Broker snap: Peel Hunt downgrades Man Group to hold

1st May 2012 09:57

Peel Hunt has downgraded its rating for hedge fund manager Man Group from buy to hold, saying that today's first-quarter update 'will do little to quell fears' surrounding the company.Overall, the broker says that this morning's statement is broadly as expected with asset flows remaining relatively weak, "particularly in the higher margin product areas"."As has already been reported, AHL's performance this year has been relatively disappointing, the strategy now standing c14% below its high watermark," notes analyst Stuart Duncan.Nevertheless, group funds under management (FuM) at March 31st was $59bn, up from the $58.4bn reported at the end of the previous financial year and the top end of the the $58-59bn range of consensus estimates."With AuM little changed over the course of the year so far, but a negative effect from the changing business mix, we would expect to reduce forecasts significantly given the inherent operational gearing in the business model," Duncan said. With consensus forecasts having been reduced by around 11% over the last month, Peel Hunt thinks that it would have to cut its estimates by around 15%."Whilst Man undoubtedly has strengths such as the range of funds and distribution network, there remain a number of uncertainties in the short term and we therefore feel a hold recommendation is more appropriate."The target price is cut from 160p to 110p.BC