EMG

Having initiated coverage on Man Group (EMG) in late July with a ‘fair value’ recommendation Kaupthing Singer & Friedlander’s Sarah Ing has upgraded to ‘buy’.

Man has struggled following a disappointing performance from its key AHL Diversified fund which has lost 9.4% of its value since 16 June. Reflecting this the company’s shares have fallen 9.1% from their 4 June high of 626p to 569p.

But Ing believes the AHL performance blip will be short term and also points to the benefits of sterling weakness, which will flatter earnings per share once they are translated back from the dollars in which Man reports its figures.

‘AHL’s weaker performance is not unusual following trend reversals in a number of futures markets,’ says Ing. ‘This degree of drawdown is not uncommon looking back over AHL’s past track record and we would expect to see a recovery in performance going forward.’

The strong performance of AHL means Man has been able to buck the sharp share price declines experienced by the traditional long-only fund managers. Despite the recent correction, Man is still up about 20% in the past year.

The ability to perform in falling equity markets means Man has kept on attracting fund inflows and Ing expects sales in the current year to ‘remain very strong’. The analyst initiated coverage along with a number of other alternative managers in a note on 31 July.

Ing has also changed her recommendation on RAB Capital (RAB:AIM) from ‘fair value’ to ‘sell’ flagging deteriorating performance from the group’s larger funds.

by Simon Keane