LONDON (Reuters) - Hedge fund firm Man Group cheered investors with plans to use surplus cash to buy back all its debt securities, overshadowing a surge in client outflows to the highest level since the onset of the credit crisis.
Man, which recently unlocked $550 million (354 million pounds) in capital when its regulatory status was changed, will use up to $470 million of cash to buy back the debt, saving up to $78 million a year in interest and coupons from next year, it said on Friday.
At 8:40 a.m. Man’s (EMG.L) shares, which are down by more than 60 percent since the start of 2011, were up 8.5 percent.
The former FTSE 100 firm, which holds its annual general meeting later in the day, said clients withdrew a net $3.7 billion during the first quarter, slightly better than analysts had forecast.
“Whilst these savings (from the buyback) are clearly beneficial to earnings in the short term, they do nothing to address fundamental top line problems caused by poor performance, weak flows and margin pressures,” said Numis analyst David McCann, who has a sell rating on the shares.
In spite of a stronger recent performance from $14.1 billion computer-driven flagship fund AHL - which has gained 10.4 percent so far this year thanks to the re-emergence of the market trends it can profit from - assets fell to $54.8 billion from $57 billion in December.
The firm said AHL open-ended funds are around 4.5 percent away from high-water mark, the point above which the firm can earn lucrative performance fees.
Its Evolution fund - another computer fund built by AHL - is up more than 11 percent in April, while its GLG Japan Core Alpha fund gained 24 percent in the first quarter, as Japan’s stock market rallied sharply on hopes its aggressive economic policies would kick-start the economy.
“Business conditions remain challenging for Man,” said CEO Manny Roman. “We remain cautious in our outlook as we will need a more sustained period of performance, particularly from AHL, before we see an improvement in net flows.”
The outflows were predominantly driven by the loss of three large, low-margin mandates, Roman said.
The withdrawals mean Man, which in February appointed Roman in place of Peter Clarke to try to win back clients and turn around fund performance, has posted outflows in each of the past seven quarters.
The firm will also hope that recent moves to cap short-term annual cash bonuses and pay no bonuses to top executives for 2012 will head off some of the criticism from small shareholders at last year’s AGM, particularly over Clarke’s nearly $7 million package.
Editing by Mark Potter