Investment performance was the major source of asset growth for Man Group in the last quarter, with AHL, GLG and the Man Multi-Manager all making positive contributions.
AHL Diversified plc was up 5.3% in the three months to 31 December 2010, to give a calendar year return of 14.8%. AHL was 3.7% below peak on a weighted average basis at 31 December, with 75% of FUM at or within 5% of peak. Metals and commodity-based currencies were the most profitable positions in the quarter.
Performance across the range of GLG alternative styles was strong, with GLG Alpha Select, GLG Market Neutral, GLG Multi-Strategy, GLG Atlas Macro, GLG Emerging Currency and Fixed Income and GLG European Distressed all nominated for the forthcoming 2010 Eurohedge awards. Positive investment movement in long only funds in the quarter was driven in particular by strong performance in GLG Japan Core Alpha (up 11.9%).
Man Multi-Manager also delivered positive performance in the third quarter, driven by its managed futures and global macro strategies, with institutional flagship fund of funds Man Absolute Return Strategies and Man Dynamic Selection up 3.6% and 3.9% respectively. Man IP 220, the flagship retail structured product, finished the calendar year up 22.3%.
Man saw a net inflow of USD0.1 billion into alternative funds in the third quarter. As expected, demand is strongest for open-ended formats, which generated an inflow of USD1.0 billion. Both AHL and GLG alternatives saw positive flows, with the majority coming from GLG.
Guaranteed products saw net outflows of USD0.6 billion – similar to the previous quarter, however, there are early signs of an increase in investor interest in guaranteed formats, with USD350 million from the Q3 launch of Man Synergy included in FUM from 1 January 2011.
There was a small net outflow of USD0.3 billion in institutional fund of funds, although the near term outlook remains positive. Man has been in exclusive negotiations with a major European institutional client to set up a bespoke managed account platform to manage in excess of USD1.5 billion. The transaction is expected to be finalised in February and to fund over the next 10 months. Institutional quarterly redemptions confirmed on 1 January 2011 were around $400 million.
Long only funds saw a USD1.1 billion outflow in the third quarter, driven principally by a single redemption of over USD1 billion of a low margin mandate, as the investor switched out of European equities. Inflows in the long only business are at higher margins than outflows.
“Investment performance has been the principal driver of asset growth in the final quarter of the calendar year, delivering impressive returns for 2010 as a whole and a solid backdrop for 2011," says Man Group Chief Executive Peter Clarke (pictured). "The quarter saw positive flows into alternative styles, but a single large redemption resulted in an outflow from lower margin long-only funds.
“The sales pipeline is strong across the business. As expected, performance is driving investor demand first in open-ended funds, with our integrated marketing campaigns focusing on emerging markets, global macro and equity long/short funds, as well as managed futures. GLG UK Alpha Select UCITS was re-opened briefly to new investors and raised an additional USD240 million. Our most recent guaranteed product, Man Synergy, started trading on 1 January 2011 at USD350 million, indicating some pick-up in private investor demand for structured product. The new Man IP220 GLG product, which combines AHL managed futures with the multi-strategy GLG Global Opportunities fund, will start marketing at the end of this month. The institutional sales outlook is positive, with a major European managed account mandate for at least USD1.5 billion expected to conclude in February for funding over the year.
"The GLG integration process has gone very well, with cost synergies on track and a sales pipeline which provides support for strong revenue synergies to develop. We have also established a new venture, Man Systematic Strategies, to develop quantitatively-based investment ideas using the combined expertise of Man and GLG. Two new products will be launched from this initiative very shortly. “With strong performance and a clear marketing focus for new and existing investment ideas, there is significant momentum for the business in the year ahead.”
