By Nell Mackenzie
LONDON (Reuters) -British hedge fund manager Man Group posted forecast-beating first-half pretax profit and record assets under management on Tuesday, but a disappointing performance across several of its funds roiled investors, sending shares lower.
Shares were trading 5.4% down at 0736 GMT.
The $32 million of core performance fees booked over the period reflected "a difficult first quarter for trend-following absolute return strategies", a statement said, although again, this figure came in above expectations.
This year's wild March toppled several regional U.S. banks and Swiss lender Credit Suisse (SIX:CSGN), and rocked stock, bond and currency markets, catching many hedge funds off-guard and leaving them with unexpected losses.
"There was a softer Q1 in particular around the March reverse in the markets led by the issues with banks in the U.S.," Antoine Forterre, Man Group's chief financial officer told Reuters. "Since then, performance has somewhat recovered," he added.
Man reported negative investment performance at its AHL Evolution Fund and Numeric Global Core Relative Return fund for the first half of 2023, as well as its actively managed GLG Global Emerging Markets Debt Total Return Fund.
Performance fees in both Man's AHL Evolution and funds marked "other alternatives" both fell by over 80% from a year earlier.
The group said its core pre-tax profit fell 65% from a year earlier to $137 million, while compensation costs - which depend on how well funds perform - also fell by a quarter year-on-year to $257 million.
Despite the first quarter volatility, Man reported net inflows of $2.6 billion for the period, coming in around 2.5% higher than industry peers. This was a fifth lower than net inflows recorded a year earlier.
Luke Ellis, Man's departing chief executive officer said in the statement that the flows highlighted "broad-based demand" for the firm's range of differentiated investment strategies.
Assets under management rose to a record high of $151.7 billion, also beating analyst expectations for the first half of 2023.
As previously announced, Robyn Grew is set to take over from Ellis on September 1, becoming the first woman to lead the company.
Man Group's Forterre said that performance from the acquisition of Varagon Capital Partners, a U.S. middle-market private credit manager, would start to come into the hedge fund later in the third quarter as Man Group looks to step up its offering in the fast-growing direct lending market
"We think the set-up into the second half [of 2023] looks attractive," analysts at Jefferies said in a note to clients, adding that consensus did not yet reflect the earnings accretive Varagon deal.
Man recommended an interim dividend of 5.6 cents a share, in line with guidance offered a year ago.