Lower revenues generated by management fees and performance fees have nearly cut profits in half at London-based Man Group.
Profit before tax fell to $205 million (€193 million) from $400 million the year before.
Partly behind this were performance fees, which fell from $326 million in 2015, to $112 million last year, the group said today in its full-year financial statement.
Analysts at Barclays said the halving of profits was within expected.
Man Group, known for its hedge fund strategies but which also offers traditional investments, made a statutory loss before tax of $272 million and said this was driven by impairments at its well-known subsidiary, GLG, and at FRM, a rival that Man Group acquired in 2012.
The impairment of GLG and FRM totalled $281 million and $98 million, respectively.
The GLG Market Neutral hedge fund was one of GLG’s best performers, returning 14.2%, and a long-only European growth fund returned 16.5%. Luke Ellis, CEO, described group performance as “respectable”.
Despite its problems last year, assets under management (AUM) increased 3% to $80.9 billion last year and net inflows increased to $1.9 billion, compared to $300 million in 2015.
Ellis said: “2016 was a challenging year for the investment management industry and despite respectable relative performance from our strategies, this is reflected in our results.”
He said the majority of Man’s funds with performance fees ended 2016 at or close to the level where fees would be paid to the manager.
Ellis also said: “We had positive alpha across our long-only strategies, during a year in which many questioned the benefits of active management.”
In a note to investors, Barclays analysts Daniel Garrod, Toni Dang and Shamoli Ravishanker, wrote: “Man Group reports in-line [full-year 2016 profit before tax] at $205m -49% [year-on-year], slightly disappointing Q4 outflows of -$0.4bn and, as a result, [AUM] was slightly below expectations at $80.9bn”.
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