GLG, the expensive fund manager it acquired in 2010, was supposed to offset periods of below-par performance at AHL – but it is doing nothing of the sort. GLG might have posted a net positive result in the quarter but around 60 per cent of its funds lost money. The departure of Noam Gottesman – one of the ‘G’s in GLG – as co-chief suggests the integration isn’t proceeding without its problems.
That said, Man shares are looking attractive. Fund outflows are getting smaller and, while there might be qualms about coverage, its dividend yield of 12.6 per cent is meaty. A further $75m of cost savings, a strong balance sheet and a superior distribution machine are also attractive.
The major draw is just how good things could get if performance improves even marginally. AHL is around 12 per cent below the high water mark at which it starts earning performance fees. Once it passes the mark, every percentage point of performance adds around $40m to the bottom line.
We remain sceptical that the execution of the GLG merger is going as well as management would have us believe. But just a small uptick in performance could leave the share price looking ridiculously low.