Panmure Liberum says Man Group's current rating fails to reflect its performance fee potential, with the stock trading at just 10 times current-year earnings
Man Group PLC (LSE:EMG), the listed alternative asset manager, saw its shares fall 5% to 252.2p after first-quarter assets under management (AUM) came in marginally below expectations, dragged down by a large single-client redemption that masked otherwise encouraging investment performance.
AUM at the end of the first quarter stood at $228.7 billion, against Panmure Liberum's forecast of $231.9 billion and a consensus estimate of $231.3 billion.
The principal shortfall came from net outflows of $1.6 billion, compared with Panmure Liberum's estimate of $800 million of net inflows and consensus expectations of $1.8 billion of inflows.
The bulk of the divergence stemmed from a single $6.1 billion client redemption from Man's systematic long-only equity strategies, which carry the lowest revenue margins across the group.
Liquid alternative strategies also saw small net outflows, though discretionary long-only strategies, predominantly in credit, attracted positive inflows.
Against that, Man Group stood apart from sector peers by recording positive market movements of $3.1 billion for the quarter, driven by strong investment performance in January and February and the breadth of markets covered by its core trend-following strategies.
Panmure noted that performance in those strategies has remained robust into April, with the AHL Alpha fund broadly flat through recent market volatility and still up approximately 8% year to date.
The broker estimates that around three-quarters of the $60 billion in performance fee-eligible AUM is at or above high-water marks, the threshold at which performance fees become payable, underpinning its forecast of approximately $200 million in performance fees for the current year.
Panmure said it believes the current share price rating "fails to adequately reflect this potential," pointing to a current-year price-to-earnings ratio of just 10 times, or 12.5 times when performance fees are half-weighted, alongside a dividend yield of approximately 5% covered 1.2 times by management fee earnings alone.