Broker snap: Man Group hit by Credit Suisse downgrade

3rd Jul 2012 09:55

Credit Suisse has downgraded its rating for hedge fund manager Man Group from 'outperform' to 'neutral' and slashed its target price from 130p to just 88p, saying that the market environment remains 'tough'.The challenging market environment during the the second quarter of 2012 saw "unhelpful" significant volatility affect Man's AHL and flagship GLG funds following a strong first three months of the year, the broker said.Credit Suisse estimates a negative performance impact on assets under management (AuM) of $2.3bn in the second quarter. The broker forecasts second-quarter net flows (-$1.7bn) versus the first quarter (-$1bn) "driven by subdued investor appetite across the industry particularly during May as confirmed by industry flow data but also the weaker investment performance."AuM is expected to decline by around 12% from $59bn to $51.8bn in the second quarter."We believe Man Group's diverse product suite and strong distribution platform offer medium-term opportunities. However in the near term, we believe market conditions are not conducive for significant asset growth and weakness in AHL pushes out further the timing for material performance fees and new fund launches," the broker said."Against this backdrop we believe management may re-assess the cost structure in the business but timing is uncertain."By 09:53 on Tuesday, shares were trading 1.81% lower at 73.1p.BC