Man Group (MNGPF) PLC H1 2016 Earnings Call

posted in: Earnings Call, Notes | 0

Manny Roman, CEO

Impact of Brexit difficult to assess but uncertainty lies ahead

“The EU referendum result came as a surprise to many in the industry; and without knowing the specific details of the changes that will be put in place if the UK left the EU, it is difficult to comment in detail on the impact. However, it is fair to say that we will experience a period of uncertainty and transition.”

Diversification helps build resilience in volatile times.

“From a funds-under-management perspective, the recent volatility in markets post the Brexit vote created a difficult environment for discretionary strategies, but benefited AHL, which demonstrates how the ongoing diversification of our business has enhanced our resilience as a firm.”

The are prepared to deal with regulatory changes that may result after the Brexit

“As far as regulation is concerned, we feel we are well positioned to manage any subsequent regulatory change, and plan to proceed with the investment to comply with MiFID 2. We currently operate in 18 different jurisdictions, with a global client base, and are experienced in operating in different regulatory environments and responding to changes.”

There operation currency is the USD hence the resulting weakness in the Sterling has been a boon to them

“From a currency perspective, we earn a profit in US dollars, and the weakness of the sterling is not a particular concern for us as we have a higher proportion of costs denominated in sterling in comparison to revenues. The weakness of the sterling will create a net benefit for us in 2017 onwards, due to us hedging our sterling cost base on a quarterly basis one year in advance. And our dividend will be higher in sterling terms.”

A fragile operating environment makes for a cautious outlook

“As we have seen in the first half of this year, the overall operating environment continues to be quite volatile. Flows are better in places, but investors’ appetite remain fragile. Our strategies have held up reasonably well, given the backdrop. However, we remain cautious in our outlook for second half of the year, given the heightened uncertainty.”

Flows in Japan are mostly driven by feelings

“What we have observed is that flow in Japan has a lot to do with how people feel about Japan…If people hate Japan, everything else being equal, it’s more likely there will be outflows; people love Japan, everything else being equal, it’s more likely there will be inflows….And it’s one of these markets where people have strong views, either positive or negative.”

Jonathan Sorrell, Co-President and CFO

They expect redemption rates to decline despite the uncertain times

“Notwithstanding the uncertain macro environment, we would hope to see our redemption rate decline over time as our assets and client base become increasingly more institutional in nature.”

Luke Ellis, Man Group plc – President

Manny is leaving and Luke is coming in but the strategy is still the same

“But Manny, Jon, and I have built the strategy together, we’ve worked very closely over the last few years, Manny and I have been friends for 20-something years, so the strategy we have is a joint one, and so the strategy going forward will be very much the same as it was before.”

The redemptions or sales levels were evenly spread out in the quarter: No spikes around Brexit

“no elevated levels of {redemptions and sales} particularly around Brexit. And I think redemptions and sales come in relatively evenly through a quarter; possibly, a weighting of sales towards the first of each month, but that’s about it.”


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