Man Group (MNGPF, Financial)(MNGPY, Financial) is a London-based asset manager. The stock did poorly in the financial crisis but pays a nice dividend.
The stock trades at $1.51, there are 170 million shares and the market cap is $2.57 billion. The dividend was 10.2 cents per share and the dividend yield was 5.5%. Earnings in 2015 were 10 cents and the price to earnings ratio was 15.1. Man is headquartered in London but reports in dollars. I’ve taken their listing in pounds and converted it into dollars. I don’t trust the price of the ADR as pink sheets can be volatile. Some of the data has changed with the weak pound. I’ll used the published historical exchange rates, meaning I won’t use the new strong dollar exchange rate.
Funds under management, as of Sept. 30, were $76.4 billion. There were $6 billion of assets under management brought in and $4.7 billion in redemptions for the quarter. The quant funds (AHL and Numeric) have $19 billion assets under management. Discretionary (GLG) has $14.9 billion. Its fund of funds (FRM) has $11.8 billion. Its long-only quant funds (Numeric and AHL) have $19 billion. Its long-only discretionary (GLG) has $11.1 billion. There are dozens of funds under these headings. It was recently announced assets under management is $80.7 billion.
Revenues were $1.135 billion in 2015, of which $833 million was management fees and $302 million in performance fees. Revenues were $1.15 billion in 2014. Adjusted Ebitda was $422 million, a 39% margin. Very profitable. Free cash flow was $355 million for a free cash flow yield of 13.8%. The balance sheet shows $1.14 billion in cash to $569 million in payables and $149 million in debt.
In 2014, Man bought Boston-based hedge fund Numeric Holdings LLC for $219 million. A further $275 million is being offered to retain employees. Numeric had $17.7 billion of assets under management at the time. It was announced today that Man purchased London-based Aalto. Aalto focuses on single family homes and real estate in Europe and the U.S. Assets under management is $1.7 billion. Man paid $25 million of which two-thirds is cash and one-third is stock. Markets liked the news and the stock jumped 10%. The CNBC link gives a nice narrative about Man and some of its issues. The CNBC announcer thinks Man will grow through M&A. I agree. Brexit and the weak pound should help Man as it reports in dollars.
A $100 million share repurchase program was announced recently. In 2015, $1.2 billion in debt was paid off and 128 million shares have been bought back since 2014. The dividend was 10.2 cents in 2015, 10.1 cents in 2014, 7.9 cents in 2013 and 22 cents in 2012. The dividend policy is to pay out much of the earnings. You can see that it has been a dividend machine in a strong financial market.
I was curious to see how the financial crash affected Man. They got pummeled. Assets under management went from $74.6 billion in 2008 to $46.8 billion in 2009 to $39.4 billion in 2010. Yikes. Every other metric, including dividends, got punished too. The stock used to trade six times higher than where it trades at now. The stock just bounded off a two-year low.
A great video explains the quant funds and how they work. Basically, it follows trends in currencies, commodities, stocks and other financial assets. It uses volume, trends and sophisticated computer programs to track these things. In a Bloomberg interview, CEO Luke Ellis opines on how hard it is to make money in these low return financial markets and how global markets will respond to deleveraging. He talks about fee pressure and how the hedge fund industry is probably at peak assets. The days of 2% management fees and 20% performance fees are probably over.
I agree with Ellis. My concern with Man is that you are getting in at the top. Even if it has shorts and puts and all of that stuff that does well in down markets, it didn’t work in 2008/2009. I do want to follow this company. The dividend payout is very intriguing.
Disclosure: We do not own shares.
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