Moodyâ??s has put Man Group on downgrade watch on fears earnings at the group will be impacted by a series of challenges facing the hedge fund firm. The ratings agency has threatened to downgrade all Manâ??s debt, which currently stands at Baa2.
Moody's fears ongoing pressure on earnings, margins and funds under management means total funds under management are unlikely to return to historic levels in the near term.
It said: â??This is the result of general market pressures as well as weaker sales of guaranteed products, changes in Man's product mix toward lower margin products such as managed accounts and the lower margins achieved by the GLG product range, leading to overall lower margins, as contrasted with Man's historic margins prior to the GLG acquisition.â??
Moodyâ??s also highlighted three other reasons for put Man on watch.
- Continued underperformance from key funds and their historical rates of return -- leaving them below high-water marks, despite the improvement of equity markets in early 2012 from the challenging conditions that prevailed in the second half of 2011
- A significant decline in debt coverage ratio over the last five years
- Pressures on the hedge fund business model more generally, where underperformance relative to investor expectations has called into question the sustainability of high fees.
