Ratings agency Moody’s Investors Services has downgraded Man Group with a negative outlook following a review which began earlier this year.
The downgrade relates to all debt and preferred stock ratings, with senior debt downgraded from Baa2 to Baa3. It had earlier been put under review for a possible downgrade.
According to Moody’s, the downgrade reflects continuing challenges to the company’s core business, including a “persistent decline in funds under management”, below benchmark investment performance, decline in management fee, falling revenues, financial condition and an expectation of “little if any retained earnings”.
Moody’s claims funds under management have declined from $75.6bn in 2008 to $52.7bn in June 2012, despite the acquisition of GLG, while underperformance was below benchmark and historical rates of return.
The ongoing decline in the aggregate gross management fee margin came about due to its shifting business mix, while falling revenues have been impacted by declining gross management fee income and gross performance fee income, according to Moody’s.
The report also highlighted weakness in Man Group’s financial condition – which “has not returned to pre-crisis strength” – despite a fall in recent debt levels.
The downgrade reflected its view that there will be little if any retained earnings given Man’s dividend policy and ongoing earnings pressure.