Goldman Sachs slashes price target for Man Group

Goldman Sachs has downgraded its rating on Man Group and cut 2019 earnings forecasts, over concerns about the strength of the market and the firm's portfolio.

Assets under management at Man Group, an active investment management firm and hedge fund, decreased by 1% in 2018 against Goldman’s expectations for 15% growth.

In a note published on Monday, the bank stated: “The lower starting base of AUM for 2019 will materially impact the future revenues on our estimates.

“Despite our expectation of AUM growth of 12% for 2019 from the new lower base of 2018, we see no growth in management fees for 2019 year-on-year, due to the loss of AUM concentrated in the fourth quarter of 2018.”

It continued: “Additionally, performance fees in 2018 of $127m fell significantly below our expectations of $200m. As the performance fee paying funds started 2019 on average 4.7% below high watermark, and given the current market volatility, which we believe will negatively impact the performance of Man’s key performance fee paying strategies, we decrease our expectations for performance fees in 2019 to $200m, from $220m previously.”

The bank said it had adjusted its forecasts to reflect "the more recent trends in the market and in Man's portfolio", cutting its estimates for 2019 earnings “materially” and slashing its price target to 150p from 205p. It now has a ‘neutral’ rating on the stock, downgraded from its previous ‘buy’ recommendation.

However, Goldman Sachs did concede that “higher or lower than expected net flows and significant swings from our fee margin forecasts could materially affect our estimates”.

As at 1000 BST shares in Man Group were down a little over 3% at 146.6p.