Moody’s has put asset manager Man Group’s ratings on review for a possible downgrade, after highlighting a number of concerns.
The ratings agency says “ongoing pressures on earnings, margins and funds under management growth” were a challenge for the firm.
“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,” reports the agency.
Moody’s also highlighted “continued underperformance from key funds”, a “significant” decline in its debt coverage ratio over the past five years, and pressures on the hedge fund business model.
The agency will evaluate Man Group on its first quarter results, the likelihood of a turnaround in funds under management trends, the potential for earning improvements and policies related to capital and liquidity management.
Moody’s says there are several factors that “partly offset the negative trends”, including debt buyback, strong liquidity, a cost savigns plan, improved product geogrgaphy and investor base and a strong market position.
But it warns the strength and stability of future revenue and earning streams have weakened “due to recent business trends”.