Man Group's Assets Rise to Record on Largest Inflows Since 2011

(Bloomberg) -- Man Group Plc, the world’s largest publicly traded hedge-fund firm, said its assets under management climbed to a record during the first quarter as investors bet that volatility will increase. The shares rose.

The London-based firm on Thursday reported net inflows of $3 billion during the first quarter, the highest since the second three months of 2011, as investors allocated capital to its long-only strategies and fund of funds. Sales of $8 billion more than offset $5 billion in redemptions, the company said in a statement. Assets under management rose to a record $88.7 billion from $80.9 billion at the end of December.

“We continue to believe Man Group to be very materially undervalued,” Shore Capital Group Ltd. analyst Paul McGinnis said in a report. The share price “implies the business model is broken, something not apparent in the strong level of net flows." He kept his buy rating on the stock.

Man Group's Assets Rise to Record on Largest Inflows Since 2011

Man Group received $3.7 billion in net inflows in the second quarter of 2011, according to a company filing.

Hedge funds are recovering from middling performance and net withdrawals last year. Investors allocated a net $15.7 billion to hedge funds in March, the largest inflows into the industry in 20 months, according to data provider eVestment. They had pulled almost $112 billion in 2016.

The easy-money policies used by central banks, which resulted in record-low interest rates, have made it harder for hedge funds to make money. However, the prospect of higher U.S. borrowing costs, and the impact on other markets, is expected to create more opportunities for them.

Man Group was up 5.8 percent at 149 pence at 11:20 a.m. in London. They had been up 22 percent this year before the results were released.

“The global environment has the potential to create alpha opportunities and we see continuing near-term interest from clients," Chief Executive Officer Luke Ellis said in the statement.

Inflows at Man Group were driven by its quantitative long-only funds as well as the GLG unit, which uses fundamental analysis to bet across asset classes.

The inflows into lower-margin funds and disappointing returns in Man Group’s computer-driven AHL strategies so far in the second quarter are a concern, Peter Lenardos, an analyst at RBC Capital Markets, said in a note. However, the “robust” first-quarter performance should lead to management-fee upgrades, he said.

The performance “indicates that the company’s diversification strategy is working,” Lenardos said.