Man (LON:EMG) is the largest hedge fund in the world, with a market cap of £1477m (at 81.1p). I had made a noted that in Whitman’s book “Value Investing: A Balanced Approach”, financial institutions like brokers/dealers and other money managers should be bought when their price is lower than tangible book value plus 2-3% of AUM (although I think he means 5%).
Using the latest figures, EMG has a tangible book value of about £895m (made up of $3809m net assets, take off intangibles of $2213m and $153m, and convert to GBP). AUM is $60b, which is about £37.2b. So, a good buy point for EMG would be at a market cap of £895m + 2% * £37200m = £1639m
EMG is below even that lowball figure, and so should be considered good value.
There have been a couple of interesting developments:
- Emmanuel Roman succeeds Peter Clarke as Chief Executive from 28 Feb 2013 (EMG’s performance over the last few years has been abysmal). Roman was formerly President and Chief Operating Officer, so it remains to be seen if he can offer sufficiently fresh eyes to management at EMG
- Odey Asset Management has taken a 5% stake in the company. It is run by Crispin Odey. “They are not publicly activist, but there will be private discussions,” one person close to Odey said.
Here’s an interesting personal quote from Crispin Odey:
You need three bear markets to know what to do. The first nearly wipes you out, the second you learn how to survive and the third you take by the scruff of the neck and enjoy it
Don’t necessarily expect to make money fast, though.
