Key Takeaways
- • UBS upgraded Man Group to 'buy' from 'neutral' and raised its price target to 365p from 335p, with shares jumping 6% to 334.8p.
- • UBS analyst Michael Werner argues AHL's recent trend-following gains are not reflected in the share price, leaving the stock more than one standard deviation below its seven-year average valuation.
- • AHL's funds have climbed 7% since early August, with the Evolution strategy up 14%, lifting all four key strategies above their high watermarks.
- • UBS raised its 2027 and 2028 performance-fee earnings forecasts to levels 28% to 29% above market consensus.
- • UBS expects Man Group to direct about 85% of performance-fee earnings into buybacks, equal to roughly 5% of company value annually, and flags early October as the next catalyst.
Summary
UBS upgraded Man Group to 'buy' from 'neutral' and raised its price target to 365p from 335p, sending shares up 6% to 334.8p. The call rests on a sharp rebound in AHL, Man Group's suite of algorithmic trend-following funds that trade momentum across markets. According to the report, the funds had been flat to negative for five months before climbing 7% since early August, with the Evolution strategy up 14%. That performance has lifted all four of AHL's key strategies above their high watermarks, the threshold a fund must clear before managers can collect performance fees.
UBS analyst Michael Werner said the gains had not yet been reflected in the share price. He noted the stock trades more than one standard deviation below its seven-year average valuation. On higher fund values, UBS raised its performance-fee earnings forecasts sharply, placing its 2027 and 2028 estimates 28% to 29% above market consensus.
Man Group has directed nearly all performance-fee earnings into share buybacks in recent years. UBS expects this practice to continue at around 85%, which would equate to buybacks worth roughly 5% of the company's value each year. The firm also estimates that a 5% swing in fund values translates into a 7% to 15% move in earnings, making AHL's performance the central risk. UBS acknowledged that returns in this space are nearly impossible to forecast. It expects the next catalyst in early October, when rival analysts are likely to revise their estimates to reflect AHL's gains as the third quarter closes.
UBS analyst Michael Werner said the gains had not yet been reflected in the share price. He noted the stock trades more than one standard deviation below its seven-year average valuation. On higher fund values, UBS raised its performance-fee earnings forecasts sharply, placing its 2027 and 2028 estimates 28% to 29% above market consensus.
Man Group has directed nearly all performance-fee earnings into share buybacks in recent years. UBS expects this practice to continue at around 85%, which would equate to buybacks worth roughly 5% of the company's value each year. The firm also estimates that a 5% swing in fund values translates into a 7% to 15% move in earnings, making AHL's performance the central risk. UBS acknowledged that returns in this space are nearly impossible to forecast. It expects the next catalyst in early October, when rival analysts are likely to revise their estimates to reflect AHL's gains as the third quarter closes.
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