It has come to something when the former darling of the hedge fund industry jumps because an analyst says that things cannot get any worse.
As its demotion from the FTSE 100 was ratified — to be replaced by Babcock International, the £3 billion services company that maintains the Royal Navy’s submarines — Man Group advanced 5¼p to 80¾p.
That came thanks to Citigroup, which told clients to buy shares in a company that for years had been the biggest listed manager of hedge funds.In its pomp, in the summer of 2007, Man commanded a market value of nearly £11.5 billion. Last night it was worth less than £1.5 billion.
Many of its problems lay with its flagship computerised AHL fund, which, since early last year, has been unable to latch on to the trends that it needs to make money.
Citigroup’s recommendation had precious little to do with AHL, whose performance it thought “cannot get sustainably worse from here”. Despite signs of life in recent weeks, the broker forecast “no AHL contribution to performance fee earnings until 2014, and only 2 per cent AHL returns from now to end 2012”.
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However, Citigroup did acknowledge that this was conservative, noting that AHL had notched up its best returns in 2008, “the last time we saw significant market dislocation”.
For now, cutting its target price for the shares from 100p to 90p, Citigroup’s “buy” rating was rooted in Man’s depleted valuation and gentle applause for its recent acquisition of another fund manager, Financial Risk Management Holdings.
Babcock, meanwhile, rose 13p to 853½p.
In reality, trying to assess the value of individual companies remained a nonsense on a day such as yesterday, when the latest wrinkles of the European debt crisis continued to determine markets’ mood and shares were marked indiscriminately higher.
In London, the FTSE 100 rose by 123.92 points, or 2.4 per cent, to 5,384.11, its best day for six months. The gains were similar across the other main European markets and Wall Street also made decent early progress. The Footsie would have been nearly 14 points more to the good but for a handful of constituents starting to trade without right to the next dividend, among them Vodafone, off 4¾p at 169p.
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Amid worsening economic data and a deepening eurozone crisis, markets were pinning their hopes on central banks to take further steps to help. Much emphasis was placed on the European Central Bank’s meeting yesterday. In the event, the ECB disappointed, making no fresh commitments to prop up the region’s faltering banks and flagging economies.
No matter, investors held their nerve, for now. “Risk assets”, including shares, copper, oil and gold, were better. As commodities gained ground — in part on hopes that China, a big consumer, would cut interest rates to stimulate its economy — miners tracked them higher. Vedanta Resources added 80p to 963½p. Petropavlovsk, formerly Peter Hambro Mining, ran 37¼p higher to 425½p after a push by UBS.
Banks, as ever an indictor of the prevailing mood about Europe, were also in demand. Royal Bank of Scotland appeared at one point to have risen by more than 900 per cent. Alas, no such luck — it was the share consolidation, approved at the annual meeting last week, that meant that every ten shares was replaced by one “new” share. Eventually, RBS closed up by a more modest 13¼p, or 6.7 per cent, at 213¼p.
Shire rallied 95p to £18.79. There were rumours last week that BioMarin Pharmaceutical, a Nasdaq-listed specialist in therapies for debilitating fatal chronic genetic disorders, may have caught the eye of a predator. By late Friday, Shire was the name that speculators were zeroing in on.
Premier Oil added 24¼p to 353¼p after a strike in the North Sea. Cairn Energy, 13¾p higher at 289¾p, and Nautical Petroleum, up 8¼p at 269p, have smaller stakes in the Carnaby well. San Leon Energy edged 1.3 per cent higher to 8¼p as it bought three quarters of some gas assets in Poland.
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IQE, a maker of microchip components, jumped by 11.6 per cent to 26½p after agreeing to take on a wafermanufacturing business from RF Micro Devices, in return for supplying the American company’s wafers for seven years.
A second profit warning in as many months sent Mecom shares down by nearly half to 76p, bumping along close to their worst. The publisher of newspapers in Europe blamed the expected shortfall on the continuing decline of advertising revenue.
Also cheaper than ever, The TEG Group was marked 48.3 per cent lower to 3¾p after the operator of organic composting and energy plants for councils said that its sale process was off and that it would raise as much as £2 million by selling new shares at a deeply discounted 3p.
Prices by Proquote