Berenberg upgrades Man Group to 'hold' from 'sell'

2nd Jun 2014 07:59

Fund manager Man Group's "enormous" restructuring effort of the last three years is set to pay off, analysts at Berenberg explained to clients on Monday morning. In a research note entitled 'Turning the corner', they argued that much of the "heavy-lifting" associated with a wide-scale and aggressive restructuring is now complete and downside risk therefore limited. In that regard, they pointed out that the legacy issues associated with the AHL fund are set to gradually ease. So, while the run-off of guaranteed and continued outflows from AHL would continue to weigh on management fees near term, that drag was set to decrease as the proportion of fees from those two sources declined to circa 30% by 2015 from approximately 50%.One significant potential risk nonetheless was that the GLG fund needed to pick up the slack, the broker explained.Even so, GLG had been seeing good flows momentum, while management was looking to further diversify via acquisitions.Meanwhile, discussions were being held with the aim of purchasing US fund manager Numeric Holdings. Few details were available but a cash deal would be earnings accretive and buying a so-called 'quant manager' might further strengthen Man's institutional franchise in the US, Berenberg said.Whether the above deal in particular went off or not it was clear that Man Group's management team was clearly on the lookout for a complementary business to further diversify its products. On the basis of all of the above Berenberg upgraded its recommendation on shares of Man Group to 'hold' from 'sell', while revising its price target upwards to 90p from 70p previously. AB