REG - Man Group plc - Financial results for the year ended 31 Dec 2022
28/02/2023 07:00
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RNS Number : 2119R Man Group plc 28 February 2023
Press Release
28 February 2023
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2022
Significant alpha and net inflows reflect quality of investment offering
across alternative and long-only
o Asset weighted investment outperformance versus peers across our
strategies of 1.4%( KPI )
o Net inflows of $3.1 billion for the year ended 31 December 2022, 5.3%
ahead of the industry( KPI )
o Assets under management (AUM) of $143.3 billion, up from $138.4 billion as
at 30 September 2022
26% core EPS (diluted) growth, demonstrating the strength of our business
model
o Core net management fee revenue growth of 6% despite clear sector
headwinds
o $779 million of core performance fees; a very strong outcome for a second
consecutive year
o Statutory EPS (diluted) of 45.8¢ and core EPS (diluted) of 48.7¢( KPI ),
the highest in over a decade
Consistent shareholder returns and capital discipline support long-term growth
prospects
o 12% increase in the total dividend per share, in line with our progressive
dividend policy
o Net financial assets of $983 million as at 31 December 2022 (2021: $907
million)
o Intention to repurchase a further $125 million of shares after the share
buyback programme announced in December 2022 is complete ($114 million of
shares had been repurchased as at 24 February 2023)
$ millions, unless otherwise stated 31 Dec 2022 31 Dec 2021 Change
AUM, end of period $143.3bn $148.6bn (4%)
Core net management fee revenue 927 877 6%
Core performance fees 779 569 37%
Core net revenue 1,696 1,486 14%
Core profit before tax 779 658 18%
Statutory profit after tax 608 487 25%
¢
Core management fee EPS (diluted) 18.4 15.7 17%
Core EPS (diluted) 48.7 38.7 26%
Statutory EPS (diluted) 45.8 33.8 36%
Dividend per share 15.7 14.0 12%
Luke Ellis, Chief Executive Officer of Man Group, said:
"2022 was another strong period of growth for Man Group, demonstrating the
ability of our talent and technology to deliver for our clients, and the
merits of the resilient and diversified business model we have built.
"Our unwavering focus on building strong client relationships globally,
together with the range of innovative investment strategies and solutions we
offer, resulted in net inflows of $3.1 billion during the year. This was
despite clear headwinds elsewhere in the asset management industry. Our
investment strategies delivered valuable alpha for our clients, generating
1.4% of relative outperformance overall; our absolute return strategies
performed particularly strongly, resulting in a 4% increase in our assets
under management from alternatives. Growth in management fee and performance
fee revenues, which were very strong for a second consecutive year, and the
operating leverage inherent in our business model, resulted in core earnings
per share growth of 26%.
"In 2022, allocators rediscovered the value that liquid alternatives can
bring, providing uncorrelated returns to investors in a difficult year and
delivering much needed liquidity within their portfolio. Looking ahead, there
is a significant opportunity for active investment managers, particularly
those with the ability to offer alpha irrespective of the direction of
prevailing market trends and in a liquid, highly customisable format. This
gives us great confidence in our ability to continue to grow in 2023 and
beyond, delivering positive outcomes for clients and shareholders alike."
'Core' measures are alternative performance measures. For a detailed
description of our alternative performance measures, including non-core items,
please refer to pages 49 - 53. For details of key performance indicators
( KPI ), refer to page 11.
Dividend and share buyback
Man Group's ordinary dividend policy is progressive, taking into account the
growth in the firm's overall earnings. The firm first takes into account
required capital and potential strategic opportunities and maintains a prudent
balance sheet. Our policy is to then distribute available capital to
shareholders over time by way of higher dividend payments and/or share
repurchases. While the Board considers dividends as the primary method of
returning capital to shareholders, it will continue to execute share buybacks
when advantageous.
In line with this policy, the Board confirms it will recommend a final
dividend of 10.1¢ per share for the financial year ended 31 December 2022,
resulting in a total dividend of 15.7¢ per share for the year. This is in
addition to $250 million of share buyback programmes announced in 2022. We
will fix and announce the US dollar to sterling dividend currency conversion
rate on 05 May 2023, in advance of payment.
Dates for the 2022 final dividend
Ex-dividend date 06 April 2023
Record date 11 April 2023
Sterling conversion date 05 May 2023
Payment date 19 May 2023
Conference call and presentation for investors and analysts
There will be a presentation by the management team at 08.00am (UK time) on 28
February 2023 at
Riverbank House, 2 Swan Lane, London, EC4R 3AD, along with a live webcast,
which will also be available on demand later in the day.
A copy of the presentation will be available on the investor relations section
of www.man.com from 07.55am.
The conference call can be accessed at:
https://mangroup.webex.com/mangroup/j.php?MTID=m26f8830d8cb58fc6e08733416a6d4c0f
(https://mangroup.webex.com/mangroup/j.php?MTID=m26f8830d8cb58fc6e08733416a6d4c0f)
Webinar number:
2360 128 6130
Webinar password:
Man2022Results (62620228 from phones)
Join by phone:
+44 203 478 5289 United Kingdom toll
+1 631 267 4890 USA/Canada toll
Access code: 236 012 86130
Please note: to ask a question during the Q&A session you will need to
attend the presentation in person.
Enquiries
Karan Shirgaokar
Head of Investor Relations
+44 20 7144 1434
investor.relations@man.com (mailto:investor.relations@man.com)
Georgiana Brunner
Head of Communications
+44 20 7144 1000
media@man.com (mailto:media@man.com)
Neil Doyle
FTI Consulting
+44 77 7197 8220
man@ (mailto:mangroupUK@finsbury.com) fticonsulting.com
About Man Group
Man Group is a global, technology-empowered active investment management firm
focused on delivering alpha and portfolio solutions for clients. Headquartered
in London, we manage $143.3 billion(1) and operate across multiple offices
globally.
We invest across a diverse range of strategies and asset classes, with a mix
of long-only and alternative strategies run on a discretionary and
quantitative basis, across liquid and private markets. Our investment teams
work within Man Group's single operating platform, enabling them to invest
with a high degree of empowerment while benefiting from the collaboration,
strength and resources of the entire firm. Our platform is underpinned by
advanced technology, supporting our investment teams at every stage of their
process, including alpha generation, portfolio management, trade execution and
risk management.
Our clients and the millions of retirees and savers they represent are at the
heart of everything we do. We form deep and long-lasting relationships and
create tailored solutions to help meet their unique needs. We recognise that
responsible investing is intrinsically linked to our fiduciary duty to our
clients, and we integrate this approach broadly across the firm.
We are committed to creating a diverse and inclusive workplace where
difference is celebrated and everyone has an equal opportunity to thrive, as
well as giving back and contributing positively to our communities. For more
information about Man Group's global charitable efforts, and our diversity and
inclusion initiatives, please visit:
https://www.man.com/corporate-responsibility
(https://www.man.com/corporate-responsibility)
Man Group plc is listed on the London Stock Exchange under the ticker EMG and
is a constituent of the FTSE 250 Index. Further information can be found at
www.man.com (http://www.man.com)
Forward-looking statements and other important information
This document contains forward-looking statements with respect to the
financial condition, results, and business of Man Group plc. By their nature,
forward-looking statements involve risk and uncertainty and there may be
subsequent variations to estimates. Man Group plc's actual future results may
differ materially from the results expressed or implied in these
forward-looking statements.
The content of the websites referred to in this announcement is not
incorporated into and does not form part of this announcement. Nothing in this
announcement should be construed as or is intended to be a solicitation for or
an offer to provide investment advisory services or to invest in any
investment products mentioned herein.
This announcement contains inside information.
The person responsible at the Company for the release of this announcement for
the purposes of UK MAR is Antoine Forterre, CFO & COO.
1. As at 31 December 2022. All investment management and advisory
services are offered through the investment engines of Man AHL, Man Numeric,
Man GLG, Man FRM and Man Global Private Markets.
Assets under management
AUM movements for the year ended 31 December 2022
$bn AUM at Net flows Investment performance FX & other AUM at
31 Dec 2021
31 Dec 2022
Absolute return 41.2 1.4 2.8 0.6 46.0
Total return 35.4 (1.8) (2.4) (2.4) 28.8
Multi-manager solutions 15.0 3.8 0.8 0.6 20.2
Alternative 91.6 3.4 1.2 (1.2) 95.0
Systematic long-only 36.1 1.2 (4.6) (1.1) 31.6
Discretionary long-only 20.9 (1.5) (0.9) (1.8) 16.7
Long-only 57.0 (0.3) (5.5) (2.9) 48.3
Total 148.6 3.1 (4.3) (4.1) 143.3
AUM movements for the three months ended 31 December 2022
$bn AUM at Net flows Investment performance FX & other AUM at
30 Sep 2022
31 Dec 2022
Absolute return 49.0 (1.1) (2.2) 0.3 46.0
Total return 29.0 (1.3) (0.1) 1.2 28.8
Multi-manager solutions 19.8 0.1 (0.1) 0.4 20.2
Alternative 97.8 (2.3) (2.4) 1.9 95.0
Systematic long-only 25.8 3.0 2.0 0.8 31.6
Discretionary long-only 14.8 (0.3) 1.2 1.0 16.7
Long-only 40.6 2.7 3.2 1.8 48.3
Total 138.4 0.4 0.8 3.7 143.3
AUM by product category
$bn 31-Dec-21 31-Mar-22 30-Jun-22 30-Sep-22 31-Dec-22
Absolute return 41.2 46.0 49.3 49.0 46.0
Man Institutional Solutions(1) 11.0 11.9 12.7 12.5 14.4
AHL Alpha 8.6 11.4 13.0 11.6 7.7
AHL Dimension 5.5 5.7 5.9 6.1 5.9
AHL Evolution 4.7 4.9 5.3 5.5 5.4
GLG equity 5.5 5.3 4.8 4.7 4.9
AHL Diversified 1.3 1.4 1.5 1.6 1.5
Other(2) 4.6 5.4 6.1 7.0 6.2
Total return 35.4 35.0 31.2 29.0 28.8
AHL TargetRisk 18.7 17.8 15.1 13.9 13.4
Alternative Risk Premia 8.9 9.1 8.2 7.6 7.8
CLOs and other 3.7 3.8 3.9 3.7 3.9
Global Private Markets 3.0 3.3 3.1 3.0 3.0
Emerging markets fixed income 1.1 1.0 0.9 0.8 0.7
Multi-manager solutions 15.0 15.9 16.3 19.8 20.2
Infrastructure & direct access 9.1 9.5 9.6 12.9 12.7
Segregated 5.4 5.9 6.1 6.2 6.9
Diversified and thematic FoHF 0.5 0.5 0.6 0.7 0.6
Systematic long-only 36.1 34.3 28.2 25.8 31.6
Global equity 18.9 17.7 13.8 12.8 16.9
International equity 8.0 8.0 6.9 6.2 7.1
Emerging markets equity 7.4 7.0 6.1 5.8 6.4
US equity 1.8 1.6 1.4 1.0 1.2
Discretionary long-only 20.9 20.2 17.3 14.8 16.7
Credit and convertibles 5.5 5.4 4.8 4.3 5.2
Japan equity 3.7 4.3 4.0 3.6 4.1
UK equity 4.7 4.5 4.0 3.3 3.8
Europe ex-UK equity 3.2 2.5 1.7 1.2 1.3
Emerging markets fixed income 1.9 1.8 1.5 1.2 0.9
Other(3) 1.9 1.7 1.3 1.2 1.4
Total 148.6 151.4 142.3 138.4 143.3
1. Man Institutional Solutions includes AHL Institutional Solutions,
which invests into a range of AHL strategies including AHL Alpha, AHL
Dimension and AHL Evolution.
2. Includes AHL other, Numeric absolute return and GLG credit absolute
return strategies.
3. Includes equity and multi-asset strategies.
Investment performance
Return (net of fees) Annualised return (net of fees)
3 months to 12 months to 3 years to 5 years to Inception to 31 Dec 2022
31 Dec 2022
31 Dec 2022
31 Dec 2022
31 Dec 2022
Absolute return
AHL Alpha 1 -3.8% 11.0% 7.8% 6.4% 10.5%
AHL Dimension 2 -3.5% 8.8% 2.5% 3.5% 4.8%
AHL Evolution 3 -3.6% 4.8% 8.4% 7.8% 12.4%
AHL Diversified 4 -8.2% 13.1% 9.0% 6.6% 10.7%
GLG Alpha Select Alternative 5 -1.7% 4.8% 6.3% 6.3% 4.6%
GLG Event Driven Alternative 6 1.1% 2.1% 6.6% - 6.7%
GLG Global Credit Multi Strategy 7 4.6% 3.6% 4.8% 4.5% 11.1%
Man Strategies 1783 8 0.4% 12.3% - - 5.6%
Total return
AHL TargetRisk 9 1.2% -16.7% 0.3% 4.9% 6.8%
Alternative Risk Premia 10 0.0% 11.9% 4.1% 2.5% 4.4%
GLG Global Emerging Markets Debt Total Return 11 -2.4% 2.3% 1.9% 0.7% 1.7%
Multi-manager solutions
FRM Diversified II 12 0.4% 2.2% 5.3% 3.2% 4.1%
Systematic long-only
Numeric Global Core 13 9.7% -15.6% 5.9% 4.3% 9.0%
Relative return 0.0% 2.6% 0.9% -1.8% 0.7%
Numeric Europe Core 14 10.2% -11.5% 4.1% 4.1% 8.2%
Relative return 0.7% -2.0% 1.1% -0.2% 2.2%
Numeric Emerging Markets Core 15 9.8% -19.3% 0.1% -0.8% 4.1%
Relative return 0.1% 0.8% 2.8% 0.6% 2.2%
Discretionary long-only
GLG Continental European Growth 16 11.7% -18.7% 4.0% 5.5% 8.8%
Relative return -0.3% -11.8% -1.8% 0.2% 3.1%
GLG Japan CoreAlpha Equity 17 7.7% 18.9% 8.6% 3.1% 4.6%
Relative return 4.4% 21.3% 2.9% -0.2% 1.9%
GLG Undervalued Assets 18 14.3% 2.8% 0.0% 1.1% 6.2%
Relative return 5.4% 2.5% -2.3% -1.8% 1.1%
GLG High Yield Opportunities 19 5.4% -10.6% 3.4% - 5.7%
Relative return 1.0% 3.0% 6.0% - 5.7%
Indices
HFRX Global Hedge Fund Index 20 0.2% -4.4% 1.9% 1.4%
HFRI Fund of Funds Conservative Index 20 1.8% 0.5% 4.8% 3.9%
HFRI Equity Hedge (Total) Index 20 4.3% -10.1% 5.8% 4.6%
HFRX EH: Equity Market Neutral Index 20 1.3% 0.1% -1.0% -1.6%
Barclay BTOP 50 Index 21 -4.4% 13.8% 9.5% 6.0%
Past or projected performance is no indication of future results. Financial
indices are used for illustrative purposes only and are provided for the
purpose of making a comparison to general market data as a point of reference
and should not be construed as a true comparison to the strategy.
The information herein is being provided solely in connection with this press
release and is not intended to be, nor should it be construed or used as,
investment, tax or legal advice, any recommendation or opinion regarding the
appropriateness or suitability of any investment or strategy, or an offer to
sell, or a solicitation of an offer to buy, an interest in any security,
including an interest in any fund or pool described herein.
1. Represented by AHL Alpha plc from 17 October 1995 to 30 September
2012, and by AHL Strategies PCC Limited: Class Y AHL Alpha USD Shares from 1
October 2012 to 30 September 2013. The representative product was changed at
the end of September 2012 due to the provisioning of fund liquidation costs in
October 2012 for AHL Alpha plc, which resulted in tracking error compared with
other Alpha Programme funds. Both funds are valued weekly; however, for
comparative purposes, statistics have been calculated using the best quality
price that is available at each calendar month end, using estimates where a
final price is unavailable. Where a price, either estimate or final is
unavailable on a calendar month end, the price on the closest date prior to
the calendar month end has been used. Both of the track records have been
adjusted to reflect the fee structure of AHL Alpha (Cayman) Limited - USD
Shares. From 30 September 2013, the actual performance of AHL Alpha (Cayman)
Limited - USD Shares is displayed.
2. Represented by AHL Strategies PCC Limited: Class B AHL Dimension
USD Shares from 3 July 2006 to 31 May 2014, and by AHL Dimension (Cayman) Ltd
- F USD Shares Class from 1 June 2014 until 28 February 2015 when AHL
Dimension (Cayman) Ltd - A USD Shares Class is used. Representative fees of
1.5% Management Fee and 20% Performance Fee have been applied.
3. Represented by AHL Evolution Limited adjusted for the fee structure
(2% p.a. management fee and 20% performance fee) from September 2005 to 31
October 2006; and by AHL Strategies PCC: Class G AHL Evolution USD from 1
November 2006 to 30 November 2011; and by the performance track record of AHL
Investment Strategies SPC: Class E AHL Evolution USD Notes from 1 December
2011 to 30 November 2012. From 1 December 2012, the track record of AHL
(Cayman) SPC: Class A1 Evolution USD Shares has been shown. All returns shown
are net of fees.
4. Represented by Man AHL Diversified plc from 26 March 1996 to 29
October 2012, and by Man AHL Diversified (Guernsey) USD Shares - Class A from
30 October 2012 to date. The representative product was changed at the end of
October 2012 due to legal and/or regulatory restrictions on Man AHL
Diversified plc preventing the product from accessing the Programme's revised
target allocations. Both funds are valued weekly; however, for comparative
purposes, statistics have been calculated using the best quality price that is
available at each calendar month end, using estimates where a final price is
unavailable. Where a price, either estimate or final is unavailable on a
calendar month end, the price on the closest date prior to the calendar month
end has been used.
5. Represented by Man GLG Alpha Select Alternative IL GBP; AUM
included within GLG equity under the absolute return product category.
6. Represented by Man GLG Event Driven Alternative IN USD; AUM
included within GLG equity under the absolute return product category.
7. Represented by GLG Market Neutral Fund - Class Z Restricted - USD
until 31 August 2007. From 1 September 2007, Man GLG Global Credit Multi
Strategy CL IL XX USD unrestricted; AUM included within Other under the
absolute return product category.
8. Represented by Man Strategies 1783 Class F1 USD until 31st December
2021. From the 1st January 2022 Man Strategies 1783 Class A USD. AUM included
within the corresponding product category.
9. Represented by Man AHL TargetRisk class I USD.
10. Represented by Man Alternative Risk Premia Class A USD.
11. Represented by Man GLG Global Emerging Markets Debt Total Return
Class I USD; AUM included within Emerging markets fixed income under the total
return product category.
12. Represented by FRM Diversified II Fund SPC - Class A USD ('the
fund') until April 2018 then Class A JPY hedged to USD thereafter. However,
prior to Jan 2004, FRM has created the FRM Diversified II pro forma using the
following methodology: i) for the period Jan 1998 to Dec 2003, by using the
returns of Absolute Alpha Fund PCC Limited - Diversified Series Share Cell
('AA Diversified - USD') adjusted for fees and/or currency, where applicable.
For the period Jan 2004 to Feb 2004, the returns of the fund's master
portfolio have been used, adjusted for fees and/or currency, where applicable.
Post Feb 2004, the fund's actual performance has been used, which may differ
from the calculated performance of the track record. There have been occasions
where the 12-months' performance to date of FRM Diversified II has differed
materially from that of AA Diversified. Strategy and holdings data relates to
the composition of the master portfolio; AUM included within Diversified and
thematic FoHF under the multi-manager product category.
13. Performance relative to the MSCI World. This reference index is
intended to best represent the strategy's universe. Investors may choose to
compare returns for their accounts to different reference indices, resulting
in differences in relative return information. Comparison to an index is for
informational purposes only, as the holdings of an account managed by Numeric
will differ from the securities which comprise the index and may have greater
volatility than the holdings of an index.
14. Performance relative to the MSCI Europe (EUR). This reference index
is intended to best represent the strategy's universe. Investors may choose to
compare returns for their accounts to different reference indices, resulting
in differences in relative return information. Comparison to an index is for
informational purposes only, as the holdings of an account managed by Numeric
will differ from the securities which comprise the index and may have greater
volatility than the holdings of an index; AUM included within International
equity under the systematic long-only product category.
15. Performance relative to MSCI Emerging Markets. This reference index
is intended to best represent the strategy's universe. Investors may choose to
compare returns for their accounts to different reference indices, resulting
in differences in relative return information. Comparison to an index is for
informational purposes only, as the holdings of an account managed by Numeric
will differ from the securities which comprise the index and may have greater
volatility than the holdings of an index.
16. Represented by Man GLG Continental European Growth Fund Class C
Accumulation Shares. Relative return shown vs FTSE World Europe Ex UK (GBP,
GDTR); AUM included within Europe ex-UK equity under the discretionary
long-only product category.
17. Represented by Man GLG Japan CoreAlpha Fund - Class C converted to
JPY until 28 January 2010. From 1 February 2010 Man GLG Japan CoreAlpha Equity
Fund - Class I JPY is displayed. Relative return shown vs TOPIX (JPY, GDTR);
AUM included within Japan equity under the discretionary long-only product
category.
18. Represented by Man GLG Undervalued Assets Fund - C Accumulation
Shares. Relative return shown vs FTSE All Share (GBP, NDTR); AUM included
within UK equity under the discretionary long-only product category.
19. Represented by Man GLG High Yield Opportunities I EUR. Relative
return is shown vs ICE BofA Global High Yield Index (EUR, TR) Hedged
benchmark. AUM included within Credit and convertibles under the discretionary
long-only product category.
20. HFRI and HFRX index performance over the past 4 months is subject to
change.
21. The historical Barclay BTOP 50 Index data is subject to change.
Chief Executive Officer's review
Overview¹
One clear, dominant force drove financial markets in 2022: inflation.
Following the aftershocks of the pandemic and Russia's invasion of Ukraine in
February, inflation prints reached record highs across the world, prompting
aggressive monetary policy tightening from central banks and heightened
concerns about economic recession. This weighed significantly on financial
markets throughout the year; the S&P 500 snapped a three-year winning
streak, registering its worst year since the global financial crisis, with the
technology sector darlings of the past decade its greatest casualty. Bond
markets also endured heavy selling: by the end of the year, the US 10-year
government bond yield increased to 3.9% from 1.6%, the largest annual increase
in records dating back to the 1960s. Together, this resulted in 2022 becoming
one of the worst years on record for a 60/40 portfolio.
This environment is the real test for active investment management. I am very
proud and delighted by the exceptionally strong set of results we delivered
for 2022. One of our key strengths as an active asset manager is the breadth
of investment capabilities we offer, many of which aim to deliver uncorrelated
returns across a range of market environments. Despite the large sell-off in
markets, our strategies were able to deliver $2.9 billion of alpha for our
clients and liquidity when they needed it most, clearly demonstrating the
value liquid alternatives can add to investment portfolios.
While our technology-empowered active investment processes delivered
significant alpha for our clients, market beta still left its mark and
resulted in negative absolute investment performance of $4.3 billion overall.
Absolute investment performance across our product categories was -1.5%. Our
absolute return strategies were up 8.7%, driven by positive performance from
AHL Alpha (+11.0%) and AHL Dimension (+8.8%). Our total return and long-only
strategies were naturally impacted significantly by the big sell-off in market
beta, with overall investment performance of -8.4% and -7.6%, respectively.
AHL TargetRisk performance (-16.7%) was an example of this, reflecting its
exposure to fixed income and equity markets, which delivered negative returns
in tandem during the year for the first time since the 1990s. AHL TargetRisk's
proprietary risk overlays were active throughout most of the year and helped
mitigate drawdowns during the sharpest sell-offs, significantly reducing
exposure when inflation worries were at their peak, contributing c.6%
to returns.
Investment performance in our systematic long-only strategies was also
negatively impacted by broad exposure to global equities while performance in
our discretionary long-only strategies was more mixed, with GLG Japan
CoreAlpha Equity performing strongly (+18.9%), while GLG Continental European
Growth suffered (-18.7%).
On an asset-weighted basis, relative investment performance across the firm
was again strong at +1.4% during the year. Our total return strategies also
outperformed by 1.4%, with notably strong outperformance from GLG EM Debt
(+20.6%) and Man Alternative Risk Premia (+7.1%), while our long-only
strategies delivered strong alpha for clients (+3.9%), with notable
outperformance from GLG Japan Core Alpha (+21.3%), GLG High Yield
Opportunities (+3.0%), and Numeric Global Core (+2.6%).
We also made further progress on the client front, building long-term
relationships with global asset allocators and distributors while helping our
existing clients navigate market volatility, recording $3.1 billion of net
inflows during the year. This was offset by $8.4 billion of combined negative
impacts from investment performance and FX and other movements owing to a
stronger US dollar. Our assets under management (AUM) were $143.3 billion as
at 31 December 2022, a 4% decrease versus 31 December 2021.
Core profit before tax increased to $779 million, compared with $658 million
in 2021, reaching a 14-year high, driven by growth in management fee
earnings and a strong performance fee outcome for a second consecutive year.
Consistent growth in our performance fee eligible AUM has increased the
performance fee potential of our business; even when we deliver investment
performance in line with previous years, significantly higher performance fee
eligible AUM means we have the ability to generate meaningful performance fees
more regularly. Core management fee profit before tax was also up 9%,
reflecting continued net management fee growth and cost discipline. Statutory
profit before tax was $745 million, compared with $590 million in 2021.
Our results highlight the continued demand for our products, the benefit of
the scale and diversification of the performance fee earning strategies we
offer, and the quality of the business we have built. During the year, we also
made significant progress on our key strategic objectives, which are core to
cementing our competitive advantage and driving the long-term growth of our
business.
Progress against strategic priorities
Strong client relationships
Client engagement was strong throughout the year, with $41.1 billion of
subscriptions, our second-best year on record. This was despite a pick-up in
redemption requests during the year as clients responded to macroeconomic
conditions or other issues in their investment portfolios, all of which were
honoured in full and on time. Net inflows of $3.1 billion during the year were
5.3% ahead of the industry, highlighting the continued demand for the
differentiated range of strategies and solutions we offer, our judicious
approach to risk management and the quality of the long-term partnerships we
have built with investors across the globe.
Our clients have confidence in our ability to manage and grow their assets,
and to provide access to liquidity when they need it the most. At the end of
December, 82% of our AUM is from clients investing in two products or more
and 52% from clients investing in four products or more, which has grown from
71% and 48% respectively five years ago. Our 50 largest clients are invested
in an average of four of our strategies.
1. Past performance is not indicative of future results. Returns may
increase or decrease as a result of currency fluctuations. Performance figures
are shown net of representative management and performance fees.
This ability to provide bespoke solutions flexibly and at scale also enabled
us to add a significant number of new relationships with strategically
important allocators during the year, often via a dedicated investment
solution. These customised mandates leverage our broad investment capabilities
to meet each client's unique risk and return requirements and are delivered
via our highly effective, technology-enabled operating platform. While
representing only a part of the overall customised mandates we offer, our
Institutional Solutions business has grown to $14.4 billion as at 31 December
2022, recording $2.6 billion of net inflows during the year.
The much-discussed UK LDI episode was a perfect manifestation of the role that
liquid alternative strategies can play in portfolios. Approximately $3 billion
or roughly 50% of our assets from UK defined benefit pension scheme clients
were redeemed between 23 September and 31 December, primarily from absolute
return and total return strategies. After several years of benign market
environments, institutions rediscovered the value of liquidity in their
portfolios and our ability to return much-needed capital at very short notice
strengthened our longstanding relationships with these clients. Importantly,
the weighted average investment performance of the assets redeemed was c.12%.
This was a key driver of c.95% of these clients requesting to redeem
partially, leaving them the option to reinvest with us easily in the future.
As schemes revisit their asset allocations, we are seeing encouraging demand
from our clients looking to reallocate to liquid alternatives.
Innovative investment strategies
We consider innovation as key to generating alpha, cementing our competitive
advantage and creating multiple dimensions for future growth. It strengthens
our business by further diversifying our revenue streams, providing
development opportunities for our people and, most importantly, maintaining
our relevance with clients.
Our culture of collaboration across the firm allows us to bring the best out
of our talent working together. A good example of this is the work we have
done on Man 1783, our multi-strategy offering, which gives clients access to
all of the systematic and discretionary alpha content at Man Group. We have
invested a huge amount of time and energy into product development this year;
we take a scientific approach and apply the same level of rigour across all
our investment areas, whether it is quantitative analysis, investing in
affordable housing, or vetting managers in our multi-manager business.
We also continued to grow our discretionary offerings for clients in the year,
launching a series of new funds including European High Yield Opportunities,
Sustainable Credit Opportunities and Dynamic Income. We hired a Global Head
of Capital Markets in September, taking the opportunity of the lull in new
issue activity to build a strong team that we feel can add significant value
to a range of investment strategies by maximising our footprint in the IPO
and secondaries market as they come back.
At Man Group, we believe the asset management industry has a role to play in
fighting climate change; it is an important driver of growth and an
opportunity for our business. Innovation in this area has also been a key
focus for us and in February 2022, we announced our first (of what we think
will be many) joint venture to build around 1,000 net zero energy
build-to-rent properties across various US metropolitan areas over the next
several years.
In November, we were delighted to launch one of the first systematic
multi-asset Article 9 strategies, which is a truly innovative product for
clients. We developed AHL TargetClimate because we saw a real opportunity to
bring our risk management and quantitative expertise to a space that has
traditionally been the domain of discretionary investors.
Identifying securities that are climate-aligned is a complex and nuanced
exercise. There is a lot of noise that requires a data-driven approach to
clean, analyse and gain insights from the multiple data sources available,
something we have been specialising in at Man Group for over 35 years.
Our seed capital programme continues to be a key way for us to support product
launches and our pipeline of new ideas remains very strong. During the year we
seeded new strategies across our business, leaving our seeding book at $688
million as at 31 December 2022, following investments into new products
developed across the business.
A great further example of our commitment to research and innovation is our
partnership with Oxford University, the Oxford-Man Institute (OMI), and this
year, we extended our funding for a further five years, which will take it to
at least 20 years. The work undertaken at the OMI has had an extensive impact
on a range of Man Group's client investment programmes, including active risk
overlays for systematic investment management, intelligent algorithms for
trade execution and order-routing and sophisticated methods for monitoring
transaction costs and market impact.
Efficient and effective operations
Due to our early and significant investment in technology, we believe we have
a huge competitive advantage in an industry which, like most others, is
becoming ever more technology-driven. Our technology capabilities enable us to
evolve and adapt as markets and clients' needs do.
We're a global leader in quantitative investing and we also use technology to
support discretionary investment teams. With 600+ quants and technologists
across the firm, our advanced investment technology platform supports our
investment teams at every stage of their process, from alpha generation and
portfolio management to trade execution and risk management.
However, technology isn't just about making better investment decisions for
us; it powers everything we do and is the foundation on which the firm
operates. For our clients, it enables us to customise our offering flexibly,
efficiently and at scale, and in 2022 alone, our teams successfully executed
and processed nearly 20 million trades.
Over the last 10 years we have grown our assets by more than 2.5 times but our
headcount in operations is actually lower; this is real operational leverage
and is only possible with an industry-leading technology platform. For our
staff across all departments, we offer data science and Python training via
our develop programme, equipping them with the skills to innovate and
make processes less time consuming. Most importantly, for our shareholders, it
delivers significant operating leverage.
In 2022, we continued to invest heavily in our technology capabilities. One of
the highlights of the year was reaching a major milestone on the four-year
rewrite of ArcticDB, the bedrock of our data science platform. Rewritten in
C++, ArcticDB sits across the bulk of our front-to-back-office systems, and
is designed to process large 'industrial sized' volumes of data, accessible by
any user across the business. We have a competitive advantage that we believe
is difficult to replicate because of the complexity of the research, the
difficulty in execution and the power of the platform.
Our platform also offers the ability to onboard new teams and businesses
efficiently and M&A continues to be a key part of our strategy. We
reviewed a large number of acquisition opportunities during the year. While
none met our full criteria in 2022, with price and culture often being the
main reason why we walk away, we think this capability will prove valuable to
shareholders in the longer term, as it has in the past.
People and culture
We are fundamentally a people business. To best serve our clients and
shareholders, one of our top priorities is to attract and retain the best
people, creating an environment in which they can achieve their potential. We
place great importance on being an employer of choice and an organisation
where all our employees can bring their authentic selves to work to learn,
develop and achieve excellence. We are pleased to report that our 2022 staff
survey recorded an engagement score of 82%, up from the previous year. We have
continued our investment in talent development to maintain our competitive
edge and our dedicated Talent function provides career development and
performance support to staff at all levels.
When I read summaries of the work that is carried out within Man Group around
diversity, equity and inclusion (DE&I) I feel an immense sense of pride in
the team I am fortunate to lead. The financial services industry has not
traditionally been renowned for its focus on DE&I, but at Man Group it is
an integral part of our culture and is an important part of what I believe
makes us stand out.
Paving the Way is our dedicated campaign to help address the 'pipeline' issue,
encouraging a more diverse range of talent to apply for positions at Man Group
and the industry. We are big believers in the benefits of combining industry
work and academia, as well as the transformative power of technology in
finance. We are partnering with the University of Warwick to deliver a new
Masters degree apprenticeship programme, providing recent STEM graduates with
the opportunity to continue their further education while transitioning into
full-time employment in a technology-oriented role. This programme is a great
opportunity to attract a more diverse range of talent into our firm, and we
are excited to increase access to tech careers for talented graduates from a
broader range of academic backgrounds.
We have signed the Social Mobility Pledge alongside roughly 700 organisations
globally, pledging to promote a level playing field for people from
disadvantaged backgrounds. Due to the initiatives led by our Social Mobility
workstream, we were ranked in the top 75 of the Social Mobility Index in 2022
(up from 99 out of 203 in 2021) and were also very pleased to be Highly
Commended for 'Championing Social Mobility' at the FT Adviser Diversity
Awards. We have also become a founding partner of Progress Together, the City
of London initiative to improve social mobility.
Fostering a working environment and culture where all our employees feel that
they belong takes time. While there is a huge amount of work still to be done
to make our firm, and the wider industry, truly representative of the
populations we serve, I want everyone to know that we stand for an absolute
and unequivocal commitment to inclusiveness.
Delivering growth
2022 was another strong year of growth for Man Group. Our intensely
client-centric approach coupled with excellent risk management and our
technology leadership has allowed us to grow significantly during
a challenging period for our industry. This, however, isn't a one-year
phenomenon. Since the beginning of 2018, we have seen $28.1 billion of net
inflows from clients, increased our core management fee profitability by 63%
to $290 million, grown our core management fee EPS (diluted) by 96%, and
increased our performance fee eligible assets under management by 28%. This
has allowed us to return $1.9 billion or 57% of our current market
capitalisation to shareholders over the last five years, an average of 11% of
our market capitalisation in dividends and share buybacks every year during
that period. Over the past few years, we have built a business that
is fundamentally resilient and run for long-term growth and success. It is
during difficult market environments that the merit of having such a resilient
business model shines through.
Outlook
The difficulties faced by traditional asset management markets during 2022
make a strong case for investing in alternatives, where we are a market
leader with over 35 years of experience. There are few alternative asset
managers with the range of compelling solutions we offer, a longstanding
track record of investment performance across a range of market environments,
excellent risk management skills and a flexible operating platform underpinned
by cutting-edge technology. I have great confidence in our ability to continue
to generate alpha at scale for clients, irrespective of the direction of
prevailing market trends. This presents a significant runway for growth in the
future.
Luke Ellis
Chief Executive Officer
Key performance indicators
Financial KPIs
Our financial KPIs illustrate and measure the relationship between the
investment experience of our clients, our financial performance and the
creation of shareholder value over time.
Relative investment performance
What we measure
The asset weighted performance of Man Group's strategies compared to peers
gives an indication of the competitiveness of our investment performance
against similar strategies offered by other investment managers.
How we performed
We had asset-weighted relative investment outperformance of 1.4% in 2022, with
outperformance across multi-manager, total return and
long-only strategies. For further discussion on investment performance see
page 8.
Relative net flows
What we measure
Relative net flows are a measure of our ability to attract and retain investor
capital in comparison to our industry peers. Growth in the
assets we manage for clients drives our financial performance via our ability
to earn management and performance fees.
How we performed
Relative net flows in 2022 were 5.3%, remaining positive despite market
volatility, indicating the strength of our global client relationships and
diverse product offering.
Core management fee EPS (diluted) growth1
Why it matters
Core management fee EPS (diluted) growth in the year measures the overall
effectiveness of our business model and reflects the value generation for
shareholders from our earnings, excluding performance fees.
How we performed
Core management fee EPS (diluted) increased by 17% to 18.4¢. Increased
management fee profitability was supplemented by $386 million of capital
returned through our share repurchases in the year, which reduced total share
count.
Core EPS (diluted)1
Why it matters
Core EPS (diluted) is a measure of the earnings that drive our cash flows.
This metric includes core performance fee profits, which are profits generated
through outperformance for our clients and are a key earnings stream for the
business, as well as a significant component of value creation for
shareholders over time.
How we performed
Core EPS (diluted) of 48.7¢ for 2022 is an increase of 26% compared with
2021, and a 10-year high, reflecting another period of very strong performance
fee generation and the operating leverage inherent in our business model.
Non-financial KPIs
Our non-financial KPIs reflect our core values and demonstrate our commitment
to our people, wider society and the environment.
Carbon footprint (tCO2e)
Why it matters
In order to monitor and decrease our carbon footprint, we measure total
market-based greenhouse gas emissions (tCO2e) using the GHG-Protocol guidance
for the Scope 1, Scope 2, Scope 3 travel and Scope 3 upstream leased asset
categories.
How we performed
In 2022, total carbon emissions increased in comparison to 2021, owing to a
significant increase in business travel post-pandemic. However, our 2022 total
emissions were 18% below our baseline year of 2019.
Employee engagement
Why it matters
Each year, we conduct a staff survey to help us monitor and understand
employee engagement and identify any areas for action. Alongside our
engagement survey, we continue to provide various mechanisms for staff to
provide feedback.
How we performed
Our 2022 staff survey recorded an engagement score of 82%, with a response
rate of 76% (a 2% decrease compared to 2021).
Women in senior management roles
Why it matters
As part of our efforts to encourage greater diversity across the investment
management industry, we measure the number of women in senior management
positions at the firm. This is defined as those who are, or report directly
to, members of our Executive Committee.
How we performed
In 2022, the number of women in senior management roles decreased slightly to
26%, from 27%. We are committed to working, both internally and externally
with the industry, to increase the number of women in senior management and we
are confident that we are on the right longer-term trajectory.
ESG-integrated AUM ($bn)
Our goal is to meet the RI needs of our clients and this can be measured by
the amount of our AUM that is invested responsibly.
We calculate ESG-integrated AUM in line with the Global Sustainable Investment
Alliance definitions, which have emerged as the global standard of
classification.
ESG-integrated assets under management have decreased to $50.0 billion in
2022, largely because of market beta and currency translation movements. In
2023, we will continue to aim to launch new sustainable funds and strategies
to support the diverse investment objectives of our clients.
1. Details of the calculation of our alternative performance measures
are provided on pages 49 to 53.
Chief Financial Officer's review
Overview
It has been another year of excellent results for Man Group, with statutory
profit increasing to $608 million from $487 million in 2021. Our net
management fee revenue continued to grow, and we generated our strongest
performance fees since 2008, leading to core profit exceeding the previous
10-year peak achieved in 2021. We have continued to take a disciplined
approach to cost management while investing in the areas which will drive our
future success. This cost discipline, along with the reduction in the number
of shares in issue as a result of our share buyback programmes in the year,
has resulted in core diluted EPS growing by 26% to reach a recent high of
48.7¢ in 2022. Statutory EPS on a diluted basis increased from 33.8¢ to
45.8¢. In spite of net inflows of $3.1 billion in the year, negative
absolute investment performance and adverse FX and other movements decreased
closing AUM from a record high of $148.6 billion at the end of 2021
to $143.3 billion at 31 December 2022, although average AUM across the year
remained higher than during 2021. Net flows and investment performance were
mixed across the various product categories, with a decrease in long-only AUM
of $8.7 billion in the year partially offset by an increase in alternative
AUM of $3.4 billion.
Management and other fees increased by 4% to $954 million for the year due to
the higher average AUM, which also drove the 6% increase in core net
management fee revenue to $927 million. The average net management fee margin
of 65 basis points for the year was one basis point lower than in 2021 due to
higher net inflows into lower margin strategies. The run rate net management
fee margin at 31 December 2022 stood at 64 basis points compared with 63 basis
points at the end of 2021. Run rate core net management fee revenue was $917
million at the end of the year, down from $939 million at the end of 2021 as
a result of the decrease in closing AUM, movements in foreign exchange rates
and the impact of changes in product mix.
Core performance fee generation was strong, with $779 million earned in the
year compared with $569 million in 2021. Our asset-weighted relative
investment outperformance was 1.4% across all categories, in comparison with
1.9% in 2021. We outperformed our peers across multi-manager, total return and
long-only strategies. Although the majority of performance fees were earned
from systematic macro strategies, all our investment engines contributed
positively. Core losses on investments of $15 million, compared with gains of
$27 million in 2021, were predominantly due to mark-to-market losses on our
CLO risk retention assets.
Core costs were $906 million, up from $815 million in 2021, driven by
higher performance fee-related variable compensation and a return to more
normalised levels of expenditure on travel and entertainment as COVID-19
restrictions eased.
Our sub-lease rental income in 2022 was broadly in line with 2021 on a
statutory basis, as we continued to market the remaining vacant space in our
London office for sub-let. In early 2023, we signed a sub-lease with a new
tenant for a substantial portion of the vacant space. This will reduce future
depreciation, following the derecognition of the associated portion of our
right-of-use lease asset, and occupancy costs which are met by Man Group in
the absence of sub-tenants. In 2022, we also signed a lease for new office
premises in New York, with the newly refitted space now fully operational.
Non-core items (excluding tax) decreased from a net expense of $68 million in
2021 to $34 million in 2022, primarily due to FX gains of $22 million and some
of our acquired intangible assets becoming fully amortised during the year.
We continue to deliver strong cash conversion of our profits and have again
increased our returns to shareholders in 2022. Our total proposed dividend
for the year of 15.7¢ per share represents an increase of 12% from 14.0¢
in 2021, reflecting the ongoing growth in the business and our progressive
dividend policy. After completing the $250 million share buyback announced in
December 2021, we announced a further $250 million of share buybacks during
2022, of which $152 million had been completed at 31 December 2022. Together
with an estimated $194 million of dividends in relation to 2022, the total
announced returns to shareholders for 2022 is over $0.4 billion, and $1.9
billion over the last five years.
Our balance sheet remains strong and liquid and allows us to navigate periods
of stress while continuing to invest in the business to support our long-term
growth prospects. Alongside the ongoing return of capital to shareholders, we
continue to allocate capital to seed investments and invest heavily in
technology to ensure we remain leaders in active investment management. We
had net tangible assets of $1,022 million at 31 December 2022 and net
financial assets of $983 million, including $349 million of cash (excluding
amounts held by consolidated fund entities). We continue to be strongly
cash-generative, with core cash flows from operations excluding working
capital movements of $810 million in the year.
Impact of foreign exchange rates
The portion of our AUM which is denominated in currencies other than the US
dollar was adversely impacted by the strengthening of the US dollar against
most currencies over the course of the year. This reduced our reported AUM by
$6.6 billion and had a knock-on impact on our management fee revenue.
However, the weakening of sterling against the US dollar in 2022 also
contributed to a partially offsetting decrease in core costs of around $26
million compared with 2021.
'Core' measures are alternative performance measures. For a detailed
description of our alternative performance measures, including non-core items,
please refer to pages 49 - 53.
$m Year ended Year ended
31 December 2022
31 December 2021
Core net management fee revenue 927 877
Core performance fees 779 569
Core (losses)/gains on investments (15) 27
Core sub-lease rental and lease surrender income 5 13
Core net revenue 1,696 1,486
Asset servicing costs (58) (58)
Compensation costs (678) (596)
Core other costs (170) (161)
Net finance expense (11) (13)
Core profit before tax 779 658
Core management fee profit before tax 290 266
Core performance fee profit before tax 489 392
Core profit 647 557
Non-core items (before tax) (34) (68)
Statutory profit 608 487
Statutory EPS (diluted) 45.8¢ 33.8¢
Core EPS (diluted) 48.7¢ 38.7¢
Core management fee EPS (diluted) 18.4¢ 15.7¢
Proposed dividend per share 15.7¢ 14.0¢
Assets under management (AUM)
Change
$bn 31 December 2021 Net inflows/ Investment FX and other 31 December 2022 $bn %
(outflows) performance
Alternative Absolute return 41.2 1.4 2.8 0.6 46.0 4.8 12%
Total return 35.4 (1.8) (2.4) (2.4) 28.8 (6.6) (19)%
Multi-manager solutions 15.0 3.8 0.8 0.6 20.2 5.2 35%
Total 91.6 3.4 1.2 (1.2) 95.0 3.4 4%
Long-only Systematic 36.1 1.2 (4.6) (1.1) 31.6 (4.5) (12)%
Discretionary 20.9 (1.5) (0.9) (1.8) 16.7 (4.2) (20)%
Total 57.0 (0.3) (5.5) (2.9) 48.3 (8.7) (15)%
Total 148.6 3.1 (4.3) (4.1) 143.3 (5.3) (4)%
Absolute return
The increase in absolute return AUM was driven by net inflows of
$1.4 billion, primarily into Man Institutional Solutions and American Beacon
AHL Managed Futures, partially offset by outflows from AHL Alpha. Positive
absolute performance of $2.8 billion was driven by a number of strategies in
the product category, in particular systematic macro strategies.
Total return
Total return AUM decreased by $6.6 billion. Net outflows of $1.8 billion were
primarily from Alternative Risk Premia and AHL TargetRisk. Negative absolute
performance of $2.4 billion was primarily due to losses in AHL TargetRisk
reflecting its long-only exposure to fixed income and equity markets. Negative
FX and other movements resulted in a further reduction of $2.4 billion.
Multi-manager solutions
The increase in multi-manager solutions AUM was primarily driven by net
inflows of $3.8 billion. Positive absolute performance of $0.8 billion was
driven by a number of strategies.
Systematic long-only
Net inflows of $1.2 billion and negative FX and other movements of $1.1
billion were primarily from Numeric Global. Negative absolute performance of
$4.6 billion was driven by multiple strategies in the product category,
reflecting broad exposure to global equities.
Discretionary long-only
Discretionary long-only AUM decreased by $4.2 billion. Net outflows of $1.5
billion were primarily from GLG Emerging Markets Debt and GLG Continental
Europe, partially offset by inflows into GLG High Yield. Negative performance
of $0.9 billion was driven by market beta across multiple strategies and
weaker performance in strategies with a growth focus e.g. GLG Continental
Europe. This was partially offset by strong absolute performance in GLG Japan
CoreAlpha.
Revenue
As a result of higher average AUM and strong performance fee generation,
statutory net revenue increased by $241 million from $1,486 million in 2021 to
$1,727 million in 2022, whilst core net revenue increased from $1,486 million
to $1,696 million for the same reasons.
Core net Net management Run rate core net Run rate net management fee margin (bps)
management fees ($m)
fee margin (bps)
management fees ($m)
Year ended Year ended Year ended Year ended Year ended Year ended Year ended Year ended
31 December
31 December
31 December
31 December
31 December
31 December
31 December
31 December
2022
2021
2022
2021
2022
2021
2022
2021
Absolute return 515 451 112 119 526 474 114 115
Total return 201 198 63 62 177 220 61 62
Multi-manager solutions 34 30 20 22 38 36 19 24
Systematic long-only 75 82 25 27 77 89 24 25
Discretionary long-only 102 116 57 58 99 121 59 58
Total 927 877 65 66 917 939 64 63
Management fees
Core net management fee revenue increased by 6% to $927 million in 2022 (2021:
$877 million), driven by higher average AUM. Net management fee margin
decreased from 66 basis points in 2021 to 65 basis points in 2022, driven by
net inflows into lower margin systematic long-only and multi-manager solutions
categories. This was partially offset by net inflows into Man Institutional
Solutions, which are typically higher margin, and an increase in average AUM
from positive investment performance in absolute return strategies.
The absolute return net management fee margin decreased by 7 basis points to
112 basis points, as a result of mix shift towards lower margin Man
Institutional Solutions mandates within the product category. The total return
net management fee margin increased by one basis point to 63 basis points,
driven by the increase in AHL TargetRisk average AUM. The multi-manager net
management fee margin decreased to 20 basis points in 2022 from 22 basis
points in 2021 as a result of the ongoing shift towards infrastructure
solutions from traditional fund of funds. The net management fee margin of
long-only strategies declined due to margin pressure and mix effects in
recent years, with systematic long-only margins decreasing from 27 basis
points to 25 basis points and discretionary long-only margins decreasing from
58 basis points in 2021 to 57 basis points in 2022.
Run rate core net management fee revenue was $917 million at 31 December 2022
(2021: $939 million). The decrease in the year was largely as a result of the
decrease in AUM in total return and long-only strategies, which were
negatively affected by market beta and FX.
The run rate net management fee margin at 31 December 2022 was 64 basis
points (2021: 63 basis points) as a result of the growth in higher margin Man
Institutional Solutions mandates towards the end of the year, with movements
in the run rate net management fee margin for individual strategies broadly
driven by the same factors as those impacting the actual margins
in the year.
Performance fees
Core performance fees for the year were $779 million (2021: $569 million),
including $761 million from alternative strategies (2021: $533 million) and
$18 million from long-only strategies (2021: $36 million). We have strong
performance fee optionality and diversity, with $57.9 billion of
performance-fee-eligible AUM at 31 December 2022, a substantial portion being
at high-water mark, and a broad range of strategies having contributed to our
performance fee earnings in recent years. More than 50 of our strategies are
performance fee-eligible.
Investment gains and losses
Core losses on investments of $15 million (2021: gains of $27 million)
primarily relate to losses on our CLO risk retention assets. The seed book
totalled $688 million at 31 December 2022, up from $648 million in 2021, as
we continue to deploy our capital to support new strategies, grow the
business, and increase returns to shareholders. We had $138 million of
additional seed investment exposure via total return swaps at year end (2021:
$108 million).
Sub-lease rental income
Sub-lease rental income was broadly flat year-on-year on a statutory basis.
Core sub-lease rental income decreased from $13 million in 2021 to $5
million in 2022 as the residual portion of the lease surrender gain arising on
the early termination of the lease of our principal sub-tenant in 2020 was
recognised through non-core items in 2021. The sub-lease we signed in early
2023 for a substantial portion of the vacant space in our London office will
reduce future depreciation and occupancy costs, following the derecognition of
the associated portion of our right-of-use lease asset.
Costs
Asset servicing
Asset servicing costs vary depending on transaction volumes, the number and
mix of funds, and fund NAVs. Asset servicing costs were $58 million (2021: $58
million), which equates to around 5 (2021: 6) basis points of average AUM
excluding systematic long-only and Man GPM strategies.
Compensation costs
Total compensation costs were $678 million for the year, up by 14% from $596
million in 2021, as a result of higher revenues increasing the associated
variable compensation, partially offset by the impact of the strengthening of
the US dollar against sterling. Our compensation ratio is generally between
40% and 50% of core net revenue, depending on the mix and level of revenue. We
expect to be at the higher end of the range in years when performance fees are
low or driven predominantly by discretionary strategies. Conversely, we expect
to be at the lower end of the range when performance fees are high or driven
by systematic strategies. The overall compensation ratio of 40% remained in
line with 2021, reflecting the strong performance fee revenue earned in 2022,
primarily from systematic macro strategies.
Other costs
Core other costs increased to $170 million in 2022 from $161 million in 2021,
partly as a result of the return to more normalised levels of expenditure on
travel and entertainment as COVID-19 restrictions lifted. This was partially
offset by sterling weakening against the US dollar, as the majority of our
cost base is denominated in sterling.
Tax
The majority of our profits are earned in the UK, with significant profits
also arising in the US, where our cash tax rate is effectively nil as a result
of available deferred tax assets, and in Switzerland, which has a lower rate
than the UK. A higher weighting of profits in the UK, where the applicable
statutory tax rate is 19%, drove an increase in the statutory effective tax
rate from 17% in 2021 to 18% in 2022. Tax on statutory profit for the year was
$137 million (2021: $103 million).
This increase in the UK profits weighting also led to an increase in the core
tax rate from 15% in 2021 to 17% in 2022.
In the US, we have accumulated tax losses and tax deductible goodwill and
intangibles of $82 million (2021: $85 million) which can be offset against
future US profits, thereby reducing taxable profits. We have recognised $64
million of the available $82 million US deferred tax assets at 31 December
2022 (2021: $74 million and $85 million respectively) as some state and city
tax losses are expected to expire before utilisation. The US core tax rate
will remain at nil until cash taxes are payable in the US, with movements in
the deferred tax asset classified as a non-core item. We currently expect
these assets to be fully consumed by 2024.
The principal factors influencing our future underlying tax rate are the mix
of profits by tax jurisdiction, the rate of consumption of US deferred tax
assets and changes to applicable statutory tax rates, in particular an
increase in the UK rate from April 2023. The global minimum tax rate
anticipated to come into effect in 2024 is not expected to have a significant
impact on our future tax charges.
Profit
Statutory profit increased from $487 million in 2021 to $608 million in 2022,
with core profit increasing from $557 million to $647 million over the same
period. This increase in profitability, together with a decrease in share
count as a result of the $386 million of shares repurchased during the year,
led to an increase in statutory EPS (diluted) from 33.8¢ in 2021 to 45.8¢ in
2022 (38.7¢ and 48.7¢ respectively on a core basis).
Cash earnings
Due to our strong conversion of profits into cash, we believe that core profit
is a good measure of our cash flow generation, although the timing of cash
conversion is impacted by the cyclical movements in our working capital
position and the size of our seed book. Core cash flows from operations
excluding working capital movements were $810 million for the year.
As at 31 December 2022, our cash balance, excluding amounts held by
consolidated fund entities, was $349 million. The $500 million committed
revolving credit facility, which matures in 2026, was undrawn.
$m Year ended Year ended
31 December 31 December
2022 2021
Opening available cash and cash equivalents 323 289
Core cash flows from operations excluding working capital movements 810 700
Working capital movements (excluding seeding) (65) (45)
Working capital movements - seeding (52) (173)
Dividends paid (179) (160)
Share repurchases (including costs) (386) (180)
Investment in associate (HUB) - (19)
Other movements (102) (89)
Closing available cash and cash equivalents 349 323
Balance sheet
We have a strong and liquid balance sheet. Fees and other receivables have
increased largely as a result of the higher level of performance fees earned
in December compared with the prior year. Payables have similarly increased
due to an increase in related compensation accruals. The increase in
investments in funds is driven by an increase in our seed portfolio, as
outlined below.
$m 31 December 2022 31 December 2021
Available cash and cash equivalents 349 323
Seeding investments portfolio 688 648
Payables under repo arrangements (54) (64)
Net financial assets 983 907
Other tangible assets and liabilities 39 21
Net tangible assets 1,022 928
Goodwill and intangibles 677 723
Shareholders' equity 1,699 1,651
Seed investments
We use our balance sheet to invest in new products, aiming to redeem as client
AUM grows in the funds. At 31 December 2022, our seed investments were $688
million, an increase from $648 million at 31 December 2021. This is due to
targeted deployment of capital to invest in new strategies and grow the
business to ultimately generate future returns to shareholders. In addition,
we held $138 million of total return swap exposure at 31 December 2022 (2021:
$108 million), allowing us to increase our seed portfolio without utilising
large portions of our cash balances.
Capital management and shareholder returns
Our balance sheet and liquidity position remains robust, allowing us to invest
in the business, support our long-term growth prospects and maximise
shareholder value. It also enables us to withstand periods of stress. We
continue to return capital that we consider to be in excess of our medium-term
requirements to our shareholders. In 2022, we completed the $250 million share
repurchase announced in December 2021 and the subsequent $125 million
repurchase announced in June 2022. In December 2022, we announced our
intention to repurchase a further $125 million of shares of which $27 million
had been repurchased at 31 December 2022.
Our 2022 proposed total dividend of 15.7¢ per share represents an increase of
12% on 2021. Our business is highly cash-generative, and these cash flows
support our progressive dividend policy, under which dividends are expected to
grow over time. We actively manage our capital to maximise value to
shareholders by either investing that capital to improve shareholder returns
in the future or by returning it through higher dividends or share buybacks.
We ensure we maintain a prudent balance sheet at all times by taking into
account capital requirements before investing capital, considering potential
strategic opportunities or returning it to shareholders. Over the past five
years, we have returned $0.9 billion to shareholders through dividends and
announced $1.0 billion of share buybacks. Our weighted average share count has
decreased by 18% to 1,288 million over that period.
Our $500 million revolving credit facility, which matures in 2026, provides
additional liquidity and was undrawn at 31 December 2022. We have maintained
prudent capital and available liquidity throughout the year and have deployed
our capital to support investment management operations and new investment
products, utilising the revolving credit facility when appropriate. We monitor
our capital requirements through continuous review of our regulatory and
economic capital, including regular reporting to the Risk and Finance
Committee and the Board.
The Board is proposing a final dividend for 2022 of 10.1¢ per share, which
together with the interim dividend of 5.6¢ per share equates to a total
dividend for the year of 15.7¢ per share. The proposed final dividend of
around $125 million is adequately covered by our available liquidity and
capital resources. Key dates relating to the proposed final dividend are
provided on page 2.
Planning for the impacts of climate change
Whilst climate change has not significantly impacted our financial performance
and position to date, consideration of the potential future impacts of climate
change on our business is embedded in our financial planning and reporting
processes. Under our strategy, we seek to minimise the carbon emissions of our
office premises, reduce inter-office travel or use lower-carbon modes of
transport where possible, and proactively plan for our ambitions in the
future. As part of our ongoing commitment to reduce our carbon footprint and
to reach net zero by 2030, we introduced carbon emissions targets into our
directors' long-term incentive plans from 2022. We have also embedded targets
to reduce our Scope 3 carbon emissions from business travel into our annual
budgeting process for 2023.
The directors have also considered potential climate-related impacts on the
Group financial statements, and do not expect them to be material in the short
to medium term. In particular, in performing their assessment the directors
have considered the impact of climate change on our going concern and
viability, the cash flow forecasts used in the impairment assessments of our
non-current assets, and the assumptions relating to future life expectancies
used in the valuation of the net pension asset. We continue to monitor the
potential longer-term impacts of climate change risks on the judgements and
estimates used in the preparation of the Group financial statements.
Antoine Forterre
Chief Financial Officer
Risk management - principal and emerging risks
Business risks
Risk Mitigants Status and trend Change
Investment performance Fund underperformance, on an absolute basis, relative to a benchmark or Man Group's investment businesses each have clearly defined investment Overall performance in 2022 has been strong given the challenging markets and Increased
relative to peer groups, could reduce AUM and may result in lower processes with integrated risk management, designed to target and deliver on the geopolitical backdrop in 2022: trend-following strategies performed
subscriptions and higher redemptions. This risk is heightened at times of the investment mandate of each product. We focus on hiring and retaining
well on an absolute basis; long-only strategies carried a beta to falling
disrupted and volatile markets, which could be triggered by geopolitical or highly-skilled professionals who are incentivised to deliver alpha within the markets, but generally outperformed their benchmarks; and equity and bond
climate factors. This may also result in dissatisfied clients, negative press parameters of their mandate. market falls led to poor absolute performance for our TargetRisk product
and reputational damage.
range. In addition, USD strengthening led to a fall in AUM for non-USD funds
Man Group's diversified range of products and strategies limits the risk to or share classes.
Lower AUM results in lower management fees and underperformance results in the business from underperformance of any particular strategy or market.
lower performance fees. Although we had net inflows, the LDI crisis is an example of an unanticipated
redemption headwind faced in 2022. A discussion of Man Group's investment
performance is included on page 8.
Key person risk A key person to the business leaves Business and investment processes are designed to minimise the impact of Man Group has continued to be able to attract and retain an array of talented Unchanged
or is unable to perform their role. losing any key individuals. Diversification of strategies and the emphasis on individuals across the firm.
technology and systematic strategies reduce the overall risk to Man Group.
Retention risk may increase in years of poor performance and the expectation
We did not see any investor concerns or material outflows as a result of
of reduced compensation. Succession plans and deferred compensation schemes are in place to support the announced departures or changes in management structure in 2022, including the
retention of senior investment professionals and key management. retirement of the Man Group President and subsequent Senior ExCo
reorganisation.
Credit risks
Risk Mitigants Status and trend Change
Counterparty A counterparty with which the funds or Man Group have financial transactions, Man Group and its funds diversify exposures across a number of the strongest There were no concerns arising in relation to our key counterparties in 2022. Unchanged
directly or indirectly, becomes distressed or defaults. available financial counterparties, each of which is approved and regularly
reviewed and challenged for creditworthiness by a firm-wide counterparty We finalised our migration away from a key prime broker linked to the collapse
Shareholders and investors in Man Group funds and products are exposed to committee. of Archegos in 2021. Our counterparty diversification model functioned as
credit risk of exchanges, prime brokers, custodians, sub-custodians, clearing
intended and we succeeded in moving material exposures to other
houses and depository banks. The risk teams monitor credit metrics on the approved counterparties daily. key-relationship counterparties in a controlled manner.
This includes Credit Default Swap spreads and credit ratings.
Liquidity risks
Risk Mitigants Status and trend Change
Corporate and fund Volatile markets and reduced market liquidity can place additional, often A $500 million revolving credit facility provides Man Group with a robust The balance sheet seeding programme and three share buybacks in 2022 were Unchanged
short-term, demands on the balance sheet. Man Group is exposed to having liquidity backstop. Liquidity forecasting for Man Group and the UK/EEA managed using the corporate liquidity forecast tool.
insufficient liquidity resources to meet its obligations. sub-group, including downside cases, facilitates planning and informs
decision-making. The asset liquidity distribution across funds remained broadly unchanged. Our
Adverse market moves and volatility
in-house liquidity analysis and reporting toolkit continued to evolve.
may sharply increase the demands on the liquid resources in Man Group's funds. The investment risk team conducts regular liquidity tests on Man Group's
Market stress and increased redemptions could result in the deterioration of funds. We endeavour to manage resources in such a way as to meet all plausible The LME/Nickel short squeeze effectively closed the market for much of March
fund liquidity and in the severest cases this could lead to the gating of demands for fund redemptions according to contractual terms. but the impact on our funds was minimal.
funds.
The Gilt/LDI crisis led to material redemption requests from our UK defined
benefit pension clients - these were managed without any issues.
Market risks
Risk Mitigants Status and trend Change
Investment book Man Group uses capital to seed new funds to build our fund offering, expand A disciplined framework ensures that each request for seed capital is assessed The investment book grew over 2022 with 23 new seed positions. The pure Unchanged
product distribution and generate returns for shareholders. Man Group also based on its risk and return on capital. seeding book returns were positive, with the benchmark hedges performing as
holds Collateralised Loan Obligation (CLO) risk retention positions until the
intended in the volatile markets. However, these gains were offset by losses
product maturity, and is currently participating in a US CLO Warehouse to Approvals are granted by a Seed Investment Committee (SIC), which is comprised on the CLO and private markets positions.
facilitate a product launch. of senior management, Group Risk and Treasury. Investments are subject to risk
limits, an exit strategy and are hedged to a benchmark where appropriate. The Repo and swap financing, used for some of the CLO and seed positions to
The firm is therefore exposed to a decline in value of the investment book. positions and hedges are monitored regularly by Group Risk and reviewed by the release liquidity, became more costly with the rate rises. However, there were
SIC. no problems encountered sourcing and rolling financing.
Pension Man Group underwrites the risks related to the UK defined benefit pension plan The UK pension plan has a low net exposure to UK interest rates and RPI In 2022 the scheme has increased its surplus on both an accounting and Decreased
which closed to new members in 1999 and future accrual in 2011. The plan is inflation though the use of LDI funds. The return-seeking assets are low actuarial basis.
healthy but is exposed to changes in net asset versus liability values. volatility and have a low correlation to directional equity markets. Longevity
is the largest remaining risk but is uncorrelated to Man Group's other risks. The scheme managed the UK Gilts and LDI crisis in September/October without
serious mishap. However, it
was necessary to rapidly sell return-seeking assets to fund the LDI margin
requirements.
Operational risks
Risk Mitigants Status and trend Change
Internal process failure Risk of losses or harm resulting from inadequate or failed corporate or fund Man Group's risk management framework and internal control systems are based Man Group remains focused on enhancing its systems and control processes where Unchanged
processes within Man Group. on a three lines of defence model. required and ensuring internal process failures are kept to a minimum.
Risks and controls are reassessed on an ongoing basis and in the event of Man Group has not observed an increase in material internal risk events in
material change, in order to determine the adequacy of the control 2022.
environment.
External process failure Man Group continues to outsource several functions as well as managing Man Group's operations team has implemented a robust methodology (including The firm's outsourcing remains intentionally concentrated with a small group Unchanged
outsourcing arrangements on behalf of its funds. Risks arise through the ongoing third-party due diligence and KPI monitoring) to confirm that of carefully selected and proven outsource providers with which it has well
supplier life cycle from sourcing and selection, to contracting and outsourced service providers are delivering as required. established and embedded working relationships. There has been no notable
onboarding, to service delivery and monitoring and finally, to exit and
increase or decrease in the number of issues caused by, or experienced by, our
offboarding. The most material risk is that the outsourced service providers outsource providers during 2022 and there have been no material losses or
do not perform as required, resulting in knock-on implications for our other impacts.
business and processes.
Model and Data Integrity Man Group is a technology-empowered active investment management firm which Man Group has embedded systems, controls and operational change control Man Group continues to source and provision new investment data sources and Unchanged
continues to make use of advanced quantitative trading strategies that processes for models and data. Controls are both preventative and detective to data analytics, but has not observed an increase in material internal risk
necessitate a robust approach minimise the potential consequences from such an event arising. events in 2022.
to data acquisition and consumption, model implementation and execution. Key
risks include model/algorithm failures or issues with data upon which
decisions are made.
Information and cybercrime security Risk of losses or harm resulting from the loss of information in electronic or Man Group has an established information security and cyber security programme Man Group continues to improve its defence using state-of-the-art Increased
hard copy form held by Man and arising as a result of sabotage, hacking, virus with relevant policies and procedures, that are aligned with industry technologies, enabling us to detect and prevent malicious activities and
attack or other malicious disruption causing system failure. expectations and best practices. Man Group's Chief Information Security complex cyber-attacks. We have not observed any increase in material issues
Officer, together with the Information Security Steering Committee, ensures following the escalation of regional conflicts and tensions seen in 2022, but
that our control environment is continuously reviewed and adjusted to keep our assessment is that activity is likely to increase in 2023.
pace with the regulatory, legislative and cyber threat landscapes.
Information technology and business continuity Risk of losses or harm incurred by IT software and hardware failures resulting Technology plays a fundamental role in delivering our objectives, so the IT Man Group has an ongoing focus on improving our technology offering, Unchanged
in system downtime, severely degraded performance or limited system functions work closely with each business unit to ensure work is correctly capability and security. Particular focus and investment have been on hardware
functionality. prioritised and financed. The prioritisation process considers the life cycle and software enhancements to core technology and data centres, and the
of both hardware and software to ensure both are adequately supported and enrichment of the trading and operations platform. Progress in centralisation
Business continuity risks may arise from incidents such as a denial of access sized. The firm's operational processes include mature risk, incident and of order management technology for the firm also continues apace.
to a key site or a data centre outage, which could lead to business problem management procedures to minimise
disruption.
the likelihood and impact of technology failures. Remote and agile working has continued to operate reliably and securely
enabling efficient flexible working arrangements for most staff, without any
Business continuity risk mitigation includes detailed planning and testing of notable change in the volume or materiality
remote access and contingency/recovery operations, and ongoing risk and threat
of issues arising through 2022.
assessments.
Criminal activities Risk of losses or harm through wrongful, unauthorised activities or criminal Man Group operates policies and procedures that comply with applicable laws Man Group has enhanced several surveillance tools to strengthen the control Unchanged
deception intended to result in financial or personal gain, or incurred and regulations, and provides periodic training to staff. environment and has adapted to the changes in the regulatory environment
through failure to comply (or have adequate procedures to comply with) laws
around aspects of financial crime which are constantly evolving with
and regulations relating to: anti-money laundering, counter-terrorist Internal policies, processes and controls are subject to internal review in heightened sanctions and enforcement actions. No material incidents were seen
financing, anti-bribery and corruption, breach of economic sanctions, insider order to ensure we remain well placed to manage evolving requirements, with in 2022, including complying with all sanctions relating to the Russian
trading and market abuse. support, independent oversight and challenge also being provided by Man invasion of Ukraine.
Group's Compliance and Financial Crime Teams.
Legal, compliance and regulatory The breadth and complexity of the regulations that Man Group and its Man Group operates a global legal and compliance framework which underpins all Man Group continues to experience new regulatory requirements. In 2022 this Increased
funds are subject to across multiple jurisdictions represent significant aspects of its business and is resourced by experienced teams. These teams are included implementation of requirements of the FCA's IFPR in relation to
operational risks should the firm fail to comply with them. Man Group supports physically located in Man Group's key jurisdictions, helping them to regulatory capital and liquidity (including the ICARA), governance and
proportionate and thoughtful regulation and initiatives that develop the understand the context and impact of any requirements. remuneration regime and to the (UK Funds) Assessment of Value.
regulatory environment. However, regulatory change can also result in
increased operational complexity and costs to Man Group or the sectors or Emphasis is placed on proactively analysing new legal and regulatory Man Group maintained an open dialogue with regulators throughout 2022 and work
markets in which it operates. developments and communications to assess likely impacts and mitigate risks. continues on a number of regulatory initiatives including the FCA's Consumer
Duty requirements.
Failure to comply with these laws and regulations may put Man Group at risk of Man Group continues to liaise directly and indirectly with competent
fines, lawsuits or reputational damage. authorities e.g. FCA, SEC, FINMA, CBI.
Reputational risks
Risk Mitigants Status and trend Change
Negative publicity The risk that an incident or negative publicity undermines our reputation as a Our reputation is dependent on our operational and fund performance and the Man Group enjoys a good reputation and work continues to build Man Group's Unchanged
leading investment manager and place to work. Reputational damage could result conduct of our employees. Our governance and control structure mitigates profile and protect its reputation across stakeholder groups.
in significant redemptions from our funds, and could lead to difficulties with operational concerns, and our attention to people and investment processes are
external financing, credit ratings and relations with core counterparties and designed to comply with accepted standards of investment management practice.
outsourcing providers. We encourage a culture of openness, inclusion and diversity.
Emerging risks
Risk Mitigants Status and trend Change
Potential future threats Emerging risks are complementary to the current principal risks and represent The Board, Executive Committees and Group Risk monitor emerging risks, trends The principal and emerging risks were reviewed and discussed by the Board Increased
potential future threats to Man Group's performance, development or viability. and changes in the likelihood or impact following discussions with subject in late 2022. The key themes were geopolitics (Russia, China, the US and the
matter experts. This assessment informs the universe of principal risks UK) and the fragile state of financial markets (volatility, leverage and
The emerging risk categories include natural disasters, pandemics, disruption managed and mitigated by the firm. insufficient margin). No changes were made to Man Group's headline principal
to financial markets and business infrastructure, geopolitical risk and risks.
changes in the competitive landscape.
Climate change risks
Risk Mitigants Status and trend Change
Physical risks Physical risks of business disruption, property damage or to employee Man Group has a small number of employees, a relatively limited physical The firm will continue to monitor and manage its risks through Unchanged
well-being due to a severe weather event. footprint and can operate completely remotely. business-as-usual reporting and management processes for the relevant
principal risk (see below).
Transition risks Transition risks as the world moves towards a low-carbon economy can be legal, Man Group has an agile business Work continues on Man Group's commitment to being a net zero carbon workplace Increased
regulatory, technological, market
model, so is well equipped to adjust to medium-term transition risks and also by 2030, including setting emissions targets, carbon budgeting and enhanced
or reputational. This may impact the appetite for and performance of some capture any opportunities. With a strong track record for innovation, the firm emissions disclosures.
investment products. continues to focus on providing investors with products that incorporate ESG
analytics. We are a signatory of the Net Zero Asset Managers initiative, with a
commitment to having net zero carbon investment portfolios by 2050. In 2022 we
set interim targets for our management of assets.
Link to our other principal risks Investment performance is exposed to market disruption or volatility triggered Man Group's diversified range of products and strategies limits the risk to In 2022 we expanded our proprietary ESG analytics toolkit and launches Increased
by severe weather events. Performance could also be impacted by fundamental any particular strategy or market. While the integrated portfolio and risk included AHL TargetClimate, with a multi-asset focus on the transition to a
moves in underlying asset prices or liquidity as the world transitions to management processes help managers understand their risk profiles. low-carbon economy, and a real estate strategy building net zero energy
a low-carbon economy.
single-family rental homes. We now have 32 Article 8 and 9 products
Agile working is well established, and employees can work remotely if offices representing 3.4% of AUM, an increase from 2.6% in 2021.
Business continuity risk manifests as damage or disruption to Man Group's are inaccessible. We conduct detailed planning for emerging scenarios along
offices and data centres and the transportation and supply systems that with testing of remote access and contingency/recovery operations. Our operations and ability to work effectively was not materially impacted by
support them. In particular our London headquarters may be exposed to flooding
the summer heatwaves across Europe, with the majority of employees working
of the River Thames. Man Group has specific policies and greenwashing controls which continue to remotely.
evolve and are subject to robust review. We take a relatively low key and
Legal and reputation risk currently comes from any suggestion of greenwashing considered approach in our external communications with a focus on education Investigations and fines announced against other financial services companies
if the ESG credentials of a fund or our corporate behaviour does not meet and data as well as highlighting the challenges inherent in this area. in 2022 highlight the increasing focus by global regulators and the media on
client or regulatory expectations. This could lead to redemptions and overstated ESG claims.
regulatory fines as well as damaging relations with core clients, employees
and the wider public.
Directors' responsibility statement
The directors are responsible for preparing the Annual Report and the Group
financial statements in accordance with applicable law and regulations. The
Annual Report will be published on the Company's website in mid-March and an
announcement will be released to the market confirming when it is available.
The Companies (Jersey) Law 1991 requires the directors to prepare financial
statements for each financial year. Under that law the directors have elected
to prepare the financial statements in accordance with applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the United
Kingdom. The financial statements are required by law to give a true and fair
view of the state of affairs of the Company and of the profit or loss of the
Company for that period.
In preparing Man Group's financial statements, International Accounting
Standard 1 requires that directors:
· properly select and apply accounting policies;
· present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific
requirements in IFRSs are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the entity's
financial position and financial performance; and
· make an assessment of the Company's ability to continue as a going
concern.
The directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply with
the Companies (Jersey) Law 1991. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company's website.
Legislation in Jersey, Channel Islands governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Each of the directors confirm that, to the best of each person's knowledge and
belief:
· the financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company and
the undertakings included in the consolidation taken as a whole;
· the Strategic report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face;
· the Annual Report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Company's and Man Group's position, performance,
business model and strategy; and
· there is no relevant audit information of which the Group's auditor is
unaware, and that they have taken all steps that they ought to have taken as a
director in order to make themselves aware of any relevant audit information
and to establish that Man Group's auditor is aware of that information.
Group financial statements
Group income statement
For the year to 31 December
Note 2022 2021
$m
$m
Management and other fees 4 954 914
Performance fees 4 778 567
Revenue 1,732 1,481
Net income or gains on investments and other financial instruments 12 7 42
Third-party share of losses/(gains) relating to interests in consolidated 12 14 (3)
funds
Sub-lease rental income 16 5 6
Distribution costs 5 (31) (40)
Net revenue 1,727 1,486
Asset servicing costs 5 (58) (58)
Compensation costs 5 (678) (596)
Other costs 5 (179) (165)
Finance expense 6 (16) (14)
Finance income 6 5 1
Revaluation of contingent consideration 13 - 2
Impairment of right-of-use lease assets - investment property 16 - (3)
Amortisation of acquired intangible assets 17 (51) (61)
Share of post-tax loss of associates 21 (5) (2)
Statutory profit before tax 745 590
Tax expense 7 (137) (103)
Statutory profit attributable to owners of the Company 608 487
Statutory earnings per share 23
Basic 47.2¢ 34.7¢
Diluted 45.8¢ 33.8¢
Group statement of comprehensive income
For the year to 31 December
Note 2022 2021
$m
$m
Statutory profit attributable to owners of the Company 608 487
Other comprehensive (loss)/income:
Remeasurements of defined benefit pension plans (2) 22
Current tax on pension plans - 4
Deferred tax on pension plans (1) (7)
Items that will not be reclassified to profit or loss (3) 19
Cash flow hedges: 14
Valuation gains taken to equity 6 9
Realised gains transferred to Group income statement (7) (8)
Net investment hedges 14 4 3
Foreign currency translation (4) (6)
Items that may be reclassified to profit or loss (1) (2)
Other comprehensive (loss)/income (4) 17
Total comprehensive income attributable to owners of the Company 604 504
Group balance sheet
At 31 December
Note 2022 2021
$m
$m
Assets
Cash and cash equivalents 8 457 387
Fee and other receivables 10 570 485
Investments in fund products and other investments 12 1,209 974
Investments in associates 21 14 18
Leasehold improvements and equipment 15 53 43
Leasehold property - right-of-use lease assets 16 92 61
Investment property - right-of-use lease assets 16 71 77
Investment property - consolidated fund entities 12 34 -
Goodwill and acquired intangibles 17 627 678
Other intangibles 18 50 45
Deferred tax assets 19 105 128
Pension asset 22 27
Total assets 3,304 2,923
Liabilities
Trade and other payables 11 942 702
Provisions 20 14 14
Current tax liabilities 7 37 15
Third-party interest in consolidated funds 12 359 254
Lease liability 16 253 250
Deferred tax liabilities 19 - 37
Total liabilities 1,605 1,272
Net assets 1,699 1,651
Equity
Capital and reserves attributable to owners of the Company 1,699 1,651
The financial statements were approved by the Board of Directors on 27
February 2023 and signed on its behalf by:
Luke Ellis Antoine Forterre
Chief Executive Officer Chief Financial Officer
Group cash flow statement
For the year to 31 December
Note 2022 2021
$m
$m
Cash flows from operating activities
Cash generated from operations 9 878 581
Interest paid (6) (2)
Payment of lease interest 16 (10) (12)
Tax paid 7 (125) (83)
Cash flows from operating activities 737 484
Cash flows from investing activities
Interest received 5 1
Purchase of leasehold improvements and equipment 15 (21) (26)
Purchase of investment property - right-of-use lease assets 16 (2) (5)
Purchase of other intangible assets (22) (18)
Purchase of interest in associate 21 - (19)
Cash flows used in investing activities (40) (67)
Cash flows from financing activities
Repayments of principal lease liability 16 (13) (21)
Purchase of Man Group plc shares by the Employee Trust (47) (18)
Proceeds from sale of Treasury shares in respect of Sharesave 2 2
Share repurchase programmes (including costs) 23 (386) (180)
Ordinary dividends paid to Company shareholders 24 (179) (160)
Cash flows used in financing activities (623) (377)
Net increase in cash and cash equivalents 74 40
Cash and cash equivalents at beginning of the year 387 351
Effect of foreign exchange movements (4) (4)
Cash and cash equivalents at end of the year 8 457 387
Less: restricted cash held by consolidated fund entities 8 (108) (64)
Available cash and cash equivalents at end of the year 8 349 323
Group statement of changes in equity
For the year to 31 December
$m Share capital Reorganisation reserve Profit Man Group plc shares held by Employee Trust Treasury shares Cumulative Other Total
and loss account
translation
reserves
adjustment
At 1 January 2021 53 (1,688) 3,292 (60) (148) 44 4 1,497
Statutory profit - - 487 - - - - 487
Other comprehensive income/(loss) - - 19 - - (3) 1 17
Total comprehensive income - - 506 - - (3) 1 504
Share-based payment charge - - 39 - - - - 39
Current tax on share-based payments - - 1 - - - - 1
Deferred tax on share-based payments - - 10 - - - - 10
Purchase of Man Group plc shares by the Employee Trust - - - (18) - - - (18)
Disposal of Man Group plc shares by the Employee Trust - - (17) 17 - - - -
Share repurchases - - (225) - - - - (225)
Transfer to Treasury shares - - 180 - (180) - - -
Transfer from Treasury shares - - (6) - 5 - 1 -
Disposal of Treasury shares for Sharesave - - - - 2 - 1 3
Cancellation of Treasury shares (2) - (143) - 143 - 2 -
Dividends paid - - (160) - - - - (160)
At 31 December 2021 51 (1,688) 3,477 (61) (178) 41 9 1,651
Statutory profit - - 608 - - - - 608
Other comprehensive loss - - (3) - - - (1) (4)
Total comprehensive income - - 605 - - - (1) 604
Share-based payment charge - - 45 - - - - 45
Current tax on share-based payments - - 4 - - - - 4
Deferred tax on share-based payments - - (6) - - - - (6)
Purchase of Man Group plc shares by the Employee Trust - - - (47) - - - (47)
Disposal of Man Group plc shares by the Employee Trust - - (28) 28 - - - -
Share repurchases - - (375) - - - - (375)
Transfer to Treasury shares - - 386 - (386) - - -
Transfer from Treasury shares - - (24) - 22 - 2 -
Disposal of Treasury shares for Sharesave - - - - 2 - - 2
Cancellation of Treasury shares (5) - (315) - 315 - 5 -
Dividends paid - - (179) - - - - (179)
At 31 December 2022 46 (1,688) 3,590 (80) (225) 41 15 1,699
Under the Companies (Jersey) Law 1991, a company may make a distribution from
any source other than the nominal capital account and capital redemption
reserve. The Company has reserves available for distribution of $1.8 billion
as at 31 December 2022 (2021: $2.4 billion).
Notes to the Group financial statements
1. Basis of preparation
While the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRSs) as adopted by the United
Kingdom, this announcement does not itself contain sufficient information to
comply with IFRSs. Details of our accounting policies can be found in Man
Group's Annual Report for the year ended 31 December 2021. The financial
information included in this statement does not constitute statutory accounts
within the meaning of Article 105 of Companies (Jersey) Law 1991. Statutory
accounts for the year ended 31 December 2022, upon which the auditors have
issued an unqualified report, will shortly be delivered to the Jersey
Registrar of Companies. The Annual Report and the Notice of the Company's 2023
Annual General Meeting (AGM) will be posted to shareholders and will be
available to download from the Company's website on 14 March 2023. The Annual
General Meeting will be held on 5 May 2023 at 10am at Riverbank House, 2 Swan
Lane, London EC4R 3AD. For further details please refer to the Notice of our
2023 Annual General Meeting when available.
Consolidation
The consolidated group is the Company and its subsidiaries (together Man
Group). The consolidated financial statements are presented in United States
dollars (USD), the Company's functional currency, as the majority of our
revenues, assets, liabilities and financing are denominated in USD.
Monetary assets and liabilities denominated in foreign currencies are
translated at the spot rate on each balance sheet date. Non-monetary items
carried at fair value that are denominated in foreign currencies are
translated at the rates prevailing at the date when the fair value was
determined. Non-monetary items that are measured at historical cost in a
foreign currency are not retranslated. Transactions denominated in foreign
currencies are converted at the spot rate at the date of the transaction or,
if appropriate, the average rate for the month in which the transaction
occurs. The resulting exchange differences are recognised in the Group income
statement.
For consolidated entities that have a functional currency other than USD, the
assets and liabilities are translated into USD at the spot rate on balance
sheet date. Income and expenses are translated at the average rate for the
period in which the transactions occur. The resulting exchange differences
between these rates are recorded in other comprehensive income.
The consolidated financial information contained within these financial
statements incorporates our results, cash flows and financial position for the
year to 31 December 2022 and includes our share of the results of any
associates and joint ventures using the equity method of accounting.
Subsidiaries are entities we control (including certain structured entities,
as defined by IFRS 12 'Disclosure of Interests in Other Entities') and are
consolidated from the date on which control is transferred to us until the
date that control ceases. Control exists when we have the power to direct the
relevant activities, exposure to significant variable returns and the ability
to utilise power to affect those returns. All intercompany transactions and
balances are eliminated on consolidation. Although the Employee Trust has
independent trustees and its assets are held separately, it is consolidated
into the Group financial statements given its nature as a structured entity
which has the obligation to deliver deferred compensation awards to our
employees.
Business combinations are accounted for using the acquisition method from the
date on which we obtain control of the acquiree. The cost of an acquisition is
measured as the fair value on the acquisition date of assets transferred,
liabilities incurred and equity instruments issued by the Company. The fair
value of an acquisition is calculated at the acquisition date by recognising
the acquiree's identifiable assets and liabilities at their fair values at
that date. Costs relating to acquisitions are recognised in the Group income
statement as incurred. Any contingent consideration is recognised at fair
value at the acquisition date, with any subsequent changes to the fair value
recognised in the Group income statement.
Management information regarding revenues, net management fee margins and
investment performance relevant to the operation of the investment managers,
products and the investor base are reviewed by the Board and Senior Executive
Committee. A centralised shared infrastructure for operations, product
structuring, distribution and support functions for our investment management
business means that operating costs are not allocated to constituent parts of
the investment management business. As a result, performance is assessed,
resources are allocated, and other strategic and financial management
decisions are determined by the Board and Senior Executive Committee on the
basis of our investment management business as a whole. Accordingly, we
operate and report the investment management business as a single segment,
together with relevant information regarding AUM flows and net margins, to
allow for analysis of the direct contribution of products and the respective
investor base.
Impact of new accounting standards
There were no new or amendments to existing accounting standards issued by the
International Accounting Standards Board (IASB) effective for the first time
in the year to 31 December 2022 that have had a significant impact on these
Group financial statements.
No other standards or interpretations issued and not yet effective are
expected to have a material impact on the Group financial statements.
2. Going concern
The preparation of the Group financial statements on a going concern basis is
supported by the forecast financial performance and capital and liquidity
analysis of Man Group, as approved by the Board. This analysis considers our
net financial assets and liquidity resources and requirements and utilises the
Man Group budget, medium-term plan and the capital and liquidity plan. These
plans include rigorous downside testing, including analyses of stressed
capital and liquidity scenarios, and incorporate Man Group's principal and
emerging risks, which are outlined on pages 18 to 23 and monitored by the
Board on an ongoing basis.
3. Judgemental areas and accounting estimates
The preparation of financial statements in conformity with IFRS requires the
use of accounting estimates and assumptions. We continually evaluate our
estimates and judgements based on historical experience and expectations of
future events that are considered reasonable in the circumstances. These
judgements and estimates are an area of focus for the Board and, in
particular, the Audit and Risk Committee.
Critical judgements
Man Group acts as the investment manager or adviser to fund entities. The most
significant area of judgement is whether we control certain of those fund
entities to which we are exposed via either direct investment holdings, total
return swaps, or sale and repurchase arrangements. We assess such
relationships on an ongoing basis to determine whether we control each fund
entity and therefore consolidate them into our results.
Critical accounting estimates
Man Group's only key source of estimation uncertainty is the valuation of the
net pension asset. The Board has also considered the assumptions used in the
assessments for impairment of goodwill and right-of-use lease assets and the
recoverability of deferred tax assets. They have concluded that these
assumptions do not have a significant risk of causing a material adjustment to
the carrying amounts of our assets or liabilities at the balance sheet date.
The Board has also considered the impact of climate change on the Group
financial statements, in particular in relation to the going concern
assessment, the cash flow forecasts used in the impairment assessments of
non-current assets and the assumptions around future life expectancies used in
the valuation of the net pension asset. The impact of climate change on the
Group financial statements is not currently expected to be material.
4. Revenue
Accounting policy
Fee income is our primary source of revenue, which is derived from the
investment management agreements that we have in place with the fund entities
or the accounts that we manage.
Management and other fees (net of rebates), which include all non-performance
related fees, are recognised in the period in which contractual investment
management services are provided and do not include any other performance
obligations. Fees are generally based on an agreed percentage of NAV or AUM
and are typically charged in arrears and receivable within one month.
Performance fees (net of rebates) relate to the performance of the funds or
managed accounts managed during the year and are recognised when the
performance obligation has been met, whereby the fee has crystallised and can
be reliably estimated. This is generally at the end of the performance period
or upon early redemption by an investor. Until the performance period ends,
market movements could significantly move the NAV of the fund products and
therefore the value of any performance fees receivable. For alternative
strategies, we will typically only earn performance fees on any positive
investment returns in excess of the high-water mark, meaning we will not be
able to earn performance fees with respect to positive investment performance
in any year following negative performance until that loss is recouped. For
long-only strategies, performance fees are usually earned only when
performance is in excess of a predetermined strategy benchmark (positive
alpha). Once crystallised, performance fees typically cannot be clawed back.
There are no other performance obligations or services provided which suggest
these have been earned either before or after the crystallisation date.
Rebates, which relate to repayments of management and performance fees
charged, typically to institutional investors, are recognised in the same
period as the associated fees for services are provided. Rebates are presented
net within management and other fees and performance fees in the Group income
statement.
5. Costs
Accounting policy
Distribution costs
Distribution costs, which are paid to external intermediaries for marketing
and investor servicing, largely in relation to retail investors, are typically
variable with AUM and the associated management fee revenue. Distribution
costs are expensed over the period in which the service is provided.
Asset servicing costs
Asset servicing includes custodial, valuation, fund accounting, registrar,
research and administration functions performed by third parties as well as
market data acquired under contract to Man Group, on behalf of the funds or
managed accounts. Asset servicing costs are recognised in the period in which
the services are provided. The costs of these services vary based on
transaction volumes, the number of funds or managed accounts and their NAVs,
and the mix of client strategies.
Compensation costs
Salaries, variable cash compensation and social security costs are charged to
the Group income statement in the period in which the service is provided and
include partner drawings. In the short term, the variable component of
compensation adjusts with revenues and profitability.
Compensation can be deferred by way of equity-settled share-based payment
schemes and fund product-based compensation arrangements. Where deferred
compensation relates to our fund products, the fair value of the employee
services received in exchange for the fund investments is recognised as a
straight-line expense of the mark-to-market value of the awards over the
relevant vesting period, with a corresponding liability recognised in the
Group balance sheet. We generally elect to separately purchase the equivalent
fund investments at grant date to offset any associated change in the value of
deferred compensation due, and on vesting the value of the fund investment is
delivered to the employee (subject to the terms of the plan rules, which
include malus provisions). If a fund product-based award is forfeited, the
cumulative charge recognised in the Group income statement is reversed in
full.
5.1. Compensation costs
2022 2021
$m
$m
Salaries 174 169
Variable cash compensation 321 266
Deferred compensation: share-based payment charge 45 39
Deferred compensation: fund product-based payment charge 72 54
Social security costs 52 54
Pension costs 14 14
Total compensation costs 678 596
Comprising:
Fixed compensation: salaries and associated social security costs, and pension 209 208
costs
Variable compensation: variable cash compensation, deferred compensation and 469 388
associated social security costs
The unamortised deferred compensation at 31 December 2022 is $76 million
(2021: $52 million) and has a weighted average remaining vesting period of
1.5 years (2021: 1.4 years).
5.2. Other costs
2022 2021
$m
$m
Audit, tax, legal and other professional fees 24 21
Technology and communications 22 22
Occupancy 18 18
Temporary staff, recruitment, consultancy and managed services 17 13
Staff benefits 14 14
Insurance 7 7
Travel and entertainment 7 2
Marketing and sponsorship 5 4
Other cash costs, including irrecoverable VAT 18 18
Total other costs before depreciation and amortisation 132 119
Depreciation of leasehold improvements and equipment, and amortisation of 30 29
other intangibles
Depreciation of right-of-use lease assets (Note 16) 17 17
Total other costs 179 165
Average headcount
The table below details average headcount by function, including directors,
employees, partners and contractors.
2022 2021
Investment management 427 388
Sales and marketing 238 218
Technology and infrastructure1 930 847
Average headcount 1,595 1,453
Headcount at 31 December 1,655 1,498
Note:
1 Includes all staff performing technology-based roles, including those
supporting the investment management side of our business.
6. Finance expense and finance income
2022 2021
$m
$m
Finance expense:
Unwind of lease liability discount (Note 16) (10) (12)
Other finance expense (6) (2)
Total finance expense (16) (14)
Finance income:
Interest on cash deposits 5 1
Total finance income 5 1
Net finance expense (11) (13)
7. Current tax and tax expense
Accounting policy
Current tax is based on our taxable profit for the year. Taxable profit
differs from net profit as reported in the Group income statement because it
excludes items of income or expense that are taxable or deductible in other
years, in addition to items that are never taxable or deductible. Accounting
for tax involves a level of estimation uncertainty given the application of
tax law requires a degree of judgement, which tax authorities may dispute. Tax
liabilities are recognised based on the best estimates of probable outcomes,
with regard to external advice where appropriate.
We are a global business and therefore operate across many different tax
jurisdictions. Income and expenses are allocated to these different
jurisdictions based on transfer pricing methodologies set in accordance with
the laws of the jurisdictions in which we operate and international guidelines
as laid out by the Organisation for Economic Co-operation and Development
(OECD). The effective tax rate results from the combination of taxes paid on
earnings attributable to the tax jurisdictions in which they arise.
The movements in our current tax liabilities are as follows:
2022 2021
$m
$m
At beginning of the year 15 12
Charge to the Group income statement 159 99
Credit to other comprehensive income and equity (4) (5)
Tax paid (125) (83)
Other balance sheet movements (5) (8)
Foreign currency translation (3) -
At end of the year 37 15
2022 2021
$m
$m
Current tax
UK corporation tax on profits 140 86
Foreign tax 19 14
Adjustments to tax charge in respect of previous years - (1)
Current tax expense 159 99
Deferred tax
Origination and reversal of temporary differences (13) 5
Adjustments to tax charge in respect of previous years (9) (1)
Deferred tax (credit)/expense (Note 19) (22) 4
Total tax expense 137 103
Factors affecting the tax expense for the year
The majority of our profits in the period were earned in the UK, Switzerland
and the US. Our tax expense is lower (2021: lower) than the amount that would
arise using the theoretical tax rate applicable to our profits as follows:
2022 2021
$m
$m
Profit before tax 745 590
Theoretical tax expense at UK rate: 19% (2021: 19%) 142 112
Effect of:
Overseas tax rates different to UK (2) 1
Adjustments to tax charge in respect of previous years (9) (2)
Derecognition/(recognition) of US deferred tax assets (Note 19) 7 (2)
Impact of change in UK tax rate - (4)
Other (1) (2)
Tax expense 137 103
The current effective tax rate is 18% (2021: 17%).
Factors affecting our future tax charges
The principal factors which may influence our future tax rate are changes in
tax regulation in the territories in which we operate, the mix of income and
expenses earned and incurred by jurisdiction, and the consumption of available
deferred tax assets. In particular, as the majority of our profits are earned
in the UK, the increase of the UK corporation tax rate to 25% on 1 April 2023
will have an impact on our overall tax rate in future periods.
The OECD has published a draft Inclusive 'Pillar 2' Framework (the Framework)
to support the introduction of a global minimum tax rate of 15%. Governments
are still consulting on how to implement the Framework with the expectation
that legislation and regulations in most jurisdictions will take effect from
2024. Pending final conclusions on the potential outcomes of the consultation,
it is not currently practicable to assess fully the impact of the Framework on
our future tax charges but we do not anticipate it will be significant.
Although not currently in force, it is expected that the IASB will treat any
impact as a permanent in-the-year difference for 2024 and onwards.
8. Cash, liquidity and borrowings
Accounting policy
Cash and cash equivalents comprise cash and short-term investments in money
market funds or bank deposits with an original maturity of three months or
less. Cash and cash equivalents are measured at amortised cost, which is
approximately equal to fair value. Available cash and cash equivalents is
invested in accordance with strict limits consistent with the Board's risk
appetite, which consider both the security and availability of liquidity.
Accordingly, cash is held in on-demand and short-term bank deposits and money
market funds, and at times invested in short-term US Treasury bills (which
meet the definition of cash equivalents). Cash and cash equivalents include
restricted balances held by consolidated fund entities to which we do not have
access and which are subject to legal or contractual restrictions as to their
use.
2022 2021
$m
$m
Cash held with banks 124 189
Short-term deposits 95 24
Money market funds 130 110
Cash held by consolidated fund entities (Note 12.2) 108 64
Cash and cash equivalents 457 387
Less: cash held by consolidated fund entities (Note 12.2) (108) (64)
Available cash and cash equivalents 349 323
Undrawn committed revolving credit facility 500 500
Total liquidity 849 823
Cash and cash equivalents
At 31 December 2022, the $349 million available cash and cash equivalents
balance is held with 14 banks (2021: $323 million with 14 banks).
Credit ratings of banks 2022 2021
$m
$m
AAA 103 51
AA 103 154
A 143 118
Total 349 323
The single largest counterparty bank exposure of $101 million is held with an
A- rated bank (2021: $85 million held with an AA- rated bank).
Liquidity risk management
Liquidity resources support ongoing operations and potential liquidity
requirements under scenarios that assume stressed market and economic
conditions. Our funding requirements relating to the investment management
process are discretionary. Our liquidity profile is monitored on a daily basis
and the stressed scenarios are updated regularly. The Board reviews our
funding resources at each Board meeting and on an annual basis, as part of the
strategic planning process. Our available liquidity is considered sufficient
to cover current requirements and potential requirements under stressed
scenarios.
Borrowings
Our $500 million committed revolving credit facility (RCF) is immediately
accessible, incorporates an ESG target-linked interest rate component and does
not include financial covenants in order to maintain maximum flexibility. The
RCF was put in place in December 2019 as a five-year facility but has since
been extended and, due to the exercise of the final one-year extension option
in 2021, is now scheduled to mature in December 2026. The RCF was drawn at
several points during the year in order to fund working capital requirements
but was undrawn at 31 December 2022 (2021: undrawn). Drawdowns under the RCF
are typically for maturities of one month or less and are therefore presented
net of repayments in the Group cash flow statement.
9. Reconciliation of statutory profit to cash generated from operations
Accounting policy
Cash flows arising from the purchase and sale of investments in fund products
and other investments, and from transactions with third-party investors in
consolidated fund entities, are included in cash flows from operating
activities in the Group cash flow statement. This classification reflects the
fact that these investments are to build product breadth and to trial
investment research before marketing the products broadly to investors as part
of Man Group's ordinary operations, or are otherwise held in connection with
settling employee remuneration, and are not intended to be held as long-term
investments.
Note 2022 2021
$m
$m
Cash flows from operating activities
Statutory profit 608 487
Adjustments for:
Share-based payment charge 5 45 39
Fund product-based payment charge 5 72 54
Net finance expense 6 11 13
Tax expense 7 137 103
Revaluation of contingent consideration 13 - (2)
Depreciation of leasehold improvements and equipment 15 12 13
Depreciation of right-of-use lease assets 16 17 17
Impairment of right-of-use lease assets - investment property 16 - 3
Amortisation of acquired intangible assets 17 51 61
Amortisation of other intangibles 18 18 16
Share of post-tax loss of associates 21 5 2
Foreign exchange movements (13) 9
Realised gains on cash flow hedges (7) (8)
Funding of defined benefit pension plan - (3)
Other non-cash movements (5) (7)
951 797
Changes in working capital(1):
Increase in fee and other receivables (68) (102)
Increase in other financial assets including consolidated fund entities(2) (45) (163)
Increase in trade and other payables 40 49
Cash generated from operations 878 581
Notes:
1 Changes in working capital differ from the movements in these balance
sheet items due to non-cash movements which either relate to the gross-up of
the third-party share of consolidated fund entities (Note 12.2) or are
adjusted elsewhere in the Group cash flow statement, such as movements
relating to the fund product-based payment charge (within operating
activities) and the share repurchase liability (within financing activities).
2 Includes $44 million (2021: $2 million) of restricted net cash inflows
relating to consolidated fund entities (Note 12.2).
10. Fee and other receivables
Accounting policy
Fee and other receivables are initially recorded at fair value and
subsequently measured at amortised cost using the effective interest rate
method, except for derivatives (measured at fair value through profit and
loss) and prepayments. Fee receivables and accrued income relate to management
and performance fees and are received in cash following finalisation of the
NAVs of the underlying funds or managed accounts. The majority of fees are
deducted from the NAVs of the respective funds by the independent
administrators and therefore the credit risk of fee receivables is minimal.
2022 2021
$m
$m
Fee receivables 35 18
Accrued income 359 355
Collateral posted with derivative counterparties 39 29
Receivables from Open Ended Investment Collective (OEIC) funds 20 25
Other fund receivables 36 11
Prepayments 17 16
Derivatives (Note 13) 9 5
Sub-lease rental income receivable 1 2
Other receivables 25 19
Receivables relating to consolidated fund entities (Note 12.2) 29 5
570 485
No balances are overdue and, under the expected credit loss model of IFRS 9
'Financial Instruments', no impairment has been recognised at 31 December
2022 (2021: nil). Included in fee and other receivables at 31 December 2022
are balances of $1 million (2021: $3 million) which are expected to be settled
after more than 12 months.
11. Trade and other payables
Accounting policy
Trade and other payables are initially recorded at fair value, which is
usually the invoiced amount, and subsequently measured at amortised cost using
the effective interest rate method, except for derivatives which are measured
at fair value through profit and loss.
2022 2021
$m
$m
Trade payables 4 5
Compensation accruals 453 373
Other accruals 86 80
Share repurchase liability 98 109
Payables under repo arrangements 54 64
Payables to OEIC funds 18 25
Tax and social security 30 5
Derivatives (Note 13) 6 5
Other payables 13 17
Payables relating to consolidated fund entities (Note 12.2) 180 19
942 702
Payables under repo arrangements relate to obligations to repurchase seed
investments.
Trade and other payables can be analysed according to their contractual
maturity date as follows:
2022 2021
$m
$m
Within one year 871 674
Between one and three years 71 28
942 702
12. Investments in fund products and other investments
Accounting policy
Investments in fund products are classified at fair value through profit or
loss, with net gains due to movements in fair value recognised through income
or gains on investments and other financial instruments. The fair values of
investments in fund products are typically derived from their reported NAVs,
which in turn are based upon the value of the underlying assets. The valuation
of the underlying assets within each fund product is determined by external
valuation service providers based on an agreed valuation policy and
methodology. While these valuations are performed independently of Man Group,
we have established oversight procedures and due diligence processes to ensure
that the NAVs reported by the external valuation service providers are
reliable and appropriate. Purchases and sales of investments are recognised
on trade date.
Our holdings in collateralised loan obligation (CLO) risk retention assets are
priced using a bottom-up valuation method. We use third-party valuations to
price the securities within the underlying portfolios and then apply the
percentage of the CLO notes we hold to these valuations. Holdings in
subordinated tranches of CLOs are valued using an average of third-party
valuations.
Seeding investments portfolio
We use capital to invest in fund products as part of our ongoing business, to
build product breadth and to trial investment research developments before
marketing the products broadly to investors. Seed capital is invested via
direct holdings in fund products or sale and repurchase (repo) arrangements,
which allow us to finance seed investments without consuming high levels of
cash. Alternatively, we may obtain exposure to seed investments via total
return swap (TRS) arrangements. Under a repo arrangement we are committed
to repurchase the underlying seed investments at maturity and pay an interest
charge over the period, with the obligation to repurchase the assets on
maturity recorded as a liability within trade and other payables. Under a TRS
arrangement, we are under no form of repayment obligation and have no
ownership interest (or voting rights) in the underlying investment. In
exchange for the returns on the underlying seed investments, we pay a floating
rate of interest.
Consolidation
The control considerations under IFRS 10 'Consolidated Financial Statements'
apply to fund product investments, including those underlying our repo and TRS
instruments. Fund entities deemed to be controlled are consolidated on a
line-by-line basis from the date control commences until it ceases. Where we
are not deemed to control the fund, our investment is classified within
investments in fund products.
We only have limited exposure to the variable returns of the fund entities we
manage unless we either hold an investment in the fund entity or receive the
returns of the fund entity via a TRS or repo arrangement. For most fund
entities: the existence of independent boards of directors; rights which allow
for the removal of the investment manager or adviser; the influence of
external investors; limited exposure to variable returns; and the arm's length
nature of our contracts with those fund entities, indicate that we do not
control them. As a result, the associated assets, liabilities and results of
these funds are not consolidated into the Group financial statements.
Investment property held by consolidated fund entities comprises land and
buildings held to earn rent or for capital appreciation, and is measured at
cost less depreciation and impairment. Other than land, which is not
depreciated, depreciation is calculated on a straight-line basis over the
asset's estimated useful life (between three and 30 years).
Fund investments held for deferred compensation arrangements
We hold fund product investments related to deferred compensation arrangements
to offset any change in the associated compensation cost over the vesting
period. At vesting, the value of the fund investment is delivered to the
employee. These fund product investments are measured at fair value and
include balances held by the Employee Trust.
Financial assets at fair value through profit or loss 2022 2021
$m
$m
Investments in fund products 304 422
Investments in consolidated funds: transferrable securities (Note 12.2) 905 549
Other investments - 3
Investments in fund products and other investments 1,209 974
Less:
Fund investments held for deferred compensation arrangements (153) (119)
Investments in consolidated funds: exclude consolidation gross-up of net (368) (204)
investment
Other investments - (3)
Seeding investments portfolio 688 648
12.1. Investments in fund products
At 31 December 2022, exposure to fund products via repo arrangements (included
within investments in fund products, with an offsetting repayment obligation
included within trade and other payables) was $54 million (2021: $64 million).
Additional exposure via TRS was $138 million (2021: $108 million). The
largest single investment in fund products at 31 December 2022 was $61 million
(2021: $45 million).
Income or gains on investments and other financial instruments comprises the
following:
2022 2021
$m
$m
Net (losses)/gains on seeding investments portfolio (12) 24
Consolidated fund entities: gross-up of net gains on investments - 12
Foreign exchange movements 22 3
Net (losses)/gains on fund investments held for deferred compensation (3) 3
arrangements and other investments
Net income or gains on investments and other financial instruments 7 42
12.2. Consolidation of investments in funds
In 2022, our interests in 43 (2021: 26) funds met the definition of control
and have therefore been consolidated on a line-by-line basis.
Consolidated fund entities are included within the Group balance sheet and
income statement as follows:
2022 2021
$m
$m
Balance sheet
Cash and cash equivalents 108 64
Transferable securities1 905 549
Investment property 34 -
Fees and other receivables 29 5
Trade and other payables (180) (19)
Net assets of consolidated fund entities 896 599
Third-party interest in consolidated funds (359) (254)
Net investment held by Man Group 537 345
Income statement
Net (losses)/gains on investments2 (31) 32
Management fee expenses3 (4) (3)
Performance fee expenses3 (1) (2)
Other costs4 (9) (4)
Net (losses)/gains of consolidated fund entities (45) 23
Third-party share of losses/(gains) relating to interests in consolidated 14 (3)
funds
Net (losses)/gains attributable to net investment held by Man Group (31) 20
Notes:
1 Included within investments in fund products and other investments.
2 Included within income or gains on investments and other financial
instruments.
3 Relate to management and performance fees paid by the funds to Man
Group during the year, which are eliminated within management and other fees
and performance fees respectively in the Group income statement.
4 Includes depreciation and impairment of investment property held by
consolidated fund entities.
Movements in the carrying value of investment property held by consolidated
fund entities can be analysed as follows:
2022 2021
$m
$m
Cost at beginning of the year - -
Additions 38 -
Cost at end of the year 38 -
Accumulated depreciation and impairment at beginning of the year - -
Depreciation (1) -
Impairment (3) -
Accumulated depreciation and impairment at end of the year (4) -
Net book value at beginning of the year - -
Net book value at end of the year 34 -
The fair value of investment property held by consolidated fund entities of
$34 million at 31 December 2022 (2021: nil) is based on independent
third-party valuations. The carrying value has been impaired to its fair value
during the year, resulting in an impairment charge of $3 million (2021: nil)
being recognised in the Group income statement within other costs.
13. Fair value of financial assets and liabilities
Accounting policy
We disclose the fair value measurement of financial assets and liabilities
using three levels, as follows:
· Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities.
· Level 2: inputs, other than quoted prices included within Level 1, that
are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices).
· Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The majority of our investments in fund products fall within Level 2 due to
the levels of subscription and redemption activity and the liquidity of the
underlying investments. Level 2 investments in fund products primarily
comprise holdings in unlisted, open-ended, active and liquid funds, which are
priced using daily or weekly observable market information derived from
third-party sources.
A transfer into Level 3 would be deemed to occur where the level of activity,
as evidenced by subscriptions and redemptions, is deemed insufficient to
support a Level 2 classification. Other factors, such as a deterioration of
liquidity in the underlying investments, would also result in a Level 3
classification.
We assess the observability of the inputs used in the valuations of our
financial assets and liabilities on an annual basis.
The fair values of our financial assets and liabilities held at fair value
through profit and loss can be analysed as follows:
2022 2021
$m Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Financial assets held at fair value:
Investments in fund products and other investments (Note 12) - 284 20 304 3 243 179 425
Investments in consolidated funds (Note 12) - 905 - 905 - 538 11 549
Derivatives (Note 10) - 9 - 9 - 5 - 5
- 1,198 20 1,218 3 786 190 979
Financial liabilities held at fair value:
Derivatives (Note 11) - (6) - (6) - (5) - (5)
- (6) - (6) - (5) - (5)
During the year, CLO risk retention assets of $154 million which were
previously classified within the Level 3 category were transferred to Level 2
following a change in valuation methodology as all inputs used in the
valuation of those assets are now observable. The change in valuation
methodology does not have a material impact on the fair value of the assets
year-on-year.
The movements in Level 3 financial assets and liabilities held at fair value
are as follows:
2022 2021
$m Assets Liabilities Assets Liabilities
At beginning of the year 190 - 179 (2)
Transfers (out of)/into Level 3 (154) - 9 -
Purchases 1 - 17 -
(Charge)/credit to Group income statement (5) - (7) 2
Sales or settlements (1) - (2) -
Change in consolidated fund entities held (11) - (6) -
At end of the year 20 - 190 -
The $2 million credit to the Group income statement in 2021 relates to the
revaluation of contingent consideration, being an adjustment to the fair value
of acquisition earn-out payments.
14. Market risks and derivatives
Accounting policy
Derivatives
We use derivative financial instruments to manage market risk in certain
circumstances. These consist primarily of market risk hedges on some of our
seeding positions and foreign exchange contracts. The carrying value of these
derivatives are included in fee and other receivables and trade and other
payables.
Hedge accounting
We have elected to apply cash flow hedge accounting to fund investments
related to deferred fund product awards granted from 1 January 2020, whereby
the offsetting gains or losses on these fund products are matched against the
corresponding fund product-based payment compensation charge in the Group
income statement pro rata over the vesting period. Gains or losses are
recognised through other comprehensive income and held within the cash flow
hedge reserve in equity until they are recycled over the vesting period into
the Group income statement.
We apply net investment hedge accounting to the net assets of material
subsidiaries that have a functional currency other than USD. Gains or losses
on derivatives are recycled from the Group income statement through other
comprehensive income in the foreign currency translation reserve in equity to
offset the impact of any currency translation of the net assets of these
subsidiaries. The accumulated gains or losses are recycled to the Group income
statement on disposal of the related subsidiary.
As in 2021, all derivatives are held with counterparties with ratings of A or
higher and mature within one year.
Management of market risk arising from investments in funds
Investments in fund products expose us to market risk and are therefore
managed within limits consistent with the Board's risk appetite. In certain
circumstances, we use derivative financial instruments, specifically equity or
credit default swaps, to hedge the risk associated with mark-to-market
movements.
The market risk from seeding investments, including those financed via repo
and TRS arrangements, is modelled using a value at risk methodology with a 95%
confidence interval and one-year time horizon. The value at risk is estimated
to be $43 million at 31 December 2022 (2021: $42 million).
Market risk hedges 2022 2021
$m
$m
Notional value of derivatives at 31 December
Assets 149 148
Liabilities (71) (112)
Net assets 78 36
For the year ended 31 December
Gain/(loss) recognised in the Group income statement 39 (9)
We generally hold an investment in the associated fund products to hedge the
mark-to-market movement in deferred fund product-based compensation over the
vesting period.
Management of foreign exchange rate risk
We are subject to risk from changes in foreign exchange rates on monetary
assets and liabilities. In certain circumstances, we use derivative financial
instruments, specifically forward foreign exchange contracts, to hedge the
risk associated with foreign exchange movements.
During the year, there were $22 million (2021: $3 million) of net realised and
unrealised foreign exchange gains recognised in the Group income statement
through income or gains on investments and other financial instruments,
including the effects of hedging. This primarily comprises a $25 million
(2021: $2 million) unrealised gain relating to the revaluation of our $200
million (2021: $238 million) unhedged GBP lease liability.
Foreign exchange hedges 2022 2021
$m
$m
Notional value of derivatives at 31 December
Assets 82 123
Liabilities (235) (364)
Net liabilities (153) (241)
For the year ended 31 December
Gain/(loss) before the impact of hedging 5 (10)
Total gain on hedging instruments 17 13
Gain recognised in the Group income statement after the impact of hedging 22 3
The table below reflects the currency profile of our net foreign currency
(non-USD) monetary assets and liabilities after the impact of hedging:
2022 2021
$m
$m
Sterling (155) (208)
Australian dollar 41 -
Japanese yen 19 -
Other 10 -
Total (85) (208)
A 10% strengthening/weakening of the USD against all other currencies, with
all other variables held constant, would have resulted in a foreign exchange
loss/gain of $9 million (2021: $21 million), with a corresponding impact on
equity. This pre-tax exposure is based on non-USD balances held by USD
functional currency entities at 31 December.
Management of interest rate risk
We are subject to risk from changes in interest rates on monetary assets and
liabilities, principally cash deposits and financing costs. In respect of our
monetary assets and liabilities which earn/incur interest indexed to floating
rates, as at 31 December 2022 a 100 basis point (2021: 50 basis point)
increase/decrease in these rates, with all other variables held constant,
would have resulted in a $1 million (2021: $1 million) increase/decrease in
net interest income.
15. Leasehold improvements and equipment
Accounting policy
All leasehold improvements and equipment are recorded at cost less
depreciation and impairment. Cost includes the original purchase price of the
asset and costs directly attributable to bringing the asset to its working
condition for its intended use. Depreciation is calculated using the
straight-line method over the asset's estimated useful life, which for
leasehold improvements is the shorter of the life of the lease and that of the
improvement (up to 24 years) and for equipment is between three and ten years.
$m 2022 2021
Leasehold improvements Equipment Total Leasehold improvements Equipment Total
Cost at beginning of the year 70 64 134 58 59 117
Additions 11 10 21 14 12 26
Disposals (13) (13) (26) - (7) (7)
Transfer to/(from) leasehold improvements from/(to) investment property (Note 2 - 2 (2) - (2)
16)
Cost at end of the year 70 61 131 70 64 134
Accumulated depreciation and impairment at beginning of the year (45) (46) (91) (44) (43) (87)
Disposals 13 13 26 - 7 7
Transfer (to)/from leasehold improvements (from)/to investment property (Note (1) - (1) 2 - 2
16)
Depreciation (3) (9) (12) (3) (10) (13)
Accumulated depreciation and impairment at end of the year (36) (42) (78) (45) (46) (91)
Net book value at beginning of the year 25 18 43 14 16 30
Net book value at end of the year 34 19 53 25 18 43
16. Leases
16.1. Man Group as lessee
Accounting policy
Our lease arrangements primarily relate to business premises property leases.
We assess whether a contract is or contains a lease at the inception of the
contract. For arrangements where we are the lessee, a right-of-use (ROU) lease
asset and a related lease liability are recognised on the Group balance sheet
at the date from which we have the right to use the asset, usually the lease
commencement date. For short-term leases (defined as leases with a term of one
year or less) and leases of low-value assets, we recognise the lease payments
on a straight-line basis over the lease term within other costs in the Group
income statement. The lease term is determined as the non-cancellable period
of a lease, together with periods covered by an option to extend the lease if
we consider that exercise of the extension option is reasonably certain. Lease
extension options and break clauses inherent in our leases do not have a
significant impact on our ROU lease assets and lease liabilities.
ROU lease assets relating to the portion of our leased business premises which
we then sub-let under operating leases are classified as investment property,
with other ROU lease assets classified as leasehold property. Transfers from
investment property to leasehold property occur when we commence development
of a previously sub-let portion of our leased business premises with a view to
occupying that space. Similarly, transfers from leasehold property to
investment property occur when we cease to occupy a portion of the leased
business premises with the intention of sub-letting that space under an
operating lease.
All of our ROU lease assets, including those classified as investment
property, are measured at cost less depreciation and impairment. Cost includes
the amount of the initial measurement of the associated lease liability, lease
payments made at or before the lease commencement date, lease incentives
received, associated leasehold improvements classified as investment property
and estimated costs to be incurred in restoring the property to the condition
required under the terms of the lease. Depreciation is calculated on a
straight-line basis over the asset's estimated useful life, which for
leasehold improvements classified as investment property is the shorter of the
lease term and the life of the improvement (up to 24 years) and for all other
assets is the lease term, and is included within other costs. We assess ROU
lease assets for impairment whenever events or circumstances indicate that the
carrying amount may not be recoverable.
All lease liabilities are measured at the present value of lease payments due
over the lease term, discounted using our incremental cost of borrowing (being
the rate we would have to pay to finance a similar asset) at the lease
commencement date or the modification date. The lease liability is adjusted
for lease payments and unwind of lease liability discount as well as the
impact of any subsequent lease modifications. The unwind of lease liability
discount is included within finance expense.
Cash payments in relation to leases, which reduce the lease liability
recognised on the Group balance sheet, are presented as payment of lease
interest (within operating activities) and repayments of principal lease
liability (within financing activities) in the Group cash flow statement.
Payments in relation to short-term leases and leases of low-value assets are
included within cash flows from operating activities.
Right-of-use lease assets
$m 2022 2021
Leasehold property Investment property Total Leasehold property Investment property Total
Cost at beginning of the year 146 256 402 168 240 408
Additions 41 2 43 4 5 9
Disposals (22) (10) (32) (15) - (15)
Transfer between leasehold property and investment property 4 (4) - (9) 9 -
Transfer (from)/to investment property (to)/from leasehold improvements (Note - (2) (2) - 2 2
15)
Remeasurement of lease liability - - - (2) - (2)
Cost at end of the year 169 242 411 146 256 402
Accumulated depreciation and impairment at beginning of the year (85) (179) (264) (94) (162) (256)
Disposals 22 10 32 14 - 14
Transfer between leasehold property and investment property (4) 4 - 4 (4) -
Transfer from/(to) investment property to/(from) leasehold improvements (Note - 1 1 - (2) (2)
15)
Impairment - - - - (3) (3)
Depreciation (Note 5) (10) (7) (17) (9) (8) (17)
Accumulated depreciation and impairment at end of the year (77) (171) (248) (85) (179) (264)
Net book value at beginning of the year 61 77 138 74 78 152
Net book value at end of the year 92 71 163 61 77 138
Lease liability
The maturity of our contractual undiscounted cash flows for the lease
liability is as follows:
2022 2021
$m
$m
Within one year 25 25
Between one and five years 97 103
Between five and ten years 125 138
Between ten and 15 years 74 105
After 15 years - 5
Undiscounted lease liability at end of the year 321 376
Discounted lease liability at end of the year 253 250
At 31 December 2022, $200 million (2021: $236 million) of the total discounted
lease liability relates to our main premises in London (expiring in 2035) and
is denominated in GBP.
Movements in the lease liability are as follows:
2022 2021
$m
$m
At beginning of the year 250 272
Additions 41 4
Disposals - (1)
Cash payments (23) (33)
Unwind of lease liability discount (Note 6) 10 12
Remeasurement - (2)
Foreign exchange movements (25) (2)
At end of the year 253 250
16.2. Man Group as lessor
Accounting policy
Operating leases
Man Group acts as lessor in respect of certain ROU lease assets which are in
turn sub-let under operating leases (investment property ROU lease assets).
Sub-lease rental income is recognised on a straight-line basis over the lease
term in the Group income statement.
An impairment expense is recognised for the amount by which the related ROU
lease asset's carrying value exceeds its recoverable amount, being its value
in use. For the purposes of assessing impairment, investment property ROU
lease assets are grouped at the lowest levels for which there are separately
identifiable cash flows, being the individual sub-lease contract level.
Finance leases
Amounts due from lessees under finance leases are recognised as receivables at
the amount of the net investment in the lease. The net investment in the lease
is measured at the present value of the lease payments due over the lease
term, discounted using our incremental cost of borrowing under the head lease.
The net investment in the lease is adjusted for lease payments and finance
lease interest as well as the impact of any subsequent lease modifications.
Finance lease interest is included within finance income.
Operating expenses of $5 million (2021: $6 million) arising from investment
property that did not generate rental income during the period are included
within other costs.
At 31 December 2022, the contractual undiscounted minimum operating lease
payments receivable are as follows:
2022 2021
$m
$m
Within one year 5 6
Between one and two years 5 6
Between two and three years 5 6
Between three and four years - 5
15 23
Fair value of investment property
2022 2021
$m
$m
Value in use 82 94
Less:
Carrying value (71) (77)
Headroom 11 17
17. Goodwill and acquired intangibles
Accounting policy
Goodwill
Goodwill represents the excess of consideration transferred over the fair
value of identifiable net assets of the acquired business at the date
of acquisition. Goodwill is carried on the Group balance sheet at cost less
accumulated impairment, has an indefinite useful life, is not subject
to amortisation and is tested for impairment annually, or whenever events or
circumstances indicate that the carrying amount may not be recoverable. An
impairment expense is recognised for the amount by which the asset's carrying
value exceeds its recoverable amount. The recoverable amounts of our
cash-generating units (CGUs) or groups of CGUs are assessed each year using a
value in use calculation.
Goodwill does not generate cash flows independently of other groups of assets
and thus is assigned to a CGU or group of CGUs for the purposes of impairment
testing. The groups of CGUs are based upon how management monitors the
business and represent the lowest level to which goodwill can be allocated on
a reasonable basis. For impairment review purposes, we have identified one
group of CGUs, comprising our liquid asset managers.
The value in use calculation at 31 December 2022 uses cash flow projections
based on the Board-approved financial plan for the year to 31 December 2023
and a further two years of projections (2024 and 2025), plus a terminal value.
The valuation analysis is based on best practice guidance whereby a terminal
value is calculated at the end of a discrete budget period and assumes, after
this three-year budget period, no growth in asset flows above the long-term
growth rate.
The assumptions applied in the value in use calculation are derived from past
experience and assessment of current market inputs. We have applied a
bifurcated discount rate to the modelled cash flows to reflect the different
risk profile of management fee profits and performance fee profits. The
discount rates are based on our weighted average cost of capital using a
risk-free interest rate, together with an equity market risk premium and an
appropriate market beta derived from consideration of our own beta, similar
alternative asset managers, and the asset management sector as a whole. The
terminal value is calculated based on the projected closing AUM at 31 December
2025 and applying the mid-point of a range of historical multiples to the
forecast cash flows associated with management and performance fee profits.
The value in use calculation is presented on a post-tax basis, consistent with
the prior year, given most comparable market data is available on a post-tax
basis. This is not significantly different to its pre-tax equivalent.
Acquired intangibles
Following initial recognition, acquired intangibles are held at cost less
accumulated amortisation and impairment. Acquired intangibles comprise
investment management agreements and related client relationships (IMAs),
distribution channels and brand names acquired in a business combination, and
are initially recognised at fair value based on the present value of the
expected future cash flows and are amortised on a straight-line basis over
their expected useful lives, which are between three and 13 years (IMAs and
brands), and eight and 12 years (distribution channels). Acquired intangibles
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Disposals of
acquired intangibles are recognised in the year the related cash inflows are
transferred.
2022 2021
$m Goodwill IMAs Distribution channels Brand names Total Goodwill IMAs Distribution channels Brand Total
names
Cost at beginning of the year 2,425 838 56 40 3,359 2,429 857 58 41 3,385
Disposals - (4) - - (4) - (19) (2) (1) (22)
Foreign currency translation - - - - - (4) - - - (4)
Cost at end of the year 2,425 834 56 40 3,355 2,425 838 56 40 3,359
Accumulated amortisation and impairment at beginning of the year (1,836) (758) (49) (38) (2,681) (1,837) (721) (47) (38) (2,643)
Amortisation - (47) (3) (1) (51) - (56) (4) (1) (61)
Disposals - 4 - - 4 - 19 2 1 22
Foreign currency translation - - - - - 1 - - - 1
Accumulated amortisation and impairment at end of the year (1,836) (801) (52) (39) (2,728) (1,836) (758) (49) (38) (2,681)
Net book value at beginning 589 80 7 2 678 592 136 11 3 742
of the year
Net book value at end of the year 589 33 4 1 627 589 80 7 2 678
Goodwill impairment assumptions
Key assumptions at 31 December 2022 Pre-tax equivalent Assumptions adopted(1)
Compound average annualised growth in AUM (over three years) 6%
Discount rate
- Management fee earnings 14% 11%
- Performance fee earnings 22% 17%
Terminal value (mid-point of range of historical multiples)
- Management fee earnings 13.0x
- Performance fee earnings 5.5x
- Implied terminal growth rate 4%
Key assumptions at 31 December 2021 Pre-tax equivalent Assumptions adopted(1)
Compound average annualised growth in AUM (over three years) 6%
Discount rate
- Management fee earnings 14% 11%
- Performance fee earnings 21% 17%
Terminal value (mid-point of range of historical multiples)
- Management fee earnings 13.0x
- Performance fee earnings 5.5x
- Implied terminal growth rate 4%
Goodwill impairment and sensitivity analyses
Details of the valuations are provided below, including sensitivity tables
which show scenarios whereby the key assumptions are changed to stressed
assumptions, indicating the modelled headroom or impairment that would result.
We have considered reasonably foreseeable changes in the compound average
annualised growth in AUM forecast assumption, stressing this by 2% and 10% or
to the point at which impairment would arise. Each assumption, or set of
assumptions, is stressed in isolation. The results of these sensitivities make
no allowance for mitigating actions that management would take if such market
conditions persisted.
2022 2021
$m
$m
Value in use 4,950 4,140
Less:
Carrying value of CGUs (720) (760)
Headroom 4,230 3,380
Discount rates (post-tax) Multiples (post-tax)
Sensitivity analysis at 31 December 2022 Compound average Management fee/ Management fee/
annualised growth in AUM
performance fee
performance fee
Key assumption stressed to: 6% 4% (4)%(2) 10%/16% 12%/18% 14.0x/6.5x 12.0x/4.5x
Modelled headroom ($m) 4,230 3,790 2,140 4,350 4,110 4,630 3,830
Increase/(reduction) in value in use ($m) 120 (120) 400 (400)
Discount rates (post-tax) Multiples (post-tax)
Sensitivity analysis at 31 December 2021 Compound average Management fee/ Management fee/
annualised growth in AUM
performance fee
performance fee
Key assumption stressed to: 6% 4% (4)%(2) 10%/16% 12%/18% 14.0x/6.5x 12.0x/4.5x
Modelled headroom ($m) 3,380 2,940 1,340 3,480 3,280 3,690 3,070
Increase/(reduction) in value in use ($m) 100 (100) 310 (310)
Notes:
1 Earnings discount rate assumptions are presented post-tax. Earnings
multiples apply to the forward year.
2 Stressed by 10%, as opposed to the point of impairment, given an
impairment scenario is not reasonably foreseeable.
18. Other intangibles
Accounting policy
Other intangibles relate to capitalised computer software. Following initial
recognition, other intangibles are held at cost, which includes costs that are
directly associated with the procurement or development of identifiable and
unique software products which will generate economic benefits exceeding costs
beyond one year, less accumulated amortisation and impairment. Capitalised
computer software is amortised on a straight-line basis over its estimated
useful life (three years), with amortisation expense included within other
costs in the Group income statement. Capitalised computer software is reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Additions primarily relate to the
continued investment in our operating platforms.
2022 2021
$m
$m
Cost at beginning of the year 130 112
Additions 27 22
Disposals (9) (4)
Cost at end of the year 148 130
Accumulated amortisation at beginning of the year (85) (73)
Amortisation (18) (16)
Disposals 5 4
Accumulated amortisation at end of the year (98) (85)
Net book value at beginning of the year 45 39
Net book value at end of the year 50 45
19. Deferred tax
Accounting policy
Deferred tax is recognised using the balance sheet liability method in respect
of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for tax
purposes.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled, or the asset is realised, based on tax
laws and rates that have been enacted or substantively enacted at the
reporting date.
The carrying amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
when they relate to income taxes levied by the same taxation authority and
the Group intends to settle those current tax assets and liabilities on a net
basis.
The movements in our net deferred tax assets and liabilities by category are
as follows:
$m Deferred compensation Tax allowances over depreciation Intangibles Accumulated operating losses Partnerships Other Total
1 January 2021 29 15 11 41 (14) 12 94
Credit/(charge) to Group income statement (Note 7) 17 3 (5) (12) (8) 1 (4)
Credit to other comprehensive income and equity 3 - - - - - 3
Other balance sheet movements - - - - - (1) (1)
Foreign currency translation - - - - - (1) (1)
31 December 2021 49 18 6 29 (22) 11 91
Credit/(charge) to Group income statement (Note 7) 8 (8) 6 (5) 22 (1) 22
Charge to other comprehensive income and equity (6) - - (1) - - (7)
Foreign currency translation - - - - - (1) (1)
At 31 December 2022 51 10 12 23 - 9 105
Deferred tax balances after offset, as presented in the Group balance sheet,
are as follows:
2022 2021
$m
$m
Deferred tax assets 105 128
Deferred tax liabilities - (37)
105 91
Deferred tax assets arise in relation to current year deferred compensation
charges which are not deductible for tax purposes until future periods. Tax
allowances over depreciation relate to deferred tax on depreciation charged on
qualifying leasehold improvements and equipment and ROU lease assets.
The gross amount of UK non-trading losses for which a deferred tax asset has
not been recognised is $25 million (2021: $25 million). These losses are not
subject to an expiration period. The gross amount of other future taxable
income deductions for which a deferred tax asset has not been recognised is
$12 million (2021: $62 million). These deductions expire in 2024.
US deferred tax assets
We have recognised accumulated deferred tax assets in the US of $64 million
(2021: $74 million) that will be available to offset future taxable profits.
As the result of a decrease in forecast future taxable profits in the US, we
derecognised $7 million of the available deferred tax assets in relation to
state and city tax losses in 2022 (2021: recognised $2 million). At 31
December 2022, $18 million of the available US deferred tax assets (2021:
$11 million) relating to state and city tax losses remain unrecognised. We do
not expect to realise sufficient future taxable profits against which
these losses can be offset before the majority expire in 2035. We do not
currently expect to pay federal tax on any profits we may earn in the
US until 2024.
US net deferred tax assets 2022 2021
$m
$m
Recognised
At beginning of the year 74 81
(Charge)/credit to Group income statement:
(Derecognition)/recognition of available tax assets (Note 7) (7) 2
Other movements: consumption - (12)
(Charge)/credit to equity (3) 5
Other balance sheet movements - (2)
At end of the year 64 74
Unrecognised
At beginning of the year 11 14
Charge/(credit) to Group income statement:
Derecognition/(recognition) of available tax assets (Note 7) 7 (2)
Other movements - (1)
At end of the year 18 11
The gross amount of US losses for which a deferred tax asset has not been
recognised is $258 million (2021: $158 million).
20. Provisions
Accounting policy
Provisions are recognised when Man Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that we will be
required to settle the obligation, and a reliable estimate can be made of the
amount of the obligation. All provisions are current given we do not have the
unconditional right to defer settlement.
2022 2021
$m
$m
At beginning of the year 14 9
Charge to Group income statement 1 6
Utilised - (1)
Foreign currency translation (1) -
At end of the year 14 14
Provisions relate to ongoing claims and leasehold property dilapidations.
21. Investments in associates
Accounting policy
Associates are entities in which Man Group holds an interest and over which we
have significant influence but not control. In assessing significant
influence, we consider our power to participate in the financial and operating
policy decisions of the investee through its voting or other rights.
Associates are accounted for using the equity method. Under the equity method,
associates are carried at cost plus our share of cumulative post-acquisition
movements in undistributed profits/losses. Gains and losses on transactions
between Man Group and our associates are eliminated to the extent of our
interests in these entities. An impairment assessment of the carrying value of
associates is performed annually or whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable, with
any impairment recognised in the Group income statement.
2022 2021
$m
$m
At beginning of the year 18 -
Acquisitions/contributions 1 20
Share of post-tax loss (5) (2)
At end of the year 14 18
In 2021, we acquired a 23% interest in Hub Technology Partners Ltd (HUB) for
cash of $19 million and $1 million in contribution of other assets. We do not
consider HUB's ongoing losses to be an indicator of impairment as its business
remains in the development phase.
22. Share-based payment schemes
Accounting policy
Man Group operates equity-settled share-based payment schemes which are
remuneration payments to selected employees that take the form of an award of
shares in the Company. These typically vest over three to five years, although
conditions vary between different types of award. The fair value of the
employee services received in exchange for the share awards/options granted is
recognised as an expense, with the corresponding credit recognised in equity,
and is determined by reference to the fair value of the share awards/options
at grant date.
We calculate the fair value of share options using the Black-Scholes valuation
model, which takes into account the effect of both financial and demographic
assumptions. Forfeiture and early vesting assumptions are based on historical
observable data. Changes to the original estimates, if any, are included in
the Group income statement, with a corresponding adjustment to equity.
23. Share capital, Employee Trust, Treasury share reserve and earnings per
share (EPS)
Accounting policy
Incremental costs directly attributable to the issue of new ordinary shares
are shown in equity as a deduction from the proceeds, net of tax.
Share repurchases are recognised at the point we become committed to
completing them. A liability is recognised for the full amount of the
commitment, including directly attributable costs, with a corresponding debit
to equity. Where repurchased shares are held in Treasury, a transfer from the
profit and loss reserve to the Treasury share reserve is recognised for the
full amount of the consideration paid. Where shares are repurchased and
subsequently cancelled, the equivalent par value by which the Company's share
capital is reduced is transferred to the capital redemption reserve.
The Employee Trust, which is consolidated into Man Group, has the obligation
to deliver deferred share-based and fund product-based compensation granted to
employees, and accordingly holds shares and fund investments to deliver
against these future obligations. Man Group plc shares held by the Employee
Trust and shares held in Treasury are recorded at cost, including any directly
attributable incremental costs (net of tax), and are deducted from equity
(within the respective reserves) until the shares are sold, cancelled or
transferred to employees. Where such shares are subsequently sold, any
consideration received, net of any directly attributable incremental
transaction costs and the related tax effects, is included in equity.
The authorised share capital of Man Group plc comprises US$100,000,000 divided
into 2,916,666,666 ordinary shares with a par value of 3(3)/(7)¢ each.
Ordinary shares represent 100% of issued share capital and all issued shares
are fully paid. The shares have attached to them full voting, dividend and
capital distribution (including on wind up) rights. They do not confer any
rights of redemption. Shareholders have the right to receive notice of,
attend, vote and speak at general meetings. When a vote is taken on a poll,
shareholders are entitled to one vote per ordinary share. When a vote is
taken by a show of hands, shareholders present in person or by proxy have one
vote.
Treasury shares are ordinary shares previously repurchased by the Company but
not cancelled (and therefore deducted from equity and included within the
Treasury share reserve) and, as they are no longer outstanding, they are
excluded for earnings per share and voting rights purposes.
Movements in the number of ordinary shares in issue and the shares used to
calculate basic and diluted EPS are provided below.
2022 2021
Total Weighted Nominal Total Weighted Nominal
number
average
value
number
average
value
$m
$m
Number of shares at beginning of year 1,473,107,813 1,473,107,813 51 1,541,794,770 1,541,794,770 53
Cancellation of own shares held in Treasury (122,551,031) (52,130,209) (5) (68,686,957) (9,611,929) (2)
Number of shares at end of the year 1,350,556,782 1,420,977,604 46 1,473,107,813 1,532,182,841 51
Shares held in Treasury share reserve (80,604,707) (99,038,830) (79,040,317) (98,674,820)
Man Group plc shares held by Employee Trust (33,745,908) (33,453,409) (30,611,905) (31,044,822)
Basic number of shares 1,236,206,167 1,288,485,365 1,363,455,591 1,402,463,199
Dilutive impact of employee share awards 36,356,550 35,415,800
Dilutive impact of Sharesave share options 2,467,128 2,165,726
Dilutive number of shares 1,327,309,043 1,440,044,725
2022 2021
Statutory profit ($m) 608 487
Basic EPS 47.2¢ 34.7¢
Diluted EPS 45.8¢ 33.8¢
Share buybacks 2022 2021
Shares repurchased during the year ($m) 386 180
Average purchase price (pence) 227.7 199.9
Shares repurchased (million) 135 66
Accretive impact on earnings per share (%) 6.0 1.7
The $386 million of shares repurchased in the year comprise the completion of
the remaining $234 million of the share repurchase programme announced in
December 2021, the completion of the $125 million share repurchase announced
in June 2022 and $27 million of the $125 million share repurchase announced in
December 2022. The purpose of the share repurchases was to deliver returns to
shareholders. All repurchased shares were held in Treasury.
Shares repurchased during the year represent 10.6% of issued share capital
(excluding Treasury shares) as at 31 December 2022 and shares held in Treasury
which were cancelled during the year represent 9.7% of issued share capital
(excluding Treasury shares). At 24 February 2023, we had an unexpired
authority to repurchase up to 38,049,057 of our ordinary shares. A special
resolution will be proposed at the forthcoming Annual General Meeting,
pursuant to which the Company will seek authority to repurchase up to
124,190,442 ordinary shares, representing 10% of the issued share capital
(excluding Treasury shares) at 24 February 2023.
In 2022, we funded $91 million via contribution or loan (2021: $33 million) to
enable the Employee Trust to meet its current period obligations. At
31 December 2022, the net assets of the Employee Trust amounted to $146
million (2021: $103 million). These assets include 33,745,908 (2021:
30,611,905) ordinary shares in the Company, and $65 million of fund product
investments (2021: $41 million) which are included within investments in fund
products.
The Employee Trust waived all dividend entitlements of the shares held in the
current and prior years.
24. Dividends
Accounting policy
Dividend distributions to the Company's shareholders are recognised directly
within equity in the period in which the dividend is paid or, for final
dividends, approved by the Company's shareholders.
¢/share 2022 ¢/share 2021
$m
$m
Ordinary shares
Final dividend paid for the previous financial year to 31 December 8.4 110 5.7 81
Interim dividend paid for the six months to 30 June 5.6 69 5.6 79
Dividends paid 179 160
Proposed final dividend for the current financial year to 31 December 10.1 125 8.4 115
25. Related party transactions
Accounting policy
Related parties comprise key management personnel, associates and fund
entities which we are deemed to control. All transactions with related parties
were carried out on an arm's-length basis.
The Executive Committee, together with the Company's non-executive directors,
are considered to be our key management personnel, being those directors,
partners and employees having authority and responsibility for planning,
directing and controlling our activities.
Key management compensation 2022 2021
$m
$m
Salaries and other short-term employee benefits1 80 64
Share-based payment charge 24 25
Fund product-based payment charge 21 15
Pension costs (defined contribution) 1 1
Total 126 105
Note:
1 Includes salary, benefits and cash bonus.
We paid £35,000 to the Standards Board for Alternative Investments Limited
during the year, which is considered a related party.
26. Other matters
In July 2019, the Public Institution for Social Security in Kuwait (PIFSS)
served a claim against a number of parties, including certain Man Group
companies, a former employee of Man Group and a former third-party
intermediary. The subject matter of these allegations dates back over a period
of 20 years. PIFSS is seeking compensation of $156 million (plus compound
interest) and certain other remedies which are unquantified in the claim. We
dispute the allegations and consider there is no merit to the claim (in
respect of liability and quantum), and will therefore vigorously and robustly
defend the proceedings.
We are subject to various other claims, assessments, regulatory enquiries and
investigations in the normal course of business. The Board does not expect
such matters to have a material adverse effect on our financial position.
27. Subsequent events
In February 2023, we signed a sub-lease with a new tenant for a substantial
portion of the vacant space in our London office. The sub-lease meets the
definition of a finance lease under IFRS 16 'Leases' and therefore on lease
commencement we derecognised the associated portion of our ROU lease asset of
$17 million and recognised a finance lease receivable of $20 million. The
excess of the finance lease receivable over the derecognised ROU lease asset
of $3 million has been recognised as a gain on disposal of the ROU lease asset
in 2023.
Alternative performance measures
We assess our performance using a variety of alternative performance measures
(APMs). We discuss our results on a statutory as well as a 'core' basis. Core
metrics, which are each APMs, exclude acquisition and disposal-related items,
significant non-recurring items and volatile or uncontrollable items, as well
as profits or losses generated outside of our investment management business.
Accordingly, these core metrics reflect the way in which performance is
monitored by the Board and present the profits or losses which drive our cash
flows and inform the way in which our variable compensation is assessed.
Details of the non-core items in the year are set out below.
Our APMs also reclassify all income and expenses relating to our consolidated
fund entities, which are required by IFRS to be split across multiple lines in
the Group income statement, to core gains/losses on investments in order to
reflect their performance as part of our seed book programme. Tax on non-core
items and movements in deferred tax relating to the utilisation or recognition
of tax assets in the US are similarly excluded from core profit, with tax on
core profit considered a proxy for cash taxes paid.
In the year, the definition of non-core items has been revised to treat all
foreign exchange gains and losses arising on non-functional currency balances
consistently, rather than only adjusting for those which relate to specific
balance sheet items which are realised over longer timeframes. The Board
considers this revised classification to be both simpler and more consistent
in its application. Comparative amounts have not been restated as the impact
is immaterial. The approach to the classification of non-core items maintains
symmetry between losses and gains and the reversal of any amounts previously
classified as non-core. Note that our APMs may not be directly comparable with
similarly titled measures used by other companies.
Non-core items
Note to the Group financial statements 2022 2021
$m
$m
Acquisition and disposal related:
Revaluation of contingent consideration 13 - (2)
Amortisation of acquired intangible assets 17 51 61
Share of post-tax loss of associates 21 5 2
Impairment of right-of-use lease assets - investment property 16 - 3
Lease surrender income - 7
Foreign exchange movements 12.1 (22) (3)
Non-core items (net expense) 34 68
Core measures: reconciliation to statutory equivalents
The statutory line items within the Group income statement can be reconciled
to their core equivalents as follows:
2022 Core measure Reclassification of amounts relating to consolidated fund entities Non-core items Per Group income statement
$m
Management and other fees ( APM ) 958 (4) - 954
Distribution costs (31) - - (31)
Net management fee revenue( APM ) 927 (4) - 923
Performance fees( APM ) 779 (1) - 778
Net income or gains on investments and other financial instruments( APM ) (15) - 22 7
Third-party share of losses relating to interests in consolidated funds - 14 - 14
Sub-lease rental income 5 - - 5
Net revenue( APM ) 1,696 9 22 1,727
Asset servicing costs (58) - - (58)
Compensation costs (678) - - (678)
Other costs( APM ) (170) (9) - (179)
Net finance expense (11) - - (11)
Amortisation of acquired intangible assets - - (51) (51)
Share of post-tax loss of associate - - (5) (5)
Profit before tax( APM ) 779 - (34) 745
Tax expense( APM ) (132) - (5) (137)
Profit( APM ) 647 - (39) 608
Core basic EPS 50.2¢
Core diluted EPS 48.7¢
2021 Core measure Reclassification of amounts relating to consolidated fund entities Non-core items Per Group income statement
$m
Management and other fees( APM ) 917 (3) - 914
Distribution costs (40) - - (40)
Net management fee revenue( APM ) 877 (3) - 874
Performance fees( APM ) 569 (2) - 567
Net income or gains on investments and other financial instruments( APM ) 27 12 3 42
Third-party share of gains relating to interests in consolidated funds - (3) - (3)
Sub-lease rental and lease surrender income( APM ) 13 - (7) 6
Net revenue( APM ) 1,486 4 (4) 1,486
Asset servicing costs (58) - - (58)
Compensation costs (596) - - (596)
Other costs( APM ) (161) (4) - (165)
Net finance expense (13) - - (13)
Revaluation of contingent consideration - - 2 2
Impairment of right-of-use lease assets - investment property - - (3) (3)
Amortisation of acquired intangible assets - - (61) (61)
Share of post-tax loss of associate - - (2) (2)
Profit before tax( APM ) 658 - (68) 590
Tax expense( APM ) (101) - (2) (103)
Profit( APM ) 557 - (70) 487
Core basic EPS 39.7¢
Core diluted EPS 38.7¢
APM The core equivalents of these statutory measures are defined as
Alternative Performance Measures.
Core costs comprise asset servicing, compensation costs and core other costs.
The statutory line items within the Group balance sheet can be reconciled to
their core equivalents as follows:
2022 Core measure Reclassification of amounts relating to consolidated fund entities Per Group
$m
balance sheet
Assets
Cash and cash equivalents( APM ) 349 108 457
Fee and other receivables( APM ) 541 29 570
Investments in fund products and other investments( APM ) 841 368 1,209
Investments in associates 14 - 14
Leasehold improvements and equipment 53 - 53
Leasehold property - right-of-use lease assets 92 - 92
Investment property - right-of-use lease assets 71 - 71
Investment property - consolidated fund entities - 34 34
Goodwill and acquired intangibles 627 - 627
Other intangibles 50 - 50
Deferred tax assets 105 - 105
Pension asset 22 - 22
Total assets 2,765 539 3,304
Liabilities
Trade and other payables( APM ) 762 180 942
Provisions 14 - 14
Current tax liabilities 37 - 37
Third-party interest in consolidated funds - 359 359
Lease liability 253 - 253
Total liabilities 1,066 539 1,605
Net assets 1,699 - 1,699
2021 Core measure Reclassification of amounts relating to consolidated fund entities Per Group
$m
balance sheet
Assets
Cash and cash equivalents( APM ) 323 64 387
Fee and other receivables( APM ) 480 5 485
Investments in fund products and other investments( APM ) 770 204 974
Investments in associates 18 - 18
Leasehold improvements and equipment 43 - 43
Leasehold property - right-of-use lease assets 61 - 61
Investment property - right-of-use lease assets 77 - 77
Goodwill and acquired intangibles 678 - 678
Other intangibles 45 - 45
Deferred tax assets 128 - 128
Pension asset 27 - 27
Total assets 2,650 273 2,923
Liabilities
Trade and other payables( APM ) 683 19 702
Provisions 14 - 14
Current tax liabilities 15 - 15
Third-party interest in consolidated funds - 254 254
Lease liability 250 - 250
Deferred tax liabilities 37 - 37
Total liabilities 999 273 1,272
Net assets 1,651 - 1,651
APM The core equivalents of these statutory measures are defined as
Alternative Performance Measures.
Core management fee profit and core performance fee profit
Core profit comprises core management fee profit, a steadier earnings stream,
and core performance fee profit, a more variable earnings stream. This split
facilitates analysis of our profitability drivers.
2022 Core measure Reclassification of amounts relating to consolidated fund entities Non-core items Per Group
$m
income statement
Net management fee revenue 927 (4) - 923
Sub-lease rental income 5 - - 5
Asset servicing costs (58) - - (58)
Compensation costs (management fee) (406) - - (406)
Other costs (170) (9) - (179)
Net finance expense (management fee) (8) - - (8)
Management fee profit before tax 290 (13) - 277
Tax expense (46)
Management fee profit 244
Core basic management fee EPS 19.0¢
Core diluted management fee EPS 18.4¢
Performance fees 779 (1) - 778
Net income or gains on investments and other financial instruments (15) - 22 7
Compensation costs (performance fee) (272) - - (272)
Net finance expense (performance fee) (3) - - (3)
Performance fee profit before tax 489 (1) 22 510
Tax expense (86)
Performance fee profit 403
Core basic performance fee EPS 31.2¢
Core diluted performance fee EPS 30.3¢
2021 Core measure Reclassification of amounts relating to consolidated fund entities Non-core items Per Group
$m
income statement
Net management fee revenue 877 (3) - 874
Sub-lease rental and lease surrender income 13 - (7) 6
Asset servicing costs (58) - - (58)
Compensation costs (management fee) (393) - - (393)
Other costs (161) (4) - (165)
Net finance expense (management fee) (12) - - (12)
Management fee profit before tax 266 (7) (7) 252
Tax expense (39)
Management fee profit 227
Core basic management fee EPS 16.1¢
Core diluted management fee EPS 15.7¢
Performance fees 569 (2) - 567
Net income or gains on investments and other financial instruments 27 12 3 42
Compensation costs (performance fee) (203) - - (203)
Net finance expense (performance fee) (1) - - (1)
Performance fee profit before tax 392 10 3 405
Tax expense (62)
Performance fee profit 330
Core basic performance fee EPS 23.6¢
Core diluted performance fee EPS 23.0¢
Core gains/losses on investments
We use the measure core gains/losses on investments to represent the net
return we receive on our seeding investments portfolio, combining both
consolidated and unconsolidated fund entities on a consistent basis. We
therefore exclude from this measure gains or losses on investments which do
not relate to the performance of the seed book and adjust the amounts relating
to consolidated funds to be included in this line on a consistent basis. Core
gains/losses on investments can be reconciled to the Group income statement as
follows:
2022 2021
$m
$m
Net (losses)/gains on seeding investments portfolio (Note 12.1) (12) 24
Net (losses)/gains on fund investments held for deferred compensation (3) 3
arrangements and other investments (Note 12.1)
Core (losses)/gains on investments (15) 27
Non-core items:
Consolidated fund entities: gross-up of net gains on investments (Note 12.2) - 12
Foreign exchange movements (Note 12.1) 22 3
Net income or gains on investments and other financial instruments 7 42
Core tax rate
The core tax rate is the effective tax rate on core profit before tax and is
equal to the tax on core profit divided by core profit before tax. The tax
expense on core profit before tax is calculated by excluding the tax
benefit/expense related to non-core items from the statutory tax expense,
together with amounts relating to the utilisation or recognition of available
US deferred tax assets. Therefore, tax on core profit is considered a proxy
for our cash taxes payable.
The impact of non-core items on our tax expense is outlined below:
2022 2021
$m
$m
Statutory tax expense 137 103
Tax on non-core items:
Amortisation of acquired intangible assets 6 7
Impairment of right-of-use lease assets - investment property - 1
Foreign exchange movements (4) -
Non-core tax item on US deferred tax assets (Note 19) (7) (10)
Non-core tax items (5) (2)
Core tax expense 132 101
Comprised of:
Tax expense on core management fee profit before tax 46 39
Tax expense on core performance fee profit before tax 86 62
The core tax rate is 17% for 2022 (2021: 15%), which has increased largely due
to a higher weighting of profits in the UK where the applicable statutory tax
rate is 19%. The increase in the UK corporation tax rate to 25% on 1 April
2023 will result in an increase in our core tax rate in future periods.
Core cash flows from operations excluding working capital movements
Cash flows from operating activities excluding working capital movements can
be reconciled to cash flows from operating activities as reported in the
Group cash flow statement as follows:
2022 2021
$m
$m
Cash flows from operating activities 737 484
Add back changes in working capital (Note 9):
Increase in fee and other receivables 68 102
Increase in other financial assets including consolidated fund entities 45 163
Increase in trade and other payables (40) (49)
Core cash flows from operations excluding working capital movements 810 700
Net financial assets
Net financial assets is considered a proxy for Group capital, and is equal to
our cash and seed book less borrowings, contingent consideration payable and
payables under repo arrangements, as follows:
Note to the Group financial statements 2022 2021
$m
$m
Seeding investments portfolio 12 688 648
Available cash and cash equivalents 8 349 323
Payables under repo arrangements 11 (54) (64)
Net financial assets 983 907
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