AS votes of confidence go, this is pretty resounding. The fact that Germany’s largest public pension fund – a byword for caution and solidity – has given Man Group a managed account mandate worth €1.2bn is good for the alternative fund manager’s image. No wonder it is shouting about it.
The mandate will provide a timely boost for Man’s assets under management, which grew from $65.9bn at the end of September (including the acquisition of GLG Group) to $68.6bn at the end of December. The gains were entirely performance related, however; the firm actually reported a net outflow of $1.1bn in its long-only funds, wiping out a net inflow of $0.1bn in alternatives.
It follows a similar win last year from the universities superannuation scheme, Britain’s second largest pension fund, which recently awarded Man Group a $1bn managed account mandate.
Managed accounts – whereby assets are invested in a hedge fund strategy but are physically held by an independent third party – are increasingly popular. Firstly, these assets aren’t subject to the kind of “gates” that hedge funds erected to stop clients pulling out their cash in the crisis. They also offer more transparency; clients with managed accounts get regular performance updates and can see – and in some cases veto – the trades made by the fund manager.
Although the deal will allow Man to report a healthy inflow at the end of the month, it is much less lucrative for the likes of Man Group. Sarah Ing thinks the management fee will be around 0.5 per cent rather than the traditional two per cent.?That would still mean an extra €6m in management fees – with even more in performance fees should the manager perform well.