have you increased your holding in MAN as the SP is now 220p
— Dave · Feb 6, 01:37 PM · #
Do you think these boffins have really worked out what happens in a depression? Beware the Black Box!
— Torquil · Feb 7, 07:12 PM · #
Dave No. I do not like averaging down.
Torquil. Lets hope so.
— Lucian Miers · Feb 10, 09:31 AM · #