Man Group, the former sugar broker which has been transformed into one of the world's leading hedge fund management groups, startled the City yesterday with news that its year-end figures would "materially" outstrip market forecasts.
Shares in the company, which has benefited hugely from the switch away from traditional fund management to "alternative" investment strategies, added 62p to £17.17 as analysts upped their profit expectations from £425m to more than £500m for the 12 months to end-March. The business is now valued at more than £5bn.
Since much of Man's trading and investment business is denominated in dollars there had been fears that the company's performance would have been hit by the severe weakness of the US currency. However, chief executive Stanley Fink was able to report a "very strong" growth in funds under management, which have ballooned from $26bn (£14.4bn) to $31bn over the year.
During January and February its flagship AHL investment fund had a "good performance," he said, adding that its "fund of funds" RMF investment product, which routes money to other hedge fund managers, also did well.
Meanwhile, he described Man's brokerage business, one of the world's largest futures brokers, as the "unsung hero" of the firm, with profitability growing by about 40%. Man has grown exponentially over recent years, with the bear market encouraging investors to move money from "long only" investment funds, such as unit trusts, to hedge funds, who are able to sell financial assets "short" and make money in falling markets.
However, some analysts had questioned whether Man could maintain its growth once world markets began to recover as they have over the past year.
"The market has bounced this year and the only region in the world where sales fell in the second half was Hong Kong, where money is very hot and it chases recent performance," Mr Fink said. "But in the rest of the world clients are holding [Man funds] for diversification." Another concern had been the firm's reliance on the "black box" of AHL, where a computer decides on what to invest in.