Man Group’s assets under management fell 5% in the final quarter as continued net inflows were offset by a performance-related reduction of $6.9bn.
The world’s largest listed hedge fund manager ended 2018 with $108.5bn under management, down from $114.1bn a quarter earlier and $109.1bn a year earlier.
Nine-tenths of Man’s performance-related decline in assets, which amounted to $7.7bn last year, came in the final quarter. Losses chipped $6.6bn from its long-only units last year, while alternatives were less affected.
“2018 was a more difficult year for the asset management industry, characterised by periods of higher volatility which impacted performance across asset classes and investment styles,” said CEO Luke Ellis in a statement.
He admitted there had been a “disappointing level of performance fee generation” last year, with revenues falling almost two-thirds to $111m. Management fees income rose by $55m to $791m compared to a year earlier.
The results provide evidence that investors are boosting allocations to hedge funds amid a more volatile market environment.
Man’s absolute and total return divisions, which include its main hedge fund products, saw net inflows of $7.7bn in 2018, more than double the $3.1bn allocated to the long-only systematic and discretionary units.
Ellis provided a mixed outlook on flows. “Looking ahead, we have had a healthy number of new mandate wins but as clients respond to changes in the market and adjust their portfolios we have also seen a pick-up in redemptions.”
The results led David McCann, an analyst with Numis Securities, to issue a hold rating on the stock, which slipped 2% in early-day trading and were worth 132.2p as of 10am.
“There remain many short to medium term uncertainties at Man, including inconsistent performance/performance fees, volatile flows and fee margin pressure,” he said.
“We think the short to medium-term outlook for the current business is for modest growth, in terms of the direction of management fee profits.”
He added that upside could come from surplus capital, which stands at about 17p per share, if distributed to shareholders or used for acquisitions.
READ MORE: Evolution of Man – our May 2018 profile interview with Luke Ellis
EuroHedge’s twentieth anniversary interview with Ellis from January 2019
Man Group assets dented by fourth-quarter losses on EuroHedge.