ShoreCap hails strong Q1 net inflows at Man Group

Contrary to what one might expect, in a quarter pockmarked by volatility the fund manager saw net inflows rise by $0.5bn, helping to keep its total assets under management on an even keel as of 31 March, at $78.6bn.

The performance of its AHL fund was particularly striking, with Quant Alternatives seeing “good” net inflows of $1.3bn (8.0%) and an excellent investment performance of +5% in a volatile quarter, “conditions not usually helpful to trend-following strategies”, ShoreCap analyst Paul McGinnis said in a research note sent to clients.

Nevertheless, a difficult first quarter did leave the fund manager nursing losses of 16.3% on its Japan Core Alpha product, versus a 12.0% fall for Tokyo’s benchmark Topix index.

Trading on 10.9 times ShoreCap’s earnings per share estimate for 2016 of 19.8c and sporting a 4.7% dividend yield, the company was changing hands at about a 20.0% discount to the sector.

That “[discount] materially undervalues […] and we think it should trade at a sector premium,” McGinnis said, sticking by his ‘buy’ recommendation and fair value estimate of 245p.

His peers at RBC were a bit more circumspect in their appraisal of the company’s solidness; hence their recommendation was held at a ‘sector perform’.

“Man’s efforts to diversify its product range and broaden its distribution network has resulted in net inflows during a volatile and uncertain Q1

“Man remains the most inexpensive asset manager that we cover and trades at 9.1x 2017E EPS (sector: 14.1x) and at 6.4x 2017E EBITDA (sector: 9.8x), largely because of the large proportion of performance fees that it derives and the lower visibility over net inflows,” RBC said.