Man Group, the world’s largest publicly traded hedge fund operator, on Thursday said its main trend-following fund saw its returns suffer in 2023 after being thrown off course by the unexpected collapse of Silicon Valley Bank in March 2023.
The London money manager said its leading AHL Alpha systematic trading fund achieved returns of just 1% last year, after the investment fund’s trend-tracking strategy was caught out by a “year that defied market expectations.”
Man Group’s
EMG,
London listed shares increased 4% on Thursday having lost 10% of their value over the previous 12 months.
The investment fund blamed SVB’s unexpected collapse into insolvency and the shift in market expectations around interest rate cuts for the underwhelming performance achieved by its largest fund, as it described 2023 as a “testing year” for trend-following strategies.
“March’s SVB crisis was an idiosyncratic event that reversed prevailing trends,” Man Group CEO Robyn Grew said. “The market narrative centred around when central banks would end their hiking cycle and whether cuts would be imminent, which changed abruptly in November.”
The situation saw Man Group’s pre-tax profits fall 56% over 2023, to $340 million, in a performance that saw it outperform analysts’ expectations it would generate pre-tax profits of $332 million for the year.
Man Group, which was first started as a City of London sugar trading company 1783 before transforming itself into a dedicated investment fund, blamed the drop in its profits on sharp decline in performance fee income compared to 2022.
The money manager, however, saw its assets under management increase 17% year-on-year to record highs of $167.5 billion, as it brought in $3 billion worth of inflows, partly due to its strong links with investors worldwide.
The tech-driven asset manager also vowed to continue investing in its artificial intelligence capabilities, with a view to building on its early investments in the technology which saw it first start using machine learning techniques in its trading strategies a decade ago.
The company noted that it launched its own in-house chatbot, ManGPT, in 2023, with a view to boosting firm-wide productivity, as it argued generative AI has the potential to “increase productivity and deliver significant operating leverage for our shareholders.”
In a note, analysts at Panmure said they were encouraged that Man Group’s new CEO Grew has seemingly decided to focus on furthering the investment fund’s existing strategy, rather than pursuing a “wholesale change of direction,” after taking up his position in September 2023.
