Shares in Man Group (LON:EMG) jumped after the hedge fund heavyweight was upgraded to a ‘buy’ from a 'neutral' recommendation by Swiss investment bank UBS.
Man Group's shares have fallen 23% over the past four weeks despite the company recently reporting third-quarter assets under management and flows, which were in line with consensus forecasts.
READ: Man Group PLC posts slight increase in Q3 funds under management, proposes new holding company
UBS analysts argue that the planned sale of its interest in Nephila would increase capital by US$130mln, which would largely offset the US$120m negative impact the company guided from changes to lease accounting (IFRS 16) to be applied at the year-end. In addition, the proposed reorganisation of the business has the potential to unlock regulatory capital, while the US$100m share repurchase plan should also serve as a positive catalyst for the shares.
“We believe the negative share performance has been driven by concerns about second-half performance fees given the recent market turbulence and the impact to its AHL funds. However, we argue these concerns are more than priced into the shares at these levels,” UBS analysts said in a note to clients.
UBS cut Man’s 2018 earnings per share estimate by 9% but kept its price target at 142p.
Man Group shares were 4.3% up at 147.95p in mid-morning trade.