Man Group's funds under management rocket

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Man (Group) certainly need not live on bread alone, as the investment manager this morning reported a massive rise in funds under management.

The FTSE 250-listed hedge fund group, most of whose clients are institutional investors, saw net inflows of $8.2bn (£6.2bn) over the first half of 2017, compared to just $1bn a year previously.

Meanwhile Man's adjusted profit before tax rocketed 48 per cent on the same period last year to $145m.

“We saw strong inflows from clients during the half and a 19 per cent increase in funds under management with growth across all our investment managers,” said Luke Ellis, Man's chief executive.

“However our revenue margin has compressed during the half as we have won several large, low margin mandates, meaning our management fees have grown at a much steadier pace.”

Run-rate net management fees in fact increased by six per cent, to $720m. Paul McGinnis, analyst at Shore Capital, said:

Man’s high eligibility to earn performance fees is the key positive aspect of its business model, in our view, in a market where active managers are being forced up the risk curve to offer clearly differentiate their product set from passives.

Shares were up 4.58 per cent at the time of writing at 167.35p.

Read more: Man Group reports losses and lower performance fees

The alternatives and private markets investor, which focuses on using algorithms and technology to help its investment decisions, beat analysts' expectations with consensus estimates putting profit before tax at $129m.

It said the Aalto acquisition added $1.8bn to funds under management, while it gained $1.2bn from currency exchange rates and "other movements".

Man's strong performance also reflects the continuing trend of worried investors seemingly piling their cash into alternative investments in the hope of escaping low interest rates.

Read more: Man Group shares jump as firm reports net inflows of $3bn in first quarter

However, Ellis warned that 2017's first-half results were probably not the new norm.

“The first half was unusual in both the scale of net inflows, and the level of margin compression. We would expect both to moderate in the second half, particularly given the uneven nature of institutional flows,” he said.

Yet the group has declared an interim dividend of five cents per share, and announced it had almost completed the $100m share buyback announced in October 2016.

Read more: These are the FTSE companies with the highest and lowest chief executive pay ratios

Full story: Man oh man: Man Group's funds under management have rocketed: City A.M.

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