Man Group's net outflows reach $2.5bn - UPDATE
Economic uncertainty in Europe and the US continued depressing investor confidence in the final quarter of 2011, leading to another decline in Man Group's (LON:EMG) assets.
Despite the lacklustre figures, Man Group emerged among the top risers in the FTSE 100 index this morning as the markets welcomed the group's plans to save an additional US$75 million this year.
The hedge fund manager saw its funds under management (FUM) drop from US$64.5 billion at the end of September to US$58.4 billion at the end of the year as net outflows reached US$2.5 billion.
Sales at Man reached US$3.1 billion during the quarter, while redemptions amounted to US$5.6 billion.
"Trading conditions have been tough for Man in the second half of 2011. Investment performance varied significantly across styles, with market volatility and reduced market liquidity impacting trading opportunities," said chief executive of Man Group Peter Clarke.
Man said today that it will address the "tough trading conditions" by implementing a further US$75 million of cost cuts by the end of 2012 on top of the previously announced US$40 million in cost savings, which are on track for 2012.
"With a strong capital base and continued focus on efficiency and performance, we are well placed to benefit when investor demand improves," said Clarke.
Shares in Man rallied 5.9 pence to 113 pence by 8:20 am, giving the company a market cap of £1.95 billion.
The FUM reported by Man Group missed Arbuthnot's forecasts by 11.6 percent, which the broker said may prompt it to reduce its 2012 forecasts for the group. Forecasts by Numis were more conservative, but also turned out to be above the actual FUM by US$0.7 billion.
Arbuthnot analyst Michael Loungo added that volatility in the group's assets is likely to continue, also noting that negative investment performance slashed Man's assets by US$1.5 billion during the quarter, pressuring its performance fees.
On a positive note, Loungo said significant caution is already priced into the current valuation and a new dividend policy along with cost cuts could serve as catalysts for share price recovery this year.
"Weak actual and forecast financial performance has obviously weighed heavily on Man Group's share price, and for the second time since initiation in July 2011, we are likely to revise downward our estimates," said Loungo.
"A material recovery in share price is unlikely without a significant turnaround in financial performance."
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