Man Group: going mainstream
Man Group plans to build up its equity research and broking business.
December 17, 2003 5:41 PM GMT (Datamonitor) - Having exploited the strong growth in alternative investments in recent years, Man Group [EMG.L], the largest listed hedge fund product provider, has announced it now plans to boost its equity research and broking division. The move, which clearly highlights Man's determination to expand, could prove challenging as Man lines up against mainstream banks and stockbrokers.
Man Group has plans to move beyond its stronghold in hedge fund management and futures brokerage to compete with traditional investment banks and stockbrokers in their own backyards. Kevin Davis, head of Man Financial, the group's brokerage arm, announced on December 15 that the company is hiring analysts and sales teams in a bid to offer equity brokerage and research.
The poor investment environment of recent years has dented investor confidence and the profits of companies handling traditional asset classes. However, the rise in the popularity of alternative investments has seen Man Group become the largest listed hedge fund manager.
Man Group now has more than $32 billion in assets under management. Income from management fees rose by 53% to GBP122.8 million ($204.7 million) in the six months to September 30.
In November, Man Group acquired a 25% stake in BlueCrest Capital, a London based fixed income and currencies hedge fund. Last year it bought RMF, a Swiss based fund of hedge funds manager, which currently has around $13 billion in assets under management.
However, alternative investment markets have a low correlation with traditional investment sectors and will not continue to achieve the same levels of growth indefinitely. This latest diversification by Man represents a new strand in its expansionary strategy.
The arrival of a new research operation with an untarnished reputation could potentially fit the bill. But equity brokerage could prove much more challenging as it places Man in direct competition with traditional investment banking and brokerage players. This is a sector where many players have struggled and growth forecasts remain relatively low.
To its credit, Man appears to have the right approach as it is looking to buy in business by hiring brokers with sizeable existing customer bases. This could allow it to expand its small institutional equities business line. A stock market turnaround could also support the initiative in the shorter term. In any case, this bold move can leave few in doubt as to Man's intention to make expansion the game plan.
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