REG - Man Group plc - Financial Results For The Year Ended 31 Dec 2023
29/02/2024 07:00
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RNS Number : 8664E Man Group plc 29 February 2024
Press Release
29 February 2024
Results for the year ended 31 December 2023
Continued net inflows reflecting demand for our range of investment strategies
o Record assets under management (AUM) of $167.5 billion (31 December 2022:
$143.3 billion)
o Net inflows of $3.0 billion for the year ended 31 December 2023, 4.9%
ahead of the industry( KPI )
o Asset weighted relative investment outperformance versus peers across our
strategies of 1.6%( KPI )
Resilient core management fee EPS of 18.4¢ highlighting the merits of our
diversified business model
o Run rate net management fees of $1,087 million (31 December 2022: $917
million)
o $180 million of core performance fees, from across our investment
divisions (2022: $779 million)
o Statutory EPS (diluted) of 19.4¢ (2022: 45.8¢) and core EPS (diluted) of
22.4¢( KPI ) (2022: 48.7¢)
Unchanged capital policy balancing growth in the business alongside consistent
shareholder returns
o 4% increase in the total dividend per share to 16.3¢, in line with our
progressive dividend policy
o Intention to repurchase up to $50 million of shares
o Net financial assets of $555 million (31 December 2022: $983 million)
$ millions, unless otherwise stated Year ended Year ended Change
31 Dec 2023 31 Dec 2022
AUM, end of period $167.5bn $143.3bn 17%
Core net management fee revenue 963 927 4%
Core performance fees 180 779 (77%)
Core net revenue 1,196 1,696 (29%)
Core profit before tax 340 779 (56%)
Statutory profit after tax 234 608 (62%)
¢
Core management fee EPS (diluted) 18.4 18.4 0%
Core EPS (diluted) 22.4 48.7 (54%)
Statutory EPS (diluted) 19.4 45.8 (58%)
Dividend per share 16.3 15.7 4%
Robyn Grew, Chief Executive Officer of Man Group, said:
"2023 was a year that defied market expectations as the world grappled with
macroeconomic uncertainty and unforeseen geopolitical events. Against that
backdrop, I'm pleased to report a solid set of results for Man Group. Our
strategies delivered positive relative investment performance of 1.6% and we
recorded a net inflow of client capital of $3.0 billion, 4.9% ahead of the
industry. Our assets under management ended the year at $167.5 billion, a 17%
increase compared with the beginning of the year. These results reflect the
quality of the business we have built, including the breadth and depth of our
client relationships, and the merits of our diversified product offering.
"We have built trusted partnerships with sophisticated allocators globally,
enabling us to gain a deep understanding of their needs and challenges. This
contributed to the considerable progress we made during the year, and informed
our strategy going forward. Beyond driving investment performance, our
priorities are to continue expanding our investment capabilities, to extend
our reach with clients across new and existing geographies and market
segments, and to leverage our strengths and scale to deliver more customised
solutions.
"Man Group has existed for well over 200 years and has done so by continuously
innovating and responding to the needs of our clients. Our ambition is to be
an indispensable partner to sophisticated investors globally, delivering the
investment performance and solutions they need. I have great confidence that
our world class talent and technology will allow us to achieve this, to the
benefit of our clients and our shareholders."
'Core' measures are alternative performance measures. For a detailed
description of our alternative performance measures, including non-core items,
please refer to pages 58 to 63. 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 10.7¢ per share for the financial year ended 31 December 2023,
resulting in a total dividend of 16.3¢ per share for the year. This is in
addition to the $125 million share buyback programme announced in 2023, and
the intention to repurchase a further $50 million of shares. We will fix and
announce the US dollar to sterling dividend currency conversion rate on 09 May
2024, in advance of payment.
Dates for the 2023 final dividend
Ex-dividend date 11 April 2024
Record date 12 April 2024
Final election date for Dividend Reinvestment Plan (DRIP)(1) 30 April 2024
Sterling conversion date 09 May 2024
Payment date 22 May 2024
Conference call and presentation
There will be a presentation by the management team at 10.00am (UK time) on 29
February 2024 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 09.55am.
The conference call can be accessed at:
https://mangroup.webex.com/mangroup/j.php?MTID=m4ceb1120f99b6c5b86545a6d7297b138
(https://mangroup.webex.com/mangroup/j.php?MTID=m4ceb1120f99b6c5b86545a6d7297b138)
Webinar number: 2377 406 7735
Webinar password: RmQB4PmT9m4 (76724768 from phones and video systems)
Join by phone:
+44 20 3478 5289 United Kingdom toll
+1 631 267 4890 USA/Canada toll
Access code: 237 740 67735
Enquiries
Karan Shirgaokar
Head of Investor Relations
+44 20 7144 1000
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@fticonsulting.com (mailto:man@fticonsulting.com)
1. A DRIP is provided by Equiniti Financial Services Limited. The DRIP
enables the Company's shareholders to elect to have their cash dividend
payments used to purchase the Company's shares. More information can be found
at www.shareview.co.uk/info/drip (http://www.shareview.co.uk/info/drip) .
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 $167.5 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, Chief Financial Officer.
1. As at 31 December 2023. All investment management and advisory
services are offered through the investment engines of Man AHL, Man Numeric,
Man GLG, Man Solutions, Man Global Private Markets and Man Varagon.
Assets under management
AUM movements for the year ended 31 December 2023
$bn AUM at Net flows Investment performance FX & other(1) AUM at
31 Dec 2022
31 Dec 2023
Absolute return 46.0 2.3 0.2 (0.8) 47.7
Total return 28.8 1.1 1.1 11.5 42.5
Multi-manager solutions 20.2 (1.0) 0.5 (0.3) 19.4
Alternative 95.0 2.4 1.8 10.4 109.6
Systematic long-only 31.6 (0.9) 5.4 0.4 36.5
Discretionary long-only 16.7 1.5 2.5 0.7 21.4
Long-only 48.3 0.6 7.9 1.1 57.9
Total 143.3 3.0 9.7 11.5 167.5
AUM movements for the three months ended 31 December 2023
$bn AUM at Net flows Investment performance FX & other AUM at
30 Sep 2023
31 Dec 2023
Absolute return 48.0 0.2 (0.3) (0.2) 47.7
Total return 39.6 0.8 0.7 1.4 42.5
Multi-manager solutions 20.3 (0.6) 0.2 (0.5) 19.4
Alternative 107.9 0.4 0.6 0.7 109.6
Systematic long-only 34.0 (1.1) 3.0 0.6 36.5
Discretionary long-only 19.3 0.4 0.9 0.8 21.4
Long-only 53.3 (0.7) 3.9 1.4 57.9
Total 161.2 (0.3) 4.5 2.1 167.5
1. Other movements relate to fee-paying assets under management added
following the acquisition of Varagon Capital Partners, maturities and leverage
movements.
AUM by product category
$bn 31 Dec 2022 31 Mar 2023 30 Jun 2023 30 Sep 2023 31 Dec 2023
Absolute return 46.0 44.7 47.3 48.0 47.7
Institutional solutions(1) 14.4 13.4 14.7 15.5 16.2
Traditional trend-following 9.2 9.5 10.4 10.1 9.5
Multi-strategy quant 5.9 5.4 6.0 5.8 6.0
Alternative trend-following 5.4 5.1 5.3 5.4 5.4
Discretionary equity 4.9 4.9 4.7 4.5 4.4
Other(2) 6.2 6.4 6.2 6.7 6.2
Total return 28.8 29.4 29.4 39.6 42.5
Multi-asset risk parity 13.4 13.7 13.2 12.4 14.2
US direct lending - - - 10.7 10.8
Alternative risk premia 7.8 8.3 8.9 9.2 9.9
CLOs and other 3.9 3.6 3.5 3.7 4.0
Real estate 3.0 3.2 3.2 3.1 3.1
Emerging markets fixed income 0.7 0.6 0.6 0.5 0.5
Multi-manager solutions 20.2 20.0 20.3 20.3 19.4
Infrastructure and direct access 12.7 12.5 12.7 12.8 12.8
Segregated 6.9 6.9 7.0 6.9 6.1
Diversified and thematic FoHF 0.6 0.6 0.6 0.6 0.5
Systematic long-only 31.6 33.0 35.7 34.0 36.5
Global equity 16.9 17.5 19.2 18.4 20.2
Emerging markets equity 6.4 6.7 7.7 7.3 8.0
International equity 7.1 7.5 7.5 7.1 7.0
US equity 1.2 1.3 1.3 1.2 1.3
Discretionary long-only 16.7 17.6 19.0 19.3 21.4
Credit and convertibles 5.2 5.7 6.6 6.6 8.1
Japan equity 4.1 4.3 4.8 5.3 5.3
UK equity 3.8 3.9 3.9 3.8 4.1
Europe ex-UK equity 1.3 1.3 1.3 1.2 1.3
Emerging markets fixed income 0.9 1.0 1.0 0.9 1.0
Other(3) 1.4 1.4 1.4 1.5 1.6
Total 143.3 144.7 151.7 161.2 167.5
1. Includes AHL Institutional Solutions, which invests into a range of
AHL strategies including AHL Alpha, AHL Dimension and AHL Evolution, as well
as other absolute return strategies.
2. Includes AHL other, Numeric absolute return and Discretionary
credit absolute return strategies.
3. Includes equity and multi-asset strategies.
Investment performance by strategy
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 2023
31 Dec 2023
31 Dec 2023
31 Dec 2023
31 Dec 2023
Absolute return
AHL Alpha 1 -2.0% 1.0% 5.5% 6.4% 10.1%
AHL Dimension 2 1.4% 4.1% 7.0% 3.8% 4.8%
AHL Evolution 3 1.0% 3.7% 8.3% 8.8% 11.9%
AHL Diversified 4 -5.1% -3.8% 3.9% 6.5% 10.2%
GLG Alpha Select Alternative 5 3.0% 10.2% 7.9% 7.2% 5.0%
GLG Event Driven Alternative 6 1.2% 5.9% 4.7% - 6.5%
GLG Global Credit Multi Strategy 7 1.6% 3.0% 3.2% 4.7% 10.8%
Man Strategies 1783 8 1.5% 3.4% 8.1% - 5.0%
Total return
AHL TargetRisk 9 7.7% 14.1% 2.8% 8.1% 7.6%
Alternative Risk Premia 10 2.3% 5.3% 9.9% 4.3% 4.5%
GLG Global Emerging Markets Debt Total Return 11 -3.8% -7.7% -1.9% -1.0% 0.4%
Multi-manager solutions
FRM Diversified II 12 2.5% 4.8% 5.9% 4.9% 4.1%
Systematic long-only
Numeric Global Core 13 7.5% 11.1% -2.6% 5.4% 4.7%
Relative return -0.4% 1.3% 2.5% 1.7% 2.1%
Numeric Europe Core 14 7.9% 18.5% 10.7% 10.4% 8.7%
Relative return 1.4% 2.6% 1.3% 0.6% 2.2%
Numeric Emerging Markets Core 15 7.5% 11.1% -2.6% 5.4% 4.7%
Relative return -0.4% 1.3% 2.5% 1.7% 2.1%
Discretionary long-only
GLG Continental European Growth 16 13.2% 20.0% 2.7% 12.0% 9.3%
Relative return 5.6% 4.3% -5.4% 1.5% 3.1%
GLG Japan CoreAlpha Equity 17 -2.2% 30.4% 25.7% 12.8% 5.9%
Relative return -4.2% 2.2% 13.6% 0.5% 1.9%
GLG Undervalued Assets 18 6.1% 16.2% 11.4% 6.8% 7.2%
Relative return 2.9% 8.3% 2.8% 0.1% 1.7%
GLG High Yield Opportunities 19 4.7% 10.9% 3.2% - 6.7%
Relative return -1.4% 0.5% 4.1% - 4.7%
GLG Sterling Corporate Bond 20 10.8% 24.3% - - 4.5%
Relative return 2.4% 14.6% - - 10.6%
Indices
HFRX Global Hedge Fund Index 21 1.7% 3.1% 0.7% 3.5%
HFRI Fund of Funds Conservative Index 21 1.8% 5.3% 4.3% 5.1%
HFRI Equity Hedge (Total) Index 21 6.4% 11.4% 3.8% 8.4%
HFRX EH: Equity Market Neutral Index 21 2.3% 4.2% 1.7% -0.2%
Barclay BTOP 50 Index 22 -4.0% -1.6% 7.5% 6.8%
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. Represented by Man GLG Sterling Corporate Bond Fund Class C
Accumulation Shares. Relative return is shown vs ICE BofA Sterling Corporate
& Collateralized Index (GBR, TR); AUM included within Credit and
convertibles under the discretionary long-only product category.
21. HFRI and HFRX index performance over the past 4 months is subject to
change.
22. The historical Barclay BTOP 50 Index data is subject to change.
Chief Executive Officer's review
Overview of the year
2023 was quite a year; one that I will remember for many reasons. Not only
did I have the honour of taking over from Luke Ellis as CEO of Man Group
in September, but the year defied expectations on multiple occasions as the
world grappled with several macroeconomic and geopolitical pressures. Measures
of inflation may have retreated in the year, but the level and future path of
interest rates were firmly on investors' minds. A shockwave rippled through
financial markets in March with the collapse of Silicon Valley Bank (SVB),
triggered by the sudden rate rises from central banks to combat inflation.
This effect was short-lived, however, and despite tensions in the Middle East,
concerns over China's economic recovery, a US credit downgrade and
debt-ceiling debate, risk assets powered ahead with growing confidence that US
policymakers would achieve an economic soft landing in 2024; this was
evidenced by the S&P 500 index gaining 24% during the year, with the
'Magnificent Seven' technology darlings leading the charge.
Against that backdrop, and in my first financial update as CEO after taking
over from Luke, I am pleased to be able to report a solid set of results for
2023. They highlight the continued demand for our strategies and solutions,
the breadth and depth of our client relationships, the benefits of a
diversified product offering, and the scale and quality of the business we
have built.
As a diversified, active investor we ended the year with positive investment
performance of $9.7 billion. Overall investment performance for our absolute
return strategies was 0.9%, with particularly strong returns from our
discretionary strategy GLG Alpha Select (+10.2%). Our total return and
long-only strategies performed well over the period, helped by positive
momentum in equity markets, delivering overall investment performance of 7.6%
and 16.8%, respectively. AHL TargetRisk gained 14.1%, once again proving its
ability to navigate hard-to-forecast macro changes and adapt quickly to
evolving market conditions.
There were nevertheless some strategies that were less suited to generating
returns in this environment. Notably, 2023 proved to be a testing year for
trend-following absolute return strategies and this was for two reasons.
First, March's SVB crisis was an idiosyncratic event that reversed prevailing
trends. Second, the market narrative centred around when central banks would
end their hiking cycle and whether cuts would be imminent, which changed
abruptly in November. In that context, performance in our flagship
trend-following strategies has been reasonable, with AHL Alpha (+1.0%) and AHL
Evolution (+3.7%), ending the period in positive territory.
On an asset-weighted basis, relative investment performance across the firm
was positive during the year. Our sophisticated approach to risk management
and technology-empowered platform meant we were able to navigate periods of
market volatility effectively, driving outperformance of 0.8% from our
alternative strategies. Our long-only strategies also outperformed by 2.8%,
which is a real testament to the skill of our investment teams.
I am delighted that we continued to attract capital and grow our market share
during the year. In what was a difficult period for most of the sector, the
client-led growth in our business remained strong. We recorded $3.0 billion of
net inflows, across both alternative and long-only strategies, which
highlights the continuing broad-based demand for the range of differentiated
investment strategies and solutions that we offer at Man Group. On a relative
basis, total net inflows were 4.9% ahead of the industry, reflecting the
merits of our client-centric distribution model and the quality of our
longstanding relationships with allocators around the world.
Strong investment performance, net inflows and positive impacts from foreign
exchange (FX) and other movements, resulted in our AUM increasing to $167.5
billion as of 31 December 2023. This marks a new high for Man Group and a
17% increase compared with 31 December 2022.
Despite these many positive elements, core profit before tax decreased by 56%
compared with 2022 to $340 million, largely driven by a decline from the
exceptionally strong performance fee outcome recorded in the previous year.
Statutory profit before tax was $279 million, compared with $745 million in
2022.
Strategy update
Following my appointment, I have spent a significant amount of time with the
Board and my new Executive Committee, who are all highly talented experts in
their fields and represent core functions from across the firm. We have worked
together to define our strategy and outline areas of focus to deliver the
next chapter of growth for Man Group. In doing so, I have been conscious not
to overlook our strengths today. We have built a high-quality, resilient
business that has delivered exceptional growth. Our investment capabilities,
powered by our advanced technology platform, are already helping to solve our
clients' most complex problems; continuing to invest in these strengths will
remain a key priority in the future.
I am proud of the progress we have made diversifying our business, however, we
cannot rest on our laurels. To maintain our relevance with clients, and to
continue to deliver for our shareholders, there are several areas that we will
be focusing on.
One of these is adding to our investment capabilities, which is critical to
our success. We see the largest opportunities in quantitative equities, across
mid-frequency and long-only, and in credit, across liquid and private markets.
We are also prioritising building out our solutions offering, acknowledging
that customisation and transparency are of ever-increasing importance to
sophisticated allocators across the globe.
Our global distribution network is one of our key differentiators and we will
continue to prioritise investment in this area. Extending
our presence in markets where we are underweight relative to the size of the
opportunity will be an important driver of future growth. We have identified
the North American region, the intermediated wealth channel and the insurance
client base as key priorities.
2023 brought a great deal of enthusiasm about the potential for technology,
and in particular AI via the arrival of ChatGPT, to catalyse productivity in
each and every sector. We have been using AI for many years already and
believe this new technology has huge potential for use across our business to
help our people perform their roles even more effectively (more on this
below). Our early and significant investment in technology has given us a
lasting competitive advantage that is not easy to replicate. We will focus on
maintaining this lead and continue to invest in the development of our
platform, leveraging the benefits of our scale to drive nimble and efficient
execution of our strategic objectives. We will also ensure that we align our
resources with our strategic goals and the new structure of our discretionary
offering reflects a first step towards that commitment.
It is vital that we continue to evolve to meet the needs of investors around
the world and the millions of pensioners and savers they represent. I have
every confidence in the talent of the people here at Man Group and our ability
to build a business that is run for long-term success and a market leader in
active management.
Progress against strategic priorities
Strong client relationships
I have spent a great deal of time with clients in recent months and it is
evident that their challenges are becoming more complex, requiring specific
customisation and partnership. Our breadth of investment strategies, quality
of institutional resources and commitment to partnering with clients to build
solutions at scale are key differentiators and have helped us to add a
significant number of new relationships with strategically important
allocators during the year. As at 31 December 2023, over 65% of our AUM is
from mandates that are customised to some degree.
As previously mentioned, we saw strong engagement with existing and new
clients across the globe in 2023, reflected by net inflows for the year of
2.1%; this is notably strong relative to the industry, which saw average
outflows of roughly 3% across comparable strategies in the year and is one of
the best signs of the strength of our business today. Our clients have
confidence in our ability to manage and grow their assets, and to help them to
navigate a range of market conditions.
The trend of clients investing across the firm continues, with a number of
existing clients investing in new products in 2023. At the end of December,
73% of our AUM is from clients investing in two products or more and 46% from
clients investing in four products or more. Our 50 largest clients are
invested in an average of four of our strategies. This illustrates the
strength of our offering and the value we bring in deeply understanding the
evolving needs of our clients.
Earlier this year, we also announced a strategic partnership with Fideuram -
Intesa Sanpaolo Private Banking (F-ISPB), one of our key clients in Italy. The
new venture is focused on building a diverse range of alternative and
long-only investment strategies and solutions, combining our own capabilities
with F-ISPB's private banking expertise, financial adviser network and client
base in Europe. We have grown successfully in the intermediated retail channel
through partnerships in the US and Japan, and we hope this venture will
likewise help to grow our presence in the Italian market.
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. We invest a huge amount of time and energy in
research and delivery, recognising that we need to keep innovating to meet
their unique and evolving requirements.
M&A has been a core part of our strategy for several years and we have
adopted a consciously disciplined approach to evaluating acquisition
opportunities. We seek to assess the repeatability and track record of the
investment process, the saleability and scalability of the product offering,
the cultural fit and ethos of the team, and the value creation opportunity a
transaction could represent for our shareholders. Varagon was the first
opportunity we have reviewed in a long time that met our criteria, and we were
delighted to announce that acquisition in 2023. As the private credit market
continues to grow in relevance for the world's largest institutions, this
transaction adds a US-focused direct lending strategy designed to provide
consistent risk-adjusted outperformance at scale, in a highly customisable
format, to our growing credit offering. The M&A environment around us
is changing and we will continue to maintain the same level of rigour and
discipline when it comes to assessing opportunities, as we have done in the
past.
Our seed capital programme continues to play a key role in supporting product
launches, and our pipeline of new ideas remains very strong. During the year
we seeded 14 new strategies across our business, leaving our seeding book at
$595 million as at 31 December 2023, following investments into new products
developed across the business. Over the last few years, we have committed
resources to mid-frequency equities, a large segment of the quant hedge fund
market with significant alpha and diversification potential. I am excited to
see that our investments in data, execution and infrastructure, together with
35+ years of expertise and credibility in the quant space, are continuing to
bear fruit. We intend to accelerate investments in that space going forward.
Our quantitative heritage and data-driven culture continues to be core to
everything we do and last year we were pleased to announce a partnership with
the Columbia Center on Sustainable Investment (CCSI) to conduct research
addressing how climate impact is defined and measured in fixed income and
equity portfolios. Our joint research with the academic experts at CCSI will
aim to produce a more refined decarbonisation framework, which will bring
greater standardisation when calculating the climate impact of public market
securities.
This is a great example of the academic rigour we apply at Man Group, and how
we work collaboratively to understand complex topics in order to add value for
our clients.
Efficient and effective operations
We are a global leader in quantitative investing, and yet the use of
technology in our business goes well beyond that. Technologists and quants
make up nearly half of our workforce - from data science and trading to risk
management and operations. It really is core to how we run our firm and
enables us to respond quickly as financial markets and our clients' needs do.
Our single operating platform means we can generate alpha at scale and deliver
portfolio solutions efficiently to the world's largest institutional
investors. It affords us the ability to execute larger volumes, trade a huge
number of markets and trade at all times of the day, and it also offers the
ability to onboard new teams and businesses efficiently. We believe our
technology is a commercial differentiator and in 2023, we invested roughly
$120 million into our investment and core technology to maintain our lead.
As I mentioned earlier, advances in AI seized the spotlight in 2023. AI
enables us not only to automate, but also to innovate, and gives us the power
to grow revenue more productively. We first used machine learning techniques
roughly ten years ago and today we employ AI as part of our investment
process in data, research, portfolio construction, and trading. During the
year, our dedicated AI team, engineers and domain experts launched an in-house
GenAI portal, ManGPT, which has led to significant usage of GenAI as a
productivity aid across the firm in a safe and scalable manner. We see
technology more broadly, and AI specifically, as a core competence with major
potential to increase productivity and deliver significant operating leverage
for our shareholders.
In 2023, we were proud to sign a multi-year open-source technology development
and product integration agreement for our database product, ArcticDB. This was
a strong external endorsement of the quality of our technology and we are
excited to leverage our technology expertise to help advance the asset
management industry's operational architecture.
People and culture
Talent is, and will always be, key to the ongoing success of our 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 full potential. Man Group is a collegiate and collaborative firm
with a real sense of community, and I am proud of the culture that we have
built, particularly over the last decade. We place great importance on being
an employer of choice, and we are pleased to report that our 2023 staff survey
recorded a strong engagement score of 81% when it was conducted in the autumn.
I believe diversity is a commercial differentiator in that diversity of
thought makes us better. We encourage, embrace, and seek out difference in all
areas. There is no particular 'type' of person that joins Man Group, and we
put real effort behind attracting diverse candidates and creating an inclusive
culture to deliver the best possible outcomes for our clients. Our people
foster and uphold that standard and it is part of the DNA of our organisation.
We continue to work hard to expand what we do to improve diversity, equity and
inclusion, both at Man Group and across the industry. During 2023, we have
made a concerted effort to take our programmes into new avenues and introduce
tangible initiatives across more fronts.
To be at the forefront of the industry for years to come, we - and our peers
- need to reconfigure the pieces that make up our teams, not just add
individuals who fit an existing mould. Fostering a working environment and
culture where all our employees feel that they belong takes time and effort
every single day. While there is a huge amount of work still to be done to
make our firm truly representative of the populations we serve, we stand for
an absolute and unequivocal commitment to inclusiveness.
Conclusion and outlook
It would be remiss of me not to mention Luke's significant contribution to the
results that we have recorded for 2023. He has handed over a business that is
in great shape and which will allow us to continue on our exciting growth
trajectory.
Man Group has existed for well over 200 years and has achieved this by
innovating and evolving to best serve the needs of its clients. Today, we are
a diversified, active asset manager with significant skill in liquid
alternatives, systematic and long-only investing, and private credit, all
underpinned by our technology.
Economic trends, geopolitical dynamics, inflation and their interplay on the
global stage persist in their unpredictability, continuing to create
challenges in both public and private markets. In this environment it is
crucial for managers to be forward thinking and adaptable. Investors have
never needed diversifying sources of risk-adjusted returns and long-term
strategic partners as much as they do now. The ability to build such
partnerships and deliver scalable alpha through customised solutions is one of
the most exciting challenges ahead for our industry. That's where we see the
opportunity for Man Group over the next five years.
We intend to support our clients for many generations to come as we have one
single role, which is to help our clients provide greater financial security
to millions of people around the world. My vision is for Man Group to be
indispensable in our clients' quest to achieve this. This means that we are
always striving to be the best we can be, and I have great confidence in our
ability to deliver on this to the benefit of both our clients and
our shareholders.
Robyn Grew
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
Why it matters
The asset-weighted performance of Man Group's strategies in comparison with
peers gives an indication of the competitiveness of our investment performance
compared with similar strategies offered by other investment managers.
How we performed
Asset-weighted relative investment outperformance of 1.6% in 2023 was driven
by our long-only strategies. For further information on investment
performance, see page 8.
Relative net flows
Why it matters
Relative net flows are a measure of our ability to attract and retain investor
capital in comparison with 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 2023 were 4.9%, reflecting the quality of our
longstanding relationships with allocators around the world and the relevance
of our investment strategies and solutions.
Core management fee EPS (diluted) growth(1)
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) of 18.4¢ was in line with 2022, as higher
core net management fee revenue was offset by an increase in fixed cash costs
to support future growth.
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 generated through
outperformance for our clients and a significant component of value creation
for shareholders over time.
How we performed
Core EPS (diluted) has decreased by 54% to 22.4¢, reflecting a reduction in
performance fee profits following the exceptionally strong outcome in 2022.
1. Details of the calculation of our alternative performance measures
are provided on pages 58 to 63.
Non-financial KPIs
Our non-financial KPIs reflect our core values and demonstrate our commitment
to our people, our communities and the environment.
Carbon footprint (tCO(2)e)
Why it matters
In order to monitor our carbon footprint, we measure total market-based
greenhouse gas emissions (tCO(2)e) using the GHG Protocol guidance for the
Scope 1, Scope 2, Scope 3 travel and Scope 3 upstream leased asset categories.
How we performed
Total carbon emissions increased by 51% in 2023, owing to an increase in
business travel (including more long-haul travel) which reflected our
acquisitions and growth and indicated a partial return to pre-COVID travel
levels. We are focused on reducing emissions and continue to source offsets so
we retain our carbon neutral stance.
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 2023 staff survey recorded an engagement score of 81%, with a response
rate of 85% (a 9% increase compared with 2022).
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 2023, the number of women in senior management roles increased to 31%,
exceeding our 2024 target of 30%.
ESG-integrated AUM ($bn)
Why it matters
Our goal is to meet the responsible investment needs of our clients and this
can be measured by the amount of our AUM that is invested sustainably.
We calculate ESG-integrated AUM in line with the Global Sustainable
Investment Alliance definition, which has emerged as the global standard of
classification.
How we performed
ESG-integrated AUM has increased to $59.3 billion in 2023, as we have
continued to respond to client demand and expand our range of ESG-oriented
strategies. Market beta and currency moves have also contributed positively to
the increase.
Chief Financial Officer's review
Overview
Man Group ended the year with record AUM of $167.5 billion, driven by
continuing positive net flows, strong investment performance in our long-only
strategies and the acquisition of Varagon. Statutory profit decreased to $234
million from $608 million in 2022, primarily due to a decrease in performance
fees following exceptional performance fee generation in 2022. The heightened
volatility following the US bank turmoil in March and continued political,
economic and monetary uncertainty led to muted performance for our systematic
macro strategies, the key drivers of our performance fees. We continued to
grow our core net management fee revenue, largely through the Varagon
acquisition, standing at $963 million for the year compared
with $927 million in 2022. Core diluted management fee EPS of 18.4¢ was in
line with 2022 due to an increase in fixed compensation and core other costs
offsetting the increase in core net management fee revenue. The decrease in
profit in the year led to statutory EPS on a diluted basis decreasing to
19.4¢ from 45.8¢ in 2022, with core diluted EPS decreasing from 48.7¢ to
22.4¢.
Closing AUM of $167.5 billion at 31 December 2023, up from $143.3 billion
at the end of 2022, was driven by net inflows of $3.0 billion in the year,
positive absolute investment performance of $9.7 billion and FX and other
movements of $11.5 billion, including $10.8 billion contributed by Varagon.
Performance was positive across all categories, and we saw net inflows of
$4.9 billion across absolute return, total return and discretionary long-only,
partially offset by net outflows of $1.0 billion and $0.9 billion in
multi-manager solutions and systematic long-only respectively.
We completed the acquisition of controlling interests in Varagon and Asteria
in the second half of the year. Varagon's private credit capabilities
diversify our offering to investors, representing the potential for
significant value creation. The growth in our strategic partnership with
Fideuram through the acquisition of Asteria enables us to increase our
offering across Europe in the intermediated wealth channel. Additionally, we
have continued to grow our CLO business and securitised new vehicles in Europe
and the US in the year.
Management and other fees on a statutory basis increased by 4% to $990 million
for the year as a result of higher average AUM, with Varagon contributing
$29 million post-acquisition. The average net management fee margin of 63
basis points for the year was 2 basis points lower than in 2022 due to
AUM mix shift towards long-only lower margin strategies, partially offset by
the acquisition of Varagon.
The run rate net management fee margin at 31 December 2023 stood at 65 basis
points compared with 64 basis points at the end of 2022, with inflows into
higher margin strategies weighted towards the end of the year. Run rate core
net management fee revenue was $1,087 million at the end of the year, up from
$917 million at the end of 2022, largely as a result of the revenue earned on
Varagon AUM.
Performance fee generation was lower, with $178 million earned in the year on
a statutory basis following the record $778 million earned in 2022. Our
asset-weighted relative investment outperformance was 1.6% across all
categories compared with 1.4% in 2022. All our investment engines generated
performance fees in the year. Core gains on investments of $48 million,
compared with losses of $15 million in 2022, were generated by mark-to-market
gains across our seed book. Core costs were $834 million, down from $906
million in 2022, driven by lower performance fee-related variable
compensation partially offset by higher fixed compensation costs due to
increased headcount following the acquisition of Varagon and continued
investment in the business. The impact of the strengthening of sterling
against the US dollar in the year also contributed to an increase in other
costs.
Our core rental income in 2023 was in line with 2022. In 2023, we signed
sub-leases with two new tenants for a substantial portion of the vacant space
in Riverbank House and our existing sub-tenant signed agreements to extend
their current leases until the end of the head lease. In early 2024, we also
signed Heads of Terms with one of our sub-tenants for additional space in the
building.
Non-core items (excluding tax) increased from a net expense of $34 million in
2022 to $61 million in 2023, primarily due to FX losses of $11 million
compared with gains of $22 million in 2022. Gains on disposal of right-of-use
lease assets and a decrease in the amortisation of our acquired intangible
assets, due to some becoming fully amortised in 2022, were partially offset by
costs relating to the acquisitions of Varagon and Asteria. Non-core items also
include adjustments to the statutory income statement charge relating to
amounts payable to the Varagon sellers who remain members of senior management
post-acquisition in order to adjust the expense recognised in the year to
reflect the corresponding profits generated. Together with acquisition-related
costs, these items added $30 million to our non-core expense.
'Core' measures are alternative performance measures. For a detailed
description of our alternative performance measures, including non-core items,
please refer to pages 58 to 63. For details of key performance indicators
( KPI ), refer to page 11.
$m Year ended 31 December 2023 Year ended 31 December 2022
Core net management fee revenue 963 927
Core performance fees 180 779
Core gains/(losses) on investments 48 (15)
Core rental income 5 5
Core net revenue 1,196 1,696
Asset servicing costs (58) (58)
Compensation costs (595) (678)
Core other costs (179) (170)
Net finance expense (21) (11)
Rollover share of post-tax profit (2) -
Third-party share of post-tax profits (1) -
Core profit before tax 340 779
Core management fee profit before tax 280 290
Core performance fee profit before tax 60 489
Core profit 271 647
Non-core items (before tax) (61) (34)
Statutory profit 234 608
Statutory EPS (diluted) 19.4¢ 45.8¢
Core EPS (diluted) 22.4¢ 48.7¢
Core management fee EPS (diluted) 18.4¢ 18.4¢
Proposed dividend per share 16.3¢ 15.7¢
We continue to deliver strong cash conversion of our profits and continued our
returns to shareholders in 2023 through completion of the two share
repurchases, each of $125 million, announced in December 2022 and March 2023
respectively. Our total proposed dividend for the year of 16.3¢ per share
represents an increase of 4% from 15.7¢ in 2022, in line with our
progressive dividend policy. The total announced returns to shareholders for
2023 is over $0.3 billion, and $1.8 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 deployment of our capital to fund acquisitions
and strategic partnerships, we continue to return excess capital to
shareholders, allocate capital to seed investments and heavily invest in
technology to ensure we remain leaders in active investment management. We had
net tangible assets of $782 million at 31 December 2023 and net financial
assets of $555 million, including $180 million of cash (excluding amounts held
by consolidated fund entities) and net of $35 million of acquisition-related
liabilities which begin to crystallise in 2028. We continue to be strongly
cash-generative, with core cash flows from operations excluding working
capital movements of $362 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 positively impacted by the weakening of the US dollar against most
currencies over the course of the year. This increased our reported AUM by
$1.4 billion and had a positive impact on our core net management fee revenue.
However, the strengthening of sterling against the US dollar also contributed
to a partially offsetting increase in core costs of around $2 million compared
with 2022.
Assets under management
Change
$bn 31 December 2022 Net inflows/ Investment performance FX and other 31 December 2023 $bn %
(outflows)
Alternative Absolute return 46.0 2.3 0.2 (0.8) 47.7 1.7 4%
Total return 28.8 1.1 1.1 11.5 42.5 13.7 48%
Multi-manager solutions 20.2 (1.0) 0.5 (0.3) 19.4 (0.8) (4)%
Total 95.0 2.4 1.8 10.4 109.6 14.6 15%
Long-only Systematic 31.6 (0.9) 5.4 0.4 36.5 4.9 16%
Discretionary 16.7 1.5 2.5 0.7 21.4 4.7 28%
Total 48.3 0.6 7.9 1.1 57.9 9.6 20%
Total 143.3 3.0 9.7 11.5 167.5 24.2 17%
Absolute return
The increase in absolute return AUM was driven by net inflows of $2.3 billion,
primarily into Man Institutional Solutions and AHL Alpha, partially offset by
outflows from GLG Event Driven. Positive absolute performance of $0.2 billion
was driven by a number of strategies in the product category, in particular
AHL Evolution and GLG UK Select, partially offset by negative performance in
American Beacon AHL Managed Futures.
Total return
Total return AUM increased by $13.7 billion, driven by the Varagon acquisition
which added $10.8 billion to the category. Net inflows of $1.1 billion were
primarily into Alternative Risk Premia and the launch of new CLOs. Positive
absolute performance of $1.1 billion was primarily due to gains in AHL
TargetRisk, reflecting its long-only exposure to fixed income and equity
markets.
Multi-manager solutions
The decrease in multi-manager solutions AUM was primarily driven by net
outflows of $1.0 billion, partially offset by positive absolute performance of
$0.5 billion, largely from infrastructure mandates.
Systematic long-only
Systematic long-only AUM increased by $4.9 billion, driven by positive
absolute performance of $5.4 billion across all strategies in the product
category.
Discretionary long-only
Discretionary long-only AUM increased by $4.7 billion. Net inflows of $1.5
billion were primarily into our credit strategies GLG Sterling Corporate Bond,
GLG High Yield and GLG Global Investment Grade Opportunities. Positive
performance of $2.5 billion was driven by a number of strategies, reflecting
exposure to a broad range of markets.
Revenue
Growth in management fee revenue was offset by lower performance fee
generation, leading to a decrease in statutory net revenue from
$1,727 million in 2022 to $1,194 million in 2023. Core net revenue similarly
decreased from $1,696 million to $1,196 million.
Core net Net management fee Run rate Run rate
management fees
margin
core net management fees
net management fee margin
($m)
(bps)
($m)
(bps)
Year ended 31 December 2023 Year ended 31 December 2022 Year ended 31 December 2023 Year ended 31 December 2022 Year ended 31 December 2023 Year ended 31 December 2022 Year ended 31 December 2023 Year ended 31 December 2022
Absolute return 526 515 112 112 544 526 114 114
Total return 208 201 64 63 294 177 69 61
Multi-manager solutions 34 34 17 20 33 38 17 19
Systematic long-only 81 75 24 25 91 77 25 24
Discretionary long-only 110 102 59 57 125 99 58 59
Other service income(1) 4 - n/a n/a n/a n/a n/a n/a
Total 963 927 63 65 1,087 917 65 64
1 Other service income included in core net management fees is earned on an
absolute basis rather than as a margin on AUM.
Management fees
Core net management fee revenue increased by 4% to $963 million in 2023 (2022:
$927 million), driven by higher average AUM and the acquisition of Varagon.
Net management fee margin decreased from 65 basis points in 2022 to 63 basis
points in 2023, driven by higher average AUM in low margin multi-manager
solutions and systematic long-only strategies following strong net inflows in
the second half of 2022. This was partially offset by the addition of Varagon,
which attracts a higher margin, and an increase in average AUM from positive
investment performance in absolute return strategies.
The absolute return net management fee margin remained at 112 basis points, as
the mix shift towards higher margin Man Institutional Solutions mandates was
offset by a decrease in average AUM in higher margin AHL Diversified. The
total return net management fee margin increased by 1 basis point to 64 basis
points, as the addition of higher margin Varagon AUM was partially offset by
higher average AUM in lower margin AHL TargetRisk. The multi-manager solutions
net management fee margin decreased to 17 basis points in 2023 from 20 basis
points in 2022 as a result of the ongoing shift towards infrastructure
solutions from traditional fund of funds. The net management fee margin of
systematic long-only strategies decreased from 25 basis points to 24 basis
points due to margin pressure and mix effects at the product level in recent
years. Discretionary long-only margins increased from 57 basis points in 2022
to 59 basis points in 2023 due to strong performance in higher margin GLG
Japan CoreAlpha.
Run rate core net management fee revenue was $1,087 million at 31 December
2023 (2022: $917 million). The increase in the year was largely as a result of
the acquisition of Varagon and the increase in AUM in absolute return, total
return and long-only strategies.
The run rate net management fee margin at 31 December 2023 was 65 basis
points compared with 64 basis points at 31 December 2022, largely as a result
of the acquisition of Varagon in the second half of the year positively
contributing to the run rate margin at 31 December 2023 when compared with the
margin in the year. Other movements in the run rate margin for individual
strategies were broadly driven by the same factors as those impacting actual
margins in the year.
Performance fees and investment gains and losses
Core performance fees for the year were $180 million (2022: $779 million),
including $163 million from alternative strategies (2022: $761 million) and
$17 million from long-only strategies (2022: $18 million). We have strong
performance fee optionality and diversity, with 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.
Core gains on investments of $48 million (2022: losses of $15 million) were
generated by mark-to-market gains across our seed book, including $17 million
from our CLO holdings.
Rental income
Core rental income was broadly flat year-on-year. The sub-leases we signed in
2023 for a substantial portion of the vacant space in our London office and
the extension of leases with one of our existing sub-tenants reduce future
rental income, depreciation and occupancy costs. Following the derecognition
of the associated portion of our right-of-use lease assets we recognised a
gain on disposal of $12 million, classified as a non-core item.
Costs
Asset servicing
Asset servicing costs vary, predominantly depending on transaction volumes,
the number and mix of funds, and fund NAVs. Asset servicing costs were $58
million (2022: $58 million), which equated to around 5 (2022: 5) basis points
of average AUM(1).
Compensation costs
Core compensation costs were $595 million for the year, down by 12% from $678
million in 2022 due to lower performance fees decreasing the associated
variable compensation. Our compensation ratio is 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 increased to 50% in 2023
from 40% in 2022, reflecting the decrease in performance fee revenue
generated in the year.
Other costs
Core other costs, which exclude acquisition-related costs and amounts incurred
by consolidated fund entities, increased to $179 million in 2023 from $170
million in 2022, primarily as a result of an increase in staff benefit costs.
The strengthening of sterling against the US dollar also contributed to the
increase 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 currently has a
lower rate than the UK. Tax on statutory profit for the year was $45 million
(2022: $137 million). The recognition of a significant portion of our
accumulated US losses as deferred tax assets as a result of the Varagon
acquisition drove a decrease in the statutory effective tax rate from 18% in
2022 to 16% in 2023. This was partially offset by the increase in the UK
statutory tax rate from 19% to 25% on 1 April 2023. This increase in the UK
tax rate led to an increase in the core tax rate from 17% in 2022 to 20% in
2023.
In the US, we have accumulated tax losses and tax-deductible goodwill and
intangibles of $89 million (2022: $82 million) which can be offset against
future US profits, thereby reducing taxable profits. We have recognised $86
million of the available $89 million US deferred tax assets at 31 December
2023 (2022: $64 million and $82 million respectively) as the portion of state
and city tax losses expected to expire before utilisation has reduced
following the Varagon acquisition. 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 do not currently expect to pay federal
tax on any profits we may earn in the US until 2026.
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. The global minimum tax
rate due to come into effect in 2024 is not expected to result in significant
top-up taxes becoming due.
Profit
Statutory profit decreased from $608 million in 2022 to $234 million in 2023,
with core profit decreasing from $647 million to $271 million over the same
period. The decrease in profitability led to a decrease in statutory EPS
(diluted) from 45.8¢ in 2022 to 19.4¢ in 2023 (48.7¢ and 22.4¢
respectively on a core basis), with the reduction partially offset by a
decrease in share count as a result of the $223 million of shares repurchased
during the year.
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 $362 million for the year.
As at 31 December 2023, our cash balance, excluding amounts held by
consolidated fund entities, was $180 million.
$m Year ended 31 December 2023 Year ended 31 December 2022
Opening available cash and cash equivalents 349 323
Core cash flows from operations excluding working capital movements 362 810
Working capital movements (excluding seeding) (132) (65)
Working capital movements - seeding 119 (52)
Acquisition of subsidiaries, net of cash acquired (170) -
Dividends paid (181) (179)
Share repurchases (including costs) (223) (386)
Drawdown of revolving credit facility 140 -
Other movements (84) (102)
Closing available cash and cash equivalents 180 349
1. Excludes systematic long-only and private markets strategies.
Balance sheet
We have a strong and liquid balance sheet. The acquisitions of Varagon and
Asteria in the year, together with the decrease in performance fee revenues
net of variable compensation costs, resulted in a decrease in available cash
and cash equivalents net of borrowings.
$m 31 December 2023 31 December 2022
Available cash and cash equivalents 180 349
Seeding investments portfolio 595 688
Borrowings (140) -
Contingent consideration payable (3) -
Put option over non-controlling interests (9) -
Put option over rollover interests (23) -
Payables under repo arrangements (45) (54)
Net financial assets 555 983
Other tangible assets and liabilities 227 39
Net tangible assets 782 1,022
Goodwill and intangibles 830 677
Shareholders' equity 1,612 1,699
Seed investments
We use our balance sheet to invest in new products, aiming to redeem as client
AUM in the funds grows. At 31 December 2023, our seed investments were $595
million, a decrease from $688 million at 31 December 2022. $45 million were
financed via repos (2022: $54 million). In addition, we held $230 million of
total return swap exposure at 31 December 2023 (2022: $138 million), allowing
us to maintain our seed portfolio exposure without tying up large portions
of our cash balances.
The statutory consolidation of a number of our CLOs results in a significant
gross-up of assets and liabilities in the Group balance sheet. Our maximum
exposure to loss associated with interests in our CLOs is limited to the
investment in these CLOs, as reflected in the seeding investments portfolio
balance, which excludes the impact of this gross-up.
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 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 repurchases. In 2023, we
completed the two $125 million share repurchases announced in December 2022
and March 2023.
The Board is proposing a final dividend for 2023 of 10.7¢ per share, which
together with the interim dividend of 5.6¢ per share equates to a total
dividend for the year of 16.3¢ per share, representing an increase of 4% on
2022. 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.
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 ensure we maintain a prudent balance sheet at all times by taking
into account liquidity 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 $0.9 billion of share buybacks. As a result, our
weighted average share count has decreased by 22% to 1,178 million over that
same period.
Our revolving credit facility was renewed in December 2023 and extended to
$800 million. It matures in 2028, providing additional liquidity. We have
maintained prudent capital and available liquidity throughout the year,
deploying our capital to acquire a controlling interest in Varagon and Asteria
and 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.
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. As part of our ongoing commitment to reduce our carbon
footprint and to reach net zero by 2030, we seek to minimise the carbon
emissions of our office premises, be thoughtful around inter-office travel or
use lower-carbon modes of transport where possible, and proactively plan for
our ambitions in the future. Under our strategy, we continue to embed targets
to reduce our Scope 3 carbon emissions from business travel into our annual
budgeting process.
The directors do not expect potential climate-related impacts to be material
on the Group financial statements 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
Risk Mitigants Status and trend Movement
Business risks
Investment performance and net redemptions Fund underperformance, on an absolute basis, relative to a benchmark or Man Group's investment businesses each have clearly defined investment Overall performance in 2023 has been mixed given the fragile and volatile Unchanged
relative to peer groups, could reduce AUM and may result in lower processes with integrated risk management, designed to target and deliver on markets and the geopolitical backdrop: trend-following strategies were
subscriptions and higher redemptions. This risk is heightened at times of the investment mandate of each product. We focus on hiring and retaining marginally positive; credit and equity alternatives strategies were mixed but
disrupted and volatile markets, which could be triggered by geopolitical highly skilled professionals who are incentivised to deliver alpha within the generally positive; long-only equity strategies carried a beta to rising
or climate factors. This may also result in dissatisfied clients, negative parameters of their mandate. markets and generally outperformed their benchmarks; and our TargetRisk
press and reputational damage.
product range saw a recovery of 2022 losses. In addition, the Varagon
Man Group's diversified range of products and strategies, which now includes acquisition brought a material AUM boost and FX moves led to an increase in
Lower AUM results in lower management fees and underperformance results in Varagon, limits the risk to the business from underperformance of any AUM for non-USD funds or share classes.
lower performance fees. particular strategy or market.
Our largely institutional client base has shown continued interest in our
product offerings which led to net inflows. A discussion of Man Group's
investment performance is included on page 8.
Key person risk A key person to the business leaves or is unable to perform their role. 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
losing any key individuals. Diversification of strategies and the emphasis on individuals across the firm.
Retention risk may increase in years of poor performance and the expectation technology and systematic strategies reduce the overall risk to Man Group.
of reduced compensation.
We did not see any investor concerns or material outflows as a result of
Succession plans and deferred compensation schemes are in place to support the announced departures or changes in management structure in 2023, including the
retention of senior investment professionals and key management. leave of absence of our deputy CEO, the retirements of our CEO and Chair of
the Board, the transition to their in-house replacements and a subsequent ExCo
reorganisation.
Credit risks
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 The March banking crisis highlights the benefit of our conservative approach Unchanged
directly or indirectly, becomes distressed or defaults. available financial counterparties, each of which is approved and regularly to counterparty selection and appropriate diversification in line with the
reviewed and challenged for creditworthiness by a firm-wide counterparty Board's appetite. We had no exposure to the US regional/specialised banks and
Shareholders and investors in Man Group funds and products are exposed to committee. our net exposure to Credit Suisse at the start of the crisis was small but
credit risk of exchanges, prime brokers, custodians, sub-custodians, clearing
nevertheless closed out.
houses and depository banks. The risk teams monitor credit metrics on the approved counterparties daily.
This includes credit default swap spreads and credit ratings.
Liquidity risks
Corporate and fund Volatile markets and reduced market liquidity can place additional, often An $800 million revolving credit facility, maturing December 2028 with two The acquisitions of Varagon and Asteria, the balance sheet seeding programme Unchanged
short-term, demands on the balance sheet. Man Group is exposed to having one-year extension options, provides Man Group with a robust liquidity and completion of two $125 million share buybacks in 2023 were planned and
insufficient liquidity resources to meet its obligations. backstop. Liquidity forecasting for Man Group and the UK/EEA sub-group, managed without issues. The revolving credit facility was extended and
including downside cases, facilitates planning and informs decision-making. increased by $300 million, to $800 million, to cater for future growth
Adverse market moves and volatility may sharply increase the demands on the
opportunities and provide capacity for Varagon balance sheet loan origination,
liquid resources in Man Group's funds. Market stress and increased redemptions The Investment Risk team conducts regular liquidity tests on Man Group's in place of their legacy facilities.
could result in the deterioration of fund liquidity and in the severest cases funds. We endeavour to manage resources in such a way as to meet all
this could lead to the gating of funds. plausible demands for fund redemptions according to contractual terms. The asset liquidity distribution across funds remained broadly unchanged. Our
in-house liquidity analysis and reporting toolkit continued to evolve and now
includes reverse stress testing.
The banking crisis and geopolitical events later in the year led to a need to
cut material positions in our trend-following funds - despite the large market
participation, these were achieved without issues, albeit at a wider bid-offer
spread.
Market risks
Investment book performance 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 size was stable over 2023 with 14 new seed positions Increased
product distribution and generate returns for shareholders. Man Group also based on its risk versus return and its commercial opportunity to Man Group. offset by recycling of existing investments. However, the overall risk has
holds CLO risk retention positions until the product maturity, and is
increased with the addition of two equity CLOs. The pure seeding book returns
currently participating in a US CLO Warehouse to facilitate a product launch. Approvals are granted by a Seed Investment Committee (SIC), which is comprised were positive, with the benchmark hedges performing as intended in the
of senior management, Group Risk and Treasury. Investments are subject to risk volatile markets. Additional gains came from reversal of prior year losses on
Varagon loan origination is a new balance sheet risk with similarities to CLO limits, an exit strategy and are hedged to a benchmark where appropriate. The our CLO risk retention positions.
risks but much shorter term. positions and hedges are monitored regularly by Group Risk and reviewed by
the SIC. We extended the use of repo and swap financing on some of the CLO and seed
The firm is therefore exposed to a decline in value of the investment book.
positions by bringing on a new counterparty. Although external financing is
more costly in higher rate environments, this released balance sheet
liquidity.
DB pension performance 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 The scheme remains in surplus on both an accounting and actuarial basis with Unchanged
which closed to new members in 1999 and future accrual in 2011. The plan is inflation though the use of Liability-Driven Investment (LDI) funds. The no further challenges arising from the use of LDI funds with UK rate
healthy but is exposed to changes in net asset versus liability values. This return-seeking assets are low volatility and have a low correlation to movements. Whilst the cost of an insurance buyout of the scheme remains in
could come from underperformance of return seeking assets or changes in directional equity markets. Longevity is the largest risk but is uncorrelated excess of our appetite, the LDI hedges have been calibrated to position the
expected member longevity assumptions. to Man Group's other risks. portfolio towards a future buyout if the trustees deem appropriate.
The plan is operated separately from Man Group and managed by independent A triennial valuation will update the actuarial assumptions as of 2023
trustees, including investment decisions. year-end.
Operational risks
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, including employee-related issues. on a three lines of defence model and have continued to operate during the required and ensuring internal process failures are kept to a minimum.
year.
Man Group has not observed an increase in material internal risk events in
Risks and controls are reassessed on an ongoing basis and in the event of 2023.
material change, to determine the adequacy of the control environment.
External (third-party) process failures 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 key outsourcing providers remain intentionally concentrated with a Unchanged
outsourcing arrangements on behalf of its funds. Risks arise through the ongoing third-party due diligence and KPI monitoring) to confirm that small group of carefully selected and proven names with which it has well
supplier life cycle from sourcing and selection, to contracting outsourced service providers are delivering as required. established and embedded working relationships. There has been no notable
and onboarding, to service delivery and monitoring and finally, to exit and increase or decrease in the number of material issues caused by, or
offboarding. The most material risk is that the outsourced service providers experienced by, our outsource providers during 2023 and there have been no
do not perform as required, including bankruptcy, resulting in knock-on material losses or other impacts.
implications for our business and processes.
Model and data integrity Man Group is a technology-empowered active investment management firm Man Group has embedded systems, controls and operational change control Man Group continues to source and provision new investment data sources and Unchanged
which continues to make use of advanced quantitative trading strategies that processes for models and data. Change management controls are applied to new data analytics, but has not observed an increase in material internal risk
necessitate a robust approach to data acquisition and consumption, model models, model changes and calibrations. events in 2023.
implementation and execution. Key risks include model/algorithm failures or
issues with data upon which decisions are made. Controls are both preventative and detective to minimise the potential
consequences from such an event arising.
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 Group and arising as a result of sabotage, hacking, with relevant policies and procedures, that are aligned with industry technologies, enabling us to detect and prevent malicious activities and
virus attack or other malicious disruption causing system failure. expectations and best practices. Man Group's Chief Information Security complex cyber-attacks. Although we have not experienced any material issues in
Officer, together with the Information Security Steering Committee, ensures 2023, the increasing cyber risk assessment is fuelled by a multitude of
that our control environment is continuously reviewed and adjusted to keep factors including the rise of AI-driven phishing attacks via models like
pace with the evolving regulatory, legislative and cyber threat landscapes. ChatGPT; the increasing risk of vulnerabilities in the supply chain; and the
increasing impact and cost of cyber breaches.
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. The single Man Group has an ongoing focus on improving our technology offering, Unchanged
in system downtime, severely degraded performance or limited system Technology team of 500+ professionals aligns with each business unit to ensure capability and security. Particular focus and investment have been on the
functionality. work is correctly prioritised and financed. The prioritisation process enrichment of the trading and operations platform, including the
considers the life cycle of both hardware and software to ensure both are centralisation of order management.
Business continuity risks may arise from incidents such as a denial of access adequately supported and sized. The firm's operational processes include
to a key site or a data centre outage, which could lead to business mature risk, incident and problem management procedures to minimise the Annual combined disaster recovery exercises have been conducted across key
disruption. likelihood and impact of technology failures. trading applications which were switched to run from our back-up data centre.
Business continuity risk mitigation includes detailed planning and testing of
remote access and contingency/recovery operations, and ongoing risk and threat
assessments.
Criminal activities Risk of losses or harm through wrongful, unauthorised activities or criminal Man Group operates a framework consisting of policies, procedures and regular Man Group continues to strengthen and adapt its control environment to monitor Unchanged
deception intended to result in financial or personal gain; or incurred training to staff to support compliance with applicable laws and regulations. and meet the challenges of an evolving regulatory environment with heightened
through failure to comply with (or have adequate procedures to ensure
sanctions and enforcement actions.
compliance with) laws and regulations relating to anti-money laundering, Internal policies, processes and controls are subject to regular review and
counter-terrorist financing, anti-bribery and corruption, breach of economic consultation internally and with external advisers to ensure we remain well No material incidents were seen in 2023, and the firm complies with all
sanctions, insider trading and market abuse. placed to manage evolving requirements. Support, independent oversight and sanctions, including those relating to the Russian invasion of Ukraine.
challenge is also being provided by Man Group's Compliance and Financial
Crime teams.
Legal, compliance and regulatory The breadth and complexity of the regulations and legislative requirements Man Group operates a global legal and compliance framework which underpins all Man Group continues to experience new regulatory requirements. In 2023 this Unchanged
that Man Group and its funds are, or were historically subject to, across aspects of its business and is resourced by experienced teams. These teams included further embedding of requirements of the FCA's IFPR in relation to
multiple jurisdictions, represent significant operational risks, should the are physically located in Man Group's key jurisdictions, helping them to regulatory capital and liquidity (including the ICARA), governance and
firm fail to comply with them. Man Group supports proportionate and thoughtful understand the context and impact of any requirements. remuneration regime and to the (UK Funds) Assessment of Value. The SEC
regulation and initiatives that develop the regulatory environment. However,
Private Fund Advisor Rules will be a focus area for 2024.
change can also result in increased operational complexity and costs to Man Emphasis is placed on proactively analysing new legal and regulatory
Group or the sectors or markets in which it operates. developments and communications to assess likely impacts and mitigate risks. Man Group maintained an open dialogue with regulators throughout 2023 and
The governance framework includes ongoing proactive reporting and management work continues on a number of regulatory initiatives.
Failure to comply with laws and regulations may put Man Group at risk of of potential and actual legal and litigation risks.
fines, lawsuits or reputational damage.
Man Group continues to liaise directly and indirectly with competent
authorities e.g. FCA, SEC, FINMA, CBI.
Reputational risks
Negative publicity The risk that an incident or negative publicity undermines our reputation as 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
a leading investment manager and place to work. Reputational damage could conduct of our employees. Our governance and control structure mitigates profile and protect its reputation across stakeholder groups.
result in significant redemptions from our funds, and could lead to operational concerns, and our attention to people and investment processes are
difficulties with external financing, credit ratings and relations with core designed to comply with accepted standards of investment management practice.
counterparties and outsourcing providers. We encourage a culture of openness, inclusion and diversity.
Emerging risks
Potential future threats Emerging risks are complementary to the current principal risks and represent The Board, Executive Committee and risk teams monitor emerging risks, trends Emerging risks are now reviewed and discussed by the Board on a six-month Increased
potential future threats to Man Group's performance, development or viability. and changes in the likelihood or impact following discussions with subject cycle. The key themes this year were heightened geopolitical tensions (Russia,
By definition, these entail greater uncertainty about if or when the risk or matter experts. This assessment informs the universe of principal risks Israel/Gaza, China, the US and the UK), the continued fragile state of
an event may manifest. managed and mitigated by the firm. financial markets (volatility, liquidity, interest rates) and the potential
impact of AI models and their misuse. No changes were made to Man Group's
The emerging risk categories include natural disasters, pandemics, disruption headline principal risks.
to financial markets and business infrastructure, geopolitical risk and
changes in the competitive landscape.
Climate change risks
Physical risks Physical risks, and specific event uncertainties, of business disruption, Man Group has a small number of employees, a relatively limited The firm will continue to monitor and manage its risks through Unchanged
property damage or to employee well-being due to a severe weather event. physical footprint and can operate completely remotely. business-as-usual reporting and management processes for the relevant
principal risk (see below).
Transition risks Transition risks, and timing uncertainties, as the world moves towards a Man Group has an agile business model, so is well equipped to adjust to Man Group met its 2023 emissions targets and work continues in line with our Unchanged
low-carbon economy can be legal, regulatory, technological, market or medium-term transition risks and also capture any opportunities. With a strong pathway to net zero by 2030. This includes a 'Building Performance
reputational. This may impact the appetite for and performance of some track record for innovation, the firm continues to focus on providing Optimisation review' of our London headquarters and work to become ISO 14001
investment products. investors with products that incorporate ESG analytics. accredited by the end of 2024.
We saw a significant reduction, compared to our 2019 baseline, in the weighted
average carbon intensity (WACI) for our AUM subject to Net Zero Asset Managers
initiative (NZAMI) interim targets. We monitor progress against our NZAMI
target and report annually via the UN-backed Principles for Responsible
Investment.
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 2023 we continued to expand our ESG analytics toolkit including a Man Group Unchanged
by severe weather events. Performance could also be impacted by fundamental any particular strategy or market. While the integrated portfolio and risk proprietary carbon dataset, integrating Paris alignment data and the inclusion
moves in underlying asset prices or liquidity as the world transitions to a management processes help managers understand their risk profiles. of green bond funding. We now have 39 Article 8 and 9 products.
low-carbon economy.
Agile working is well established, and employees can work remotely if offices Our operations and ability to work effectively was not materially impacted by
Business continuity risk manifests as damage or disruption to Man Group's are inaccessible. We conduct detailed planning for emerging scenarios along the summer heatwaves across the US and Central and Southern Europe, with the
offices and data centres and the transportation and supply systems that with testing of remote access and contingency/recovery operations. majority of employees working remotely.
support them. In particular our London headquarters may be exposed to flooding
of the River Thames. Man Group has specific policies and greenwashing controls which continue to
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
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.
client or regulatory expectations. This could lead to redemptions and
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 the Group 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 as at 31 December 2023, 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 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 income statement
For the year to 31 December
Note 2023 2022
$m
$m
Management and other fees 4 990 954
Performance fees 4 178 778
Revenue 1,168 1,732
Net income or gains on investments and other financial instruments 12.1 76 7
Third-party share of (gains)/losses relating to interests in consolidated 12.2 (24) 14
funds
Rental income 12.1,16.2 6 5
Distribution costs 5 (32) (31)
Net revenue 1,194 1,727
Asset servicing costs 5 (58) (58)
Compensation costs 5.1 (595) (678)
Other employment-related expenses 5.1 (23) -
Other costs 5.2 (198) (179)
Finance expense 6 (34) (16)
Finance income 6 13 5
Gain on disposal of investment property - right-of-use lease assets 16.2 12 -
Amortisation and impairment of acquired intangibles 18 (28) (51)
Share of post-tax loss of associates 22 (3) (5)
Third-party share of post-tax profits 17 (1) -
Statutory profit before tax 279 745
Tax expense 7 (45) (137)
Statutory profit attributable to owners of the Company 234 608
Statutory earnings per share 25
Basic 19.9¢ 47.2¢
Diluted 19.4¢ 45.8¢
Group statement of comprehensive income
For the year to 31 December
Note 2023 2022
$m
$m
Statutory profit attributable to owners of the Company 234 608
Other comprehensive (loss)/income:
Remeasurements of defined benefit pension plans 23 (10) (2)
Deferred tax on pension plans 2 (1)
Items that will not be reclassified to profit or loss (8) (3)
Cash flow hedges:
Valuation gains taken to equity 14 6
Realised gains transferred to Group income statement (12) (7)
Net investment hedges 1 4
Foreign currency translation 3 (4)
Items that may be reclassified to profit or loss 6 (1)
Other comprehensive loss (2) (4)
Total comprehensive income attributable to owners of the Company 232 604
Group balance sheet
At 31 December
Note 2023 2022
$m
$m
Assets
Cash and cash equivalents 8 276 457
Fee and other receivables 10 551 570
Investments in fund products and other investments 12 2,279 1,209
Investments in associates 22 11 14
Current tax assets 7 15 -
Finance lease receivable 16.2 67 -
Leasehold improvements and equipment 15 53 53
Leasehold property - right-of-use lease assets 16.1 112 92
Investment property - right-of-use lease assets 16.1 17 71
Investment property - consolidated fund entities 12.2 30 34
Other intangibles 19 54 50
Deferred tax assets 20 128 105
Pension asset 23 12 22
Goodwill and acquired intangibles 18 776 627
Total assets 4,381 3,304
Liabilities
Borrowings 8 140 -
Trade and other payables 11 736 942
Provisions 21 16 14
Current tax liabilities 7 3 37
CLO liabilities - consolidated funds 12.2 1,036 -
Third-party interest in consolidated funds 12.2 554 359
Third-party interest in other subsidiaries 17 1 -
Lease liability 16.1 283 253
Total liabilities 2,769 1,605
Net assets 1,612 1,699
Equity
Capital and reserves attributable to owners of the Company 1,612 1,699
The financial statements were approved by the Board of Directors on 28
February 2024 and signed on its behalf by:
Robyn Grew Antoine
Forterre
Chief Executive Officer Chief Financial Officer
Group cash flow statement
For the year to 31 December
Note 2023 2022
$m
$m
Operating activities
Cash generated from operations 9 470 878
Interest paid (23) (6)
Payment of lease interest 16.1 (10) (10)
Tax paid 7 (100) (125)
Cash flows from operating activities 337 737
Investing activities
Interest received 12 5
Purchase of leasehold improvements and equipment 15 (12) (21)
Purchase of investment property - right-of-use lease assets - (2)
Purchase of other intangibles (21) (22)
Acquisition of subsidiaries, net of cash acquired (170) -
Cash flows used in investing activities (191) (40)
Financing activities
Repayments of lease liability principal 16.1 (10) (13)
Purchase of Man Group plc shares by the Employee Trust (56) (47)
Proceeds from sale of Treasury shares in respect of Sharesave 4 2
Share repurchase programmes (including costs) 25 (223) (386)
Ordinary dividends paid to Company shareholders 26 (181) (179)
Payment of upfront costs of revolving credit facility (3) -
Drawdown of borrowings 8 140 -
Cash flows used in financing activities (329) (623)
Net (decrease)/increase in cash and cash equivalents (183) 74
Cash and cash equivalents at beginning of the year 457 387
Effect of foreign exchange movements 2 (4)
Cash and cash equivalents at end of the year 8 276 457
Less: restricted cash held by consolidated fund entities 8 (96) (108)
Available cash and cash equivalents at end of the year 8 180 349
Group statement of changes in equity
$m Note Share capital Reorganisation reserve Profit Man Group plc shares held by Treasury shares Cumulative translation adjustment Other Total
and loss account
Employee
reserves
Trust
At 1 January 2022 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 5.1 - - 45 - - - - 45
Current tax on share-based payments 7 - - 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 25 (5) - (315) - 315 - 5 -
Dividends paid 26 - - (179) - - - - (179)
At 31 December 2022 46 (1,688) 3,590 (80) (225) 41 15 1,699
Statutory profit - - 234 - - - - 234
Other comprehensive (loss)/income - - (8) - - 4 2 (2)
Total comprehensive income - - 226 - - 4 2 232
Share-based payment charge 5.1 - - 40 - - - - 40
Current tax on share-based payments 7 - - 5 - - - - 5
Deferred tax on share-based payments - - 1 - - - - 1
Purchase of Man Group plc shares by the Employee Trust - - - (56) - - - (56)
Disposal of Man Group plc shares by the Employee Trust - - (30) 30 - - - -
Share repurchases 25 - - (125) - - - - (125)
Transfer to Treasury shares - - 223 - (223) - - -
Transfer from Treasury shares - - (18) - 15 - 3 -
Disposal of Treasury shares for Sharesave - - - - 4 - - 4
Cancellation of Treasury shares 25 (1) - (103) - 103 - 1 -
Dividends paid 26 - - (181) - - - - (181)
Put option over non-controlling interests in subsidiaries - - (7) - - - - (7)
At 31 December 2023 45 (1,688) 3,621 (106) (326) 45 21 1,612
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, included within other reserves. The Company has reserves available
for distribution of $2.9 billion as at 31 December 2023 (2022: $1.8 billion).
Notes to the Group financial statements
1. Basis of preparation
Accounting
The audited consolidated financial information has been prepared in accordance
with International Financial Reporting Standards (IFRSs) and interpretations
(IFRICs) as adopted by the United Kingdom. The consolidated financial
statements are prepared on a going concern basis using the historical cost
convention, except for certain financial instruments that are measured at fair
value and defined benefit pension plans. Our significant accounting policies,
which have been consistently applied in the current and prior years, are
included in the relevant notes, except for those below which relate to the
consolidated financial statements as a whole.
Man Group plc (the Company) has taken advantage of the exemption provided in
Article 105 (11) of the Companies (Jersey) Law 1991 and therefore does not
present its individual financial statements and related notes.
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 2023 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
Man Group uses the acquisition method to recognise acquired businesses from
the date on which we obtain control of the acquiree. The consideration
transferred in an acquisition is measured at the fair value of the assets
transferred, including any contingent consideration, the liabilities incurred,
and any equity instruments issued. The fair value of the business acquired is
measured at the fair value of the acquiree's identifiable assets and
liabilities at that date. Goodwill is measured as the excess of the sum of the
consideration transferred and the amount of any non-controlling interests in
the acquiree over the net of the amounts of the identifiable assets acquired
and liabilities assumed at the acquisition date. Acquisition-related costs are
recognised in the Group income statement as incurred. Any contingent
consideration is recognised at fair value at the acquisition date, with
subsequent changes in fair value recognised in the Group income statement.
Non-controlling interests in subsidiaries are measured either at fair value or
at the non-controlling interest's proportionate share of the acquiree's
identifiable net assets on a case-by-case basis. Put options over
non-controlling interests are classified as a financial liability as there is
no unavoidable right to defer settlement of the obligation.
Operating segments
As a result of the change in Chief Executive Officer and subsequent
reorganisation of the Senior Executive Committee and Executive Committee in
the year, we have revisited the definition of the Chief Operating Decision
Maker (CODM) which has been identified as the Man Group Board (the Board) as
Man Group's key decision-making body.
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. 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 its constituent parts. As a result, performance is
assessed, resources are allocated, and other strategic and financial
management decisions are determined by the Board, considering 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 management fee 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 2023 that have had a significant impact on these
Group financial statements.
We have applied the temporary exception issued by the IASB in May 2023 from
the accounting requirements for deferred taxes in IAS 12 'Income Taxes'.
Accordingly, Man Group neither recognises nor discloses information about
deferred tax assets and liabilities related to Pillar 2 income taxes.
In November 2023, the IASB issued an exposure draft (ED) on Financial
Instruments with Characteristics of Equity, which impacts the accounting for
non-controlling interests over which there is a put option. The ED requires
non-controlling interests to be recognised and measured based on current
rights associated with an instrument, as well as the recognition of a put
option over an entity's own shares at the present value of the gross
settlement value. While the proposals have not had a material impact on the
Group financial statements in the year, the impact could become more material
in the future as the value of the non-controlling interests in the businesses
acquired in the year increase.
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
Consolidation of fund entities
Man Group acts as the investment manager or adviser to fund entities. A
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. Further details of the
control assessment are set out in Note 12.
Acquisition of Varagon
Significant judgement was applied in determining the appropriate accounting
treatment of the acquisition of Varagon Capital Partners, L.P. (Varagon). In
determining the classification of amounts payable to certain sellers as
post-acquisition remuneration rather than consideration for the acquisition,
we considered the rights and obligations of those sellers under the terms of
the transaction, balancing the economic substance of the transaction against
the potential forfeiture of future profit distributions and the right to sell
their economic interest to Man Group in the future, and changes to the price
at which the economic interest may be sold. We have determined that payments
to sellers who are also employees should be accounted for as
employment-related costs.
Further judgement was applied when determining the appropriate accounting
policies to apply to these arrangements, since the terms differ significantly
from more common forms of compensation. In particular, we have applied
judgement when selecting the appropriate vesting period for the put options
accounted for as cash-settled share-based payments. Since the maximum
settlement value of the options varies over time, different vesting periods
have been selected for the period over which each alternate value can be
earned. Changes in the fair value of these cash-settled share-based payments
will be recognised in the Group income statement up until the final settlement
date.
The determination of the treatment of future amounts payable to the selling
shareholders who are also key customers also involved significant judgement
when determining whether to treat them as payments in their capacity as
customers or as sellers. We have determined that these payments should be
treated as part of the customer relationship as they are outlined in the
investment management agreements and are in substance reductions in future
fees charged for services rendered by Man Group.
Acquisition of Asteria
Judgement was applied in determining the appropriate accounting treatment of
the acquisition of Asteria Investment Managers SA (Asteria), in particular the
accounting for the non-controlling interest and the associated put option,
including the decision to not separately disclose the immaterial
non-controlling interest. As the transaction is not material, this is not
considered a significant judgement.
Further information in relation to the acquisitions of Varagon and Asteria is
set out in Note 17.
Critical accounting estimates
Acquisition of Varagon
Man Group's acquisition of Varagon in the year has introduced new sources of
estimation uncertainty. The measurement of provisional values of the
identifiable assets acquired, liabilities assumed and goodwill arising on the
acquisition required the use of multiple uncertain inputs (Note 17). An
increase or decrease in the fair value of the assets acquired and liabilities
assumed would result in an equal and offsetting decrease or increase in
goodwill. The value of employment-related expenses arising from business
combinations is a further source of significant estimation uncertainty as the
expenses are determined with reference to the expected future value and
performance of the Varagon business (Note 5).
Pension
The estimation uncertainty arising on the valuation of the pension asset
remains a critical accounting estimate (Note 23).
Other considerations
The Board has also considered the assumptions used in the assessments for
impairment of goodwill and right-of-use lease assets, the recoverability of
deferred tax assets and the valuation of contingent consideration and the put
option over non-controlling interests relating to the acquisition of Asteria.
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 the 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. As rebates constitute a reduction in the fees
charged for services provided, they 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.
Other employment-related expenses
Other employment-related expenses relate to amounts payable to sellers of
businesses acquired in exchange for post-acquisition services and are
recognised in profit and loss over the sellers' relevant service periods.
5.1. Compensation costs and other employment-related expenses
2023 2022
$m
$m
Salaries 201 174
Variable cash compensation 205 321
Deferred compensation: share-based payment charge 40 45
Deferred compensation: fund product-based payment charge 83 72
Social security costs 50 52
Pension costs (Note 23) 16 14
Compensation costs 595 678
Other employment-related expenses (Note 24) 23 -
Total employment-related expenses recognised in the Group income statement 618 678
Comprising:
Fixed compensation: salaries and associated social security costs, and pension 239 209
costs
Variable compensation: variable cash compensation, deferred compensation and 356 469
associated social security costs
Other employment-related expenses 23 -
The unamortised deferred compensation at 31 December 2023 is $120 million
(2022: $76 million) and has a weighted average remaining vesting period of 2.2
years (2022: 1.5 years). $2 million of the $23 million other
employment-related expenses relates to the portion of profits earned in the
year ended 31 December 2023 which are payable to Varagon selling shareholders.
Sensitivity analysis
The value recognised for other employment-related expenses is an area of
significant estimation uncertainty as the fair value has been determined with
reference to the expected future value and performance of the Varagon
business. The estimates will be updated in each reporting period until the
associated liabilities are settled. The table below illustrates the impact of
changing the most significant assumptions used in the expected future value
calculation on the expense recognised in the Group income statement.
$m Increase/(decrease) in 2023 employment-related expense
Discount rate decreased/(increased) by 5% p.a. 8 (6)
Forecast future cash flows increased /(decreased) by 50% p.a. 3 (20)
5.2. Other costs
2023 2022
$m
$m
Audit, tax, legal and other professional fees 24 24
Technology and communications 24 22
Occupancy 20 18
Temporary staff, recruitment, consultancy and managed services 13 17
Staff benefits 19 14
Insurance 5 7
Travel and entertainment 11 7
Marketing and sponsorship 5 5
Claims 1 -
Other costs, including irrecoverable VAT 10 9
Other costs - consolidated fund entities 9 9
Acquisition-related costs (Note 17) 9 -
Other costs before depreciation and amortisation 150 132
Depreciation of leasehold improvements and equipment (Note 15) 12 12
Depreciation of right-of-use lease assets (Note 16.1) 14 17
Amortisation of other intangibles (Note 19) 22 18
Total other costs 198 179
Average headcount
The table below details average headcount by function, including directors,
employees, partners and contractors.
2023 2022
Investment management 469 427
Sales and marketing 251 238
Technology and infrastructure(1) 996 930
Average headcount 1,716 1,595
Headcount at 31 December 1,790 1,655
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
2023 2022
$m
$m
Finance expense
Unwind of lease liability discount (Note 16.1) (10) (10)
Interest expense on total return swaps and sale and repurchase agreements (12) (3)
Other finance expense (12) (3)
Total finance expense (34) (16)
Finance income
Interest on cash deposits 12 5
Unwind of finance lease discount (Note 16.2) 1 -
Total finance income 13 5
Net finance expense (21) (11)
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 net current tax assets/liabilities are as follows:
2023 2022
$m
$m
Net current tax liability at beginning of the year 37 15
Charge to the Group income statement 65 159
Credit to equity (5) (4)
Tax paid (100) (125)
Other balance sheet movements (6) (5)
Foreign currency translation (3) (3)
Net current tax (asset)/liability at end of the year (12) 37
2023 2022
$m
$m
Current tax
UK corporation tax on profits 56 140
Foreign tax 14 19
Adjustments to tax charge in respect of previous years (5) -
Current tax expense 65 159
Deferred tax
Origination and reversal of temporary differences (23) (13)
Adjustments to tax charge in respect of previous years 3 (9)
Deferred tax credit (Note 20) (20) (22)
Total tax expense 45 137
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. On 1 April 2023, the UK corporation tax rate increased to 25%
from 19%. Our tax expense is lower (2022: lower) than the amount that would
arise using the theoretical tax rate applicable to our profits as follows:
2023 2022
$m
$m
Profit before tax 279 745
Theoretical tax expense at UK rate: 23.5% (2022: 19%) 66 142
Effect of:
Overseas tax rates different to UK (4) (2)
Adjustments to tax charge in respect of previous years (2) (9)
(Recognition)/derecognition of US deferred tax assets (Note 20) (19) 7
Other 4 (1)
Tax expense 45 137
The effective tax rate in the year was 16% (2022: 18%).
Factors affecting our future tax charges
The principal factors which may influence our future tax rate are changes in
tax legislation 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.
The OECD has published an Inclusive 'Pillar 2' Framework (the Framework) to
support the introduction of a global minimum tax rate of 15%. The UK has
enacted its legislation in Finance (No. 2) Act 2023, effective from 2024. We
anticipate being subject to the global minimum top-up tax in certain
jurisdictions in which we operate, notably Ireland and Switzerland. However,
based on historical and anticipated profit profiles, the impact on our
effective tax rate is not expected to be greater than 1%. We are continuing to
assess the impact of Pillar 2 legislation on our future financial results.
8. Cash, liquidity and borrowings
Accounting policy
Cash and cash equivalents
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 are
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.
Borrowings
Borrowings comprise amounts drawn under committed revolving credit facilities.
Borrowings are initially recorded at fair value and subsequently measured at
amortised cost. Drawdowns under revolving credit facilities are typically for
maturities of one month or less and are therefore presented net of repayments
in the Group cash flow statement.
2023 2022
$m
$m
Cash held with banks 92 124
Short-term deposits 46 95
Money market funds 42 130
Cash held by consolidated fund entities (Note 12.2) 96 108
Cash and cash equivalents 276 457
Less: cash held by consolidated fund entities (Note 12.2) (96) (108)
Available cash and cash equivalents 180 349
Undrawn committed revolving credit facility(1) 660 500
Total liquidity 840 849
Note:
1 Excludes the $300 million facility acquired with Varagon in the year. This
facility was undrawn at 31 December 2023 and subsequently cancelled in January
2024.
Cash and cash equivalents
At 31 December 2023, the $180 million available cash and cash equivalents
balance was held with 19 banks (2022: $349 million with 14 banks).
Credit ratings of banks 2023 2022
$m
$m
AAA 31 103
AA 67 103
A 82 143
Total 180 349
The single largest counterparty bank exposure of $50 million is held with an
A- rated bank (2022: $101 million held with an A- 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.
Our maximum exposure to loss associated with interests in our consolidated
CLOs is limited to the net investment in these CLOs (Note 12.2). Therefore,
the CLO liabilities on the Group balance sheet of $1,036 million (2022: nil)
do not present a liquidity risk to Man Group as we have no obligation to repay
the noteholders at maturity should the CLO assets be insufficient to meet the
obligations.
Further information relating to Man Group's exposure to liquidity risk is set
out on page 19.
Borrowings
Our $800 million committed revolving credit facility (RCF) is immediately
accessible. It does not include financial covenants to maintain maximum
flexibility. The RCF was put in place in December 2023, replacing the previous
$500 million facility, as a five-year facility with two one-year extension
options and is currently scheduled to mature in December 2028. $140 million
was drawn down at 31 December 2023 (2022: undrawn).
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 2023 2022
$m
$m
Cash flows from operating activities
Statutory profit 234 608
Adjustments for:
Share-based payment charge 5.1 40 45
Fund product-based payment charge 5.1 83 72
Other employment-related expenses 5.1 23 -
Net finance expense 6 21 11
Tax expense 7 45 137
Depreciation of leasehold improvements and equipment 15 12 12
Depreciation of right-of-use lease assets 16.1 14 17
Gain on disposal of investment property - right-of-use lease assets 16.2 (12) -
Amortisation and impairment of acquired intangibles 18 28 51
Amortisation of other intangibles 19 22 18
Share of post-tax loss of associates 22 3 5
Realised gains on cash flow hedges (12) (7)
Foreign exchange movements 3 (13)
Other non-cash movements (9) (5)
495 951
Changes in working capital(1):
Decrease/(increase) in fee and other receivables 104 (68)
Decrease/(increase) in other financial assets including consolidated fund 71 (45)
entities(2)
(Decrease)/increase in trade and other payables (200) 40
Cash generated from operations 470 878
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 and other employment-related
expenses (within operating activities) and the share repurchase liability
(within financing activities).
2 Includes $12 million of restricted net cash outflows (2022: $44 million
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.
2023 2022
$m
$m
Fee receivables 25 35
Accrued income 274 359
Collateral posted with derivative counterparties 48 39
Receivables from Open Ended Investment Company (OEIC) funds 39 20
Other fund receivables 29 36
Prepayments 23 17
Derivatives 5 9
Other receivables 20 26
Receivables relating to consolidated fund entities (Note 12.2) 88 29
Fee and other receivables 551 570
Comprising:
Financial assets at amortised cost 523 544
Financial assets at fair value through profit or loss 5 9
Non-financial assets 23 17
Credit risk management
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. No balances are overdue and, under the expected credit loss model of
IFRS 9 'Financial Instruments', no impairment has been recognised at
31 December 2023 (2022: nil). Included in fee and other receivables at 31
December 2023 are balances of $2 million (2022: $1 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, contingent
consideration payable and put options over non-controlling interests in
subsidiaries, which are measured at fair value through profit and loss.
2023 2022
$m
$m
Trade payables 7 4
Compensation accruals 365 453
Other accruals 79 86
Share repurchase liability - 98
Payables under repo arrangements 45 54
Payables to OEIC funds 39 18
Tax and social security 31 30
Derivatives 12 6
Contingent consideration (Note 17) 3 -
Put option over non-controlling interests in subsidiaries (Note 24) 9 -
Employment-related payables to sellers of businesses acquired (Note 5) 23 -
Other payables 7 13
Payables relating to consolidated fund entities (Note 12.2) 116 180
Trade and other payables 736 942
Comprising:
Financial liabilities at amortised cost 712 936
Financial liabilities at fair value through profit or loss 24 6
Trade and other payables can be analysed according to their contractual
maturity dates as follows:
2023 2022
$m
$m
Within one year 658 871
Between one and three years 49 71
After three years 29 -
736 942
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 net
income or gains on investments and other financial instruments.
The fair values of investments in fund products other than CLOs 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 unconsolidated 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.
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.
Other than our holdings in CLOs and co-investments, our seed investments are
generally liquid in nature and may be liquidated at short notice. It is not
practicable to allocate our seeding investments portfolio between amounts
expected to be recovered or settled within or after 12 months after the end of
the reporting period as the sale or liquidation of seed investments is subject
to client asset raising and the ongoing requirements of the business. The
majority of our CLO holdings are likely to be settled more than 12 months
after the end of the reporting period.
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. In the
control assessment, we consider our exposure to variable returns and the
existence of substantive kick-out rights. Other factors considered include the
nature of relevant fee arrangements, the decision-making powers we hold as
investment manager or adviser and whether the shares we hold include voting
rights. 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.
The assets held by the CLOs we consolidate are priced using independent
pricing sources. Other than subordinated notes, the debt liabilities of
consolidated CLOs are valued at par plus accrued interest, which is considered
equivalent to fair value. The subordinated notes of these CLOs are priced
using an intrinsic valuation approach, excluding any potential future value.
Investment property held by consolidated fund entities comprises land and
buildings held to earn rent or for capital appreciation, or both, 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).
Third-party interests in consolidated fund entities are measured at amortised
cost.
Fund product 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.
The seeding investments portfolio reflects our exposure to holdings in
investments in fund products, as follows:
2023 2022
$m
$m
Investments in fund products 289 304
Investments in consolidated funds: transferable securities (Note 12.2) 1,987 905
Other investments 3 -
Investments in fund products and other investments 2,279 1,209
Less:
Fund investments held for deferred compensation arrangements (189) (153)
Investments in consolidated funds: exclude consolidation gross-up of net (1,492) (368)
investment
Other investments (3) -
Seeding investments portfolio 595 688
Included in fund investments held for deferred compensation arrangements at 31
December 2023 are balances of $101 million (2022: $80 million) which are
expected to be settled after more than 12 months.
12.1. Investments in fund products
At 31 December 2023, 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 $45 million (2022: $54 million).
Additional exposure via TRS was $230 million (2022: $138 million). The largest
single investment in fund products at 31 December 2023 was $88 million (2022:
$61 million).
Income or gains on investments and other financial instruments comprises the
following:
2023 2022
$m
$m
Net gains/(losses) on seeding investments portfolio 47 (12)
Consolidated fund entities: gross-up of net gains on investments 39 -
Foreign exchange movements (11) 22
Net gains/(losses) on fund investments held for deferred compensation 1 (3)
arrangements and other investments
Net income or gains on investments and other financial instruments 76 7
12.2. Consolidation of investments in funds
At 31 December 2023, our interests in 35 (2022: 43) funds met the definition
of control and have therefore been consolidated on a line-by-line basis.
Certain of our CLOs have been consolidated for the first time in the year
following the purchase of majority holdings in the subordinated tranches.
Consolidated fund entities are included within the Group balance sheet and
income statement as follows:
2023 2022
$m
$m
Balance sheet
Cash and cash equivalents (Note 8) 96 108
Transferable securities(1) 1,987 905
Fees and other receivables 88 29
Investment property 30 34
Trade and other payables (116) (180)
CLO liabilities (1,036) -
Net assets of consolidated fund entities 1,049 896
Third-party interest in consolidated funds (554) (359)
Net investment held by Man Group 495 537
Income statement
Net gains/(losses) on investments(2) 90 (31)
Rental income(3) 1 -
Management fee expenses(4) (5) (4)
Performance fee expenses(4) (2) (1)
Other costs(5) (9) (9)
Net gains/(losses) of consolidated fund entities 75 (45)
Third-party share of (gains)/losses relating to interests in consolidated (24) 14
funds
Net gains/(losses) attributable to net investment held by Man Group 51 (31)
Notes:
1 Included within investments in fund products and other investments.
Includes assets held by consolidated CLOs of $1,103 million.
2 Included within net income or gains on investments and other financial
instruments.
3 Relates to rental income generated from investment property held by
consolidated fund entities.
4 Relates 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.
5 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:
2023 2022
$m
$m
Cost at beginning of the year 38 -
Additions - 38
Disposals (4) -
Cost at end of the year 34 38
Accumulated depreciation and impairment at beginning of the year (4) -
Depreciation (1) (1)
Reversal of impairment/(impairment) 1 (3)
Accumulated depreciation and impairment at end of the year (4) (4)
Net book value at beginning of the year 34 -
Net book value at end of the year 30 34
The fair value of investment property held by consolidated fund entities of
$30 million at 31 December 2023 (2022: $34 million) is based on valuations
provided by independent property experts.
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.
The assets held by our consolidated CLOs comprise a portfolio of bonds and
loan securities. Loans are valued using broker quotes sourced from an
independent pricing service, with bonds priced using latest prices executed
for similar assets. We do not make any adjustments to the quotes obtained.
Where the quotes are obtained from multiple pricing sources within a narrow
range, the assets are classified as Level 2 in the fair value hierarchy. Where
prices are derived from a small number of quotes, or where there is a wide
bid-ask spread between quotes, we classify these assets as Level 3.
Transferable securities held by our other consolidated funds which are
classified as Level 3 have significant unobservable inputs, as they trade
infrequently or not at all. When observable prices are not available for these
securities, we use valuation techniques for which sufficient and reliable data
is available. Level 3 investments may also be adjusted to reflect illiquidity
and/or non-transferability.
The fair values of our financial assets and liabilities held at fair value
through profit and loss can be analysed as follows:
2023 2022
$m Level 1 Level 2 Level 3 Total Level 1(1) Level 2(1) Level 3 Total
Financial assets held at fair value:
Investments in fund products and other - 280 12 292 - 284 20 304
investments (Note 12)
Investments in consolidated funds: transferable securities (Note 12.2) 274 1,567 146 1,987 401 504 - 905
Derivatives (Note 10) - 5 - 5 - 9 - 9
274 1,852 158 2,284 401 797 20 1,218
Financial liabilities held at fair value:
Derivatives (Note 11) - (12) - (12) - (6) - (6)
Contingent consideration (Note 17) - - (3) (3) - - - -
Put option over non-controlling interests in subsidiaries (Note 17) - - (9) (9) - - - -
CLO liabilities - consolidated fund entities (Note 12.2) - (1,036) - (1,036) - - - -
- (1,048) (12) (1,060) - (6) - (6)
Note:
1 $401 million of investments in consolidated funds: transferable securities
previously reported as Level 2 are now reported as Level 1 to reflect the
nature of the underlying securities within the consolidated funds. Previously,
the inputs to the overall pricing of the investments in consolidated funds
were considered when determining the appropriate classification in the fair
value hierarchy.
The movements in Level 3 financial assets and liabilities held at fair value
are as follows:
2023 2022
$m Assets Liabilities Assets Liabilities
At beginning of the year 20 - 190 -
Transfers out of Level 3 (11) - (154) -
Purchases 2 (12) 1 -
Credit/(charge) to Group income statement(1,2) 1 - (5) -
Sales or settlements - - (1) -
Change in consolidated fund entities held 146 - (11) -
At end of the year 158 (12) 20 -
Notes:
1 Included within net income or gains on investments and other financial
instruments.
2 Includes net unrealised gains of $1 million (2022: losses of $5 million).
Purchases of Level 3 financial liabilities relate to the fair value of
contingent consideration and the put option over the non-controlling interest
arising on the acquisition of Asteria (Note 17).
The Level 3 financial assets in the portfolios of our consolidated fund
entities other than CLOs primarily comprise bonds, equities and credit-linked
notes. The techniques used the valuations of those assets primarily include
discounted cash flows, estimated recovery and single broker quotes. The
unobservable inputs in those valuations comprise future cash flows, discount
rates and yields.
Sensitivity analysis
A 5% increase/decrease in the valuations of Level 3 financial assets would
result in a $8 million increase/decrease in their fair value. Changes in the
unobservable inputs to the valuation of Level 3 financial liabilities would
not be expected to result in a significant change in the carrying value of
these assets and liabilities, and hence a sensitivity analysis has not been
presented.
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 apply cash flow hedge accounting to fund investments related to deferred
fund product awards, 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 2022, 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 $61 million at 31 December 2023 (2022: $43 million).
We generally hold an investment in the associated fund products to hedge the
mark-to-market movement in fund product-based compensation over the vesting
period.
Our maximum exposure to loss associated with interests in our consolidated
CLOs is limited to the net investment in these CLOs (Note 12.2). Therefore,
the CLO liabilities on the Group balance sheet of $1,036 million (2022: nil)
do not present a market risk to Man Group as we have no obligation to repay
the noteholders at maturity should the CLO assets be insufficient to meet the
obligations.
Further information relating to Man Group's exposure to market risk is set out
on pages 19 and 20.
Market risk hedges 2023 2022
$m
$m
Notional value of derivatives at 31 December
Assets - 149
Liabilities (175) (71)
Net (liabilities)/assets (175) 78
For the year ended 31 December
(Loss)/gain recognised in the Group income statement (17) 39
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 with a one-month
duration, to hedge the risk associated with foreign exchange movements.
During the year, there were $11 million of net realised and unrealised foreign
exchange losses (2022: $22 million gains) recognised in the Group income
statement through net income or gains on investments and other financial
instruments, including the effects of hedging. This primarily comprises a $10
million unrealised loss (2022: $25 million gain) relating to the revaluation
of our $209 million (2022: $200 million) unhedged sterling lease liability.
Foreign exchange hedges 2023 2022
$m
$m
Notional value of derivatives at 31 December
Assets 124 82
Liabilities (343) (235)
Net liabilities (219) (153)
For the year ended 31 December
(Loss)/gain before the impact of hedging (4) 5
(Loss)/gain on hedging instruments (7) 17
(Loss)/gain recognised in the Group income statement after the impact of (11) 22
hedging
The table below reflects the currency profile of our net foreign currency
(non-USD) monetary assets and liabilities after the impact of hedging:
2023 2022
$m
$m
Sterling (138) (155)
Australian dollar 14 41
Japanese yen 7 19
Other 10 10
Total (107) (85)
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 $11 million (2022: $9 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 2023 a 100 basis point increase/decrease in these
rates, with all other variables held constant, would have resulted in a $1
million (2022: $1 million) increase/decrease in net interest expense.
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.
2023 2022
$m Leasehold improvements Equipment Total Leasehold improvements Equipment Total
Cost at beginning of the year 70 61 131 70 64 134
Acquired through business combinations (Note 17) - 1 1 - - -
Additions 4 8 12 11 10 21
Disposals (1) (3) (4) (13) (13) (26)
Transfer to leasehold improvements from - - - 2 - 2
investment property (Note 16.1)
Cost at end of the year 73 67 140 70 61 131
Accumulated depreciation and impairment at beginning (36) (42) (78) (45) (46) (91)
of the year
Disposals - 3 3 13 13 26
Transfer to leasehold improvements from - - - (1) - (1)
investment property (Note 16.1)
Depreciation (3) (9) (12) (3) (9) (12)
Accumulated depreciation and impairment at end (39) (48) (87) (36) (42) (78)
of the year
Net book value at beginning of the year 34 19 53 25 18 43
Net book value at end of the year 34 19 53 34 19 53
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
2023 2022
$m Leasehold property Investment property Total Leasehold property Investment property Total
Cost at beginning of the year 169 242 411 146 256 402
Acquired through business combinations (Note 17) 22 - 22 - - -
Additions 3 - 3 41 2 43
Disposals - (141) (141) (22) (10) (32)
Remeasurement of lease liability 5 - 5 - - -
Transfer between leasehold property and investment property - - - 4 (4) -
Transfer from investment property to leasehold improvements (Note 15) - - - - (2) (2)
Cost at end of the year 199 101 300 169 242 411
Accumulated depreciation and impairment at beginning (77) (171) (248) (85) (179) (264)
of the year
Disposals - 91 91 22 10 32
Transfer between leasehold property and investment property - - - (4) 4 -
Transfer from investment property to leasehold improvements (Note 15) - - - - 1 1
Depreciation (Note 5.2) (10) (4) (14) (10) (7) (17)
Accumulated depreciation and impairment at end (87) (84) (171) (77) (171) (248)
of the year
Net book value at beginning of the year 92 71 163 61 77 138
Net book value at end of the year 112 17 129 92 71 163
Lease liability
The maturity of our contractual undiscounted cash flows for the lease
liability is as follows:
2023 2022
$m
$m
Within one year 32 25
Between one and five years 114 97
Between five and ten years 142 125
Between ten and 15 years 54 74
Undiscounted lease liability at end of the year 342 321
Discounted lease liability at end of the year 283 253
Of the total discounted lease liability at 31 December 2023 of $283 million
(2022: $253 million), $21 million (2022: $20 million) is expected to be
settled within 12 months.
Movements in the lease liability are as follows:
2023 2022
$m
$m
At beginning of the year 253 250
Acquired through business combinations (Note 17) 22 -
Additions 3 41
Cash payments (20) (23)
Unwind of lease liability discount (Note 6) 10 10
Remeasurement 5 -
Foreign exchange movements 10 (25)
At end of the year 283 253
16.2. Man Group as lessor
Accounting policy
Finance leases
Whenever the terms of the sub-lease transfer substantially all risks and
rewards of ownership of the underlying ROU lease asset to the lessee, we
classify the contract as a finance lease. This is typically when the end of
the sub-lease term aligns with the end of our head lease, with no break
option. 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 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-leases which do not meet the definition of a finance lease are classified
as operating leases. 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.
Sub-lease rental income from operating leases was $5 million in 2023 (2022: $5
million).
Operating expenses of $5 million (2022: $5 million) arising from investment
property that did not generate rental income during the period are included
within other costs.
Fair value of investment property
2023 2022
$m
$m
Value in use 23 82
Less:
Carrying value (17) (71)
Headroom 6 11
In 2023, we signed new sub-leases for a substantial portion of the vacant
space in our main premises in London. As the sub-leases extend to close to the
end of the head lease with no break option, they are classified as finance
leases. On lease commencement, we recognised finance lease receivables of $65
million. The derecognition of the associated ROU lease assets with a total
carrying value of $53 million resulted in a gain on disposal of $12 million,
recognised in the Group income statement.
At 31 December 2023, the contractual undiscounted lease payments receivable
under operating and finance leases were as follows:
2023 2022
$m Operating leases Finance Operating Finance
leases
leases
leases
Within one year 2 - 5 -
Between one and two years 1 3 5 -
Between two and three years - 5 5 -
Between three and four years - 9 - -
Between four and five years - 10 - -
Between five and ten years - 47 - -
Between ten and 15 years - 17 - -
3 91 15 -
At 31 December 2023, the contractual undiscounted minimum finance lease
payments receivable can be reconciled to the net investment in finance lease
as follows:
2023 2022
$m
$m
Undiscounted lease payments 91 -
Less: unearned finance income (24) -
Net investment in finance lease 67 -
Movements in the net investment in finance lease are as follows:
2023 2022
$m
$m
At beginning of the year - -
Additions 65 -
Unwind of finance lease discount (Note 6) 1 -
Foreign exchange movements 1 -
At end of the year 67 -
17. Business combinations
Accounting policy
Business combinations are accounted for using the acquisition method. The
consideration for the acquisition of a subsidiary is the acquisition-date fair
values of the assets transferred, the liabilities incurred, and any equity
interests issued in exchange for control of the acquiree. Amounts payable to
the sellers of a business, including those contingent on the exercise of a put
option, that can be forfeited in the absence of post-acquisition services
provided by those sellers are accounted for as post-acquisition remuneration
and excluded from the consideration for the acquisition of the business. The
associated employment-related expenses are spread over the relevant service
periods.
When the consideration transferred in a business combination includes a
contingent consideration arrangement, the contingent consideration is measured
at its acquisition-date fair value. Contingent consideration classified as a
liability is remeasured to fair value at each reporting date with changes in
fair value recognised in profit or loss.
At the acquisition date, the identifiable assets acquired and the liabilities
assumed are recognised at fair value. Acquisition-related costs are recognised
in profit or loss as incurred.
Put options held by non-controlling shareholders, which are not linked to
post-acquisition employment, give rise to a financial liability, recorded
within trade and other payables at the present value of the expected
redemption amount. The corresponding debit is recorded in retained earnings.
The liability is remeasured at each reporting date based on the latest
assessment of the expected redemption amount, with remeasurements recognised
in profit or loss.
17.1. Acquisition of Varagon
Varagon Capital Partners, L.P. (Varagon) is a leading US middle-market private
credit manager with a strong and experienced management team and high-quality,
sophisticated client base, with a particular emphasis on the insurance
channel. Varagon brings significant institutional credibility to support Man
Group's growth in US private credit.
On 6 September 2023, Man Group acquired 100% of the voting rights in Varagon,
the entirety of the interest classified as equity for accounting purposes, for
upfront cash consideration of $179 million. This represents a 73% economic
interest. The remaining 27% economic interest in Varagon is held by those
sellers who remain in employment for a specified period post-acquisition. The
acquisition agreement includes options which, if exercised, provide the
opportunity for the rollover sellers to sell, and Man Group to buy, this
remaining interest in years eight, nine or ten post-acquisition at up to fair
market value.
Payments to the rollover sellers holding the residual 27% economic interest in
Varagon may be forfeited should those sellers become 'bad leavers' during
specified periods subsequent to the completion of the transaction. Payments in
relation to the acquisition of the sellers' interest on exercise of the put
options, and the distributions of their proportionate share of Varagon's
post-acquisition profits, are therefore recorded as employment-related
expenses. These expenses are spread, and a corresponding liability accreted,
over the relevant service periods (Note 5 and Note 24).
Third-party interests in a subsidiary of Varagon, which are classified as a
liability in the Group balance sheet, generated profits of $1 million for the
period post-acquisition to 31 December 2023 and are presented as third-party
share of post-tax profits in the Group income statement.
The provisional values recognised at the date of acquisition were as follows:
$m Book value Fair value adjustments Fair value
Cash and cash equivalents 12 - 12
Fee and other receivables 20 - 20
Investments in fund products and other investments 6 - 6
Leasehold improvements and equipment (Note 15) 1 - 1
Leasehold property - right-of-use lease assets (Note 16.1) 22 - 22
Other intangibles (Note 19) 1 - 1
Acquired intangibles (Note 18) - 147 147
Trade and other payables (29) - (29)
Lease liability (Note 16.1) (22) - (22)
Third-party share of post-tax profits payable (1) - (1)
Net assets acquired 10 147 157
Goodwill on acquisition (Note 18) 22
Total consideration 179
Comprising:
Cash consideration 179
The acquisition-date values presented have been determined on a provisional
basis due to the proximity of the acquisition date to the reporting date. Fair
value adjustments relate to the recognition of intangible assets comprising
investment management agreements and related client relationships ($140
million) and the Varagon brand ($7 million). These intangible assets are
recognised at the present value of the future cash flows expected to be
generated and are amortised on a straight-line basis over their expected
useful lives of between seven and 15 years. No deferred tax liability has been
recognised on acquisition as the amortisation of intangible assets is
tax-deductible in the US.
The goodwill arising from the acquisition represents the enhancement of our
investment capabilities and the ability to deploy these capabilities at scale
in a customisable format to the world's largest institutional investors. The
goodwill is expected to be fully tax-deductible. Acquisition costs of $8
million, primarily relating to professional fees, are included within other
costs and do not form part of goodwill.
Revenues and pre-tax profit for the Varagon business from acquisition to 31
December 2023 were $31 million and $9 million respectively. If Varagon had
been acquired at the beginning of the year, Man Group's total revenue and
pre-tax profit for the year would have been $1,231 million and $307 million
respectively, before the deduction of employment-related expenses payable to
the sellers who remain in employment post-acquisition.
17.2. Acquisition of Asteria
On 31 October 2023, Man Group acquired a controlling 51% interest in Asteria
Investment Managers SA (Asteria), an ESG-oriented Swiss asset management
company, for consideration of $11 million comprising cash and contingent
consideration of $8 million and $3 million respectively. The acquisition of
Asteria is part of a new strategic partnership with Fideuram-Intesa Sanpaolo
Private Banking, which increases our presence in the European intermediated
retail channel. The agreement also includes options which, if exercised,
provide the opportunity for Asteria's non-controlling shareholder to sell, and
Man Group to buy, the remaining 49% interest in Asteria. The present value of
the expected redemption amount of the options, which can be exercised four
years post-acquisition at fair market value, is $9 million at 31 December
2023, included within trade and other payables in the Group balance sheet.
The contingent consideration payable for the acquisition of Asteria is based
on future levels of management fees. The maximum amount payable by Man Group
is capped at $53 million.
The non-controlling interest in Asteria is measured at the proportionate share
of Asteria's identifiable net assets. As the non-controlling interest is
immaterial, the proportionate share of Asteria's profits has been deducted
from statutory profit before tax within other costs. Similarly, the
non-controlling shareholder's share of equity has not been separately
presented within the Group statement of changes in equity at 31 December 2023
and has instead been offset against the profit and loss reserve. The
non-controlling interest will be separately presented in the Group financial
statements should it become material in the future.
Goodwill arising on acquisition of $8 million (Note 18) represents synergies
from combining Man Group's expertise in bespoke portfolio solutions with
access to a broader financial adviser network and client base. Acquisition
costs of $1 million, primarily relating to professional fees, are included
within other costs.
18. Goodwill and acquired intangibles
Accounting policy
Goodwill
Goodwill is measured as the excess of the sum of the consideration transferred
and the amount of any non-controlling interest over the fair value of the
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 amount of our group of
cash-generating units (CGUs) is 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 group of CGUs for the purposes of impairment
testing. Our CGUs are aggregated into a single group for impairment testing
purposes, reflecting the lowest level at which goodwill is monitored by
management and which now incorporates our private market asset managers
alongside our liquid asset managers.
The value in use calculation at 31 December 2023 uses cash flow projections
based on the Board-approved financial plan for the three-year period ending on
31 December 2026, 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
2026 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
Intangible assets acquired in a business combination and recognised separately
from goodwill are initially measured at their fair value at the acquisition
date. 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 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 seven and 15 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.
2023 2022
$m Goodwill IMAs Distribution channels Brand Total Goodwill IMAs Distribution channels Brand Total
names
names
Cost at beginning of the year 2,425 834 56 40 3,355 2,425 838 56 40 3,359
Acquired through business combinations (Note 17) 30 140 - 7 177 - - - - -
Disposals - - - - - - (4) - - (4)
Cost at end of the year 2,455 974 56 47 3,532 2,425 834 56 40 3,355
Accumulated amortisation and impairment at beginning of the year (1,836) (801) (52) (39) (2,728) (1,836) (758) (49) (38) (2,681)
Amortisation - (22) (2) (1) (25) - (47) (3) (1) (51)
Impairment - (1) (2) - (3) - - - - -
Disposals - - - - - - 4 - - 4
Accumulated amortisation and impairment at end of the year (1,836) (824) (56) (40) (2,756) (1,836) (801) (52) (39) (2,728)
Net book value at beginning of the year 589 33 4 1 627 589 80 7 2 678
Net book value at end of 619 150 - 7 776 589 33 4 1 627
the year
Goodwill impairment assumptions
Key assumptions at 31 December 2023 and 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 3%
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.
2023 2022
$m
$m
Value in use 5,560 4,950
Less:
Carrying value of CGUs (880) (720)
Headroom 4,680 4,230
Discount rates (post-tax) Multiples (post-tax)
Sensitivity analysis at 31 December 2023 Compound average Management fee/ Management fee/
annualised growth in AUM
performance fee
performance fee
Key assumption stressed to: 6% 4% (4)%(2) 10%/16% 12%/18% 14.0x/6.5x 12.0x/4.5x
Modelled headroom ($m) 4,680 4,150 2,190 4,810 4,550 5,140 4,220
Increase/(reduction) in value in use ($m) (530) (2,490) 130 (130) 460 (460)
Discount rates (post-tax) Multiples (post-tax)
Sensitivity analysis at 31 December 2022 Compound average Management fee/ Management fee/
annualised growth in AUM
performance fee
performance fee
Key assumption stressed to: 6% 4% (4)%(2) 10%/16% 12%/18% 14.0x/6.5x 12.0x/4.5x
Modelled headroom ($m) 4,230 3,790 2,140 4,350 4,110 4,630 3,830
Increase/(reduction) in value in use ($m) (440) (2,090) 120 (120) 400 (400)
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.
Impairment of acquired intangibles
During the year, acquired intangibles with a carrying value of $3 million were
fully impaired following the termination of the IMAs to which they relate.
19. Other intangibles
Accounting policy
Other intangibles relate to capitalised computer software. Following initial
recognition, other intangibles are held at cost less accumulated amortisation
and impairment. Cost 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. 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.
2023 2022
$m
$m
Cost at beginning of the year 148 130
Acquired through business combinations (Note 17) 1 -
Additions 25 27
Disposals (2) (9)
Cost at end of the year 172 148
Accumulated amortisation at beginning of the year (98) (85)
Amortisation (22) (18)
Disposals 2 5
Accumulated amortisation at end of the year (118) (98)
Net book value at beginning of the year 50 45
Net book value at end of the year 54 50
20. 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 we
intend 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
At 1 January 2022 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
Credit/(charge) to Group income statement (Note 7) 3 (8) 1 23 - 1 20
Credit to other comprehensive income and equity 3 - - - - - 3
At 31 December 2023 57 2 13 46 - 10 128
The gross amounts for which deferred tax assets have not been recognised are
as follows:
2023 2022
$m
$m
United States 43 258
Switzerland 64 12
United Kingdom 12 25
Hong Kong 4 4
China 1 1
Total 124 300
Of the total $124 million unrecognised available gross deferred tax assets,
$45 million will expire in 2024, $19 million will expire between 2027 and
2029, $43 million will expire in 2035 and $17 million have no expiry.
US deferred tax assets
We have recognised accumulated deferred tax assets in the US of $86 million
(2022: $64 million) that will be available to offset future taxable profits.
As a result of an increase in forecast future taxable profits in the US
following the acquisition of Varagon, we recognised an additional $19 million
of the available deferred tax assets in relation to state and city tax losses
in 2023 (2022: derecognised $7 million). At 31 December 2023, $3 million of
the available US deferred tax assets (2022: $18 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
remainder expire in 2034. We do not currently expect to pay federal tax on any
profits we may earn in the US until 2026.
US net deferred tax assets 2023 2022
$m
$m
Recognised
At beginning of the year 64 74
Credit/(charge) to Group income statement:
Recognition/(derecognition) of available tax assets (Note 7) 19 (7)
Other movements 3 -
Charge to equity - (3)
At end of the year 86 64
Unrecognised
At beginning of the year 18 11
(Recognition)/derecognition of available tax assets (Note 7) (19) 7
Other movements 4 -
At end of the year 3 18
21. 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.
2023 2022
$m
$m
At beginning of the year 14 14
Charge to Group income statement - 1
Additions 1 -
Foreign currency translation 1 (1)
At end of the year 16 14
Provisions relate to ongoing claims and leasehold property dilapidations.
22. 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.
2023 2022
$m
$m
At beginning of the year 14 18
Acquisitions/contributions - 1
Share of post-tax loss (3) (5)
At end of the year 11 14
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 and is broadly progressing in accordance with
its original business plan.
23. Pension
Accounting policy
We operate 12 (2022: 13) defined contribution plans and two (2022: two)
material funded defined benefit plans.
Defined contribution plans
We pay contributions to publicly or privately administered pension plans on a
mandatory, contractual or voluntary basis. We have no further payment
obligation once the contributions have been paid. Defined contribution costs
are recognised as pension costs within compensation in the Group income
statement when they are due.
Defined benefit plans
A defined benefit plan creates a financial obligation to provide funding to
the pension plan to provide a retired employee with pension benefits usually
dependent on one or more factors such as age, years of service and
compensation. As with the vast majority of similar arrangements, we ultimately
underwrite the risks related to the defined benefit plans. The risks to which
this exposes us include:
· Uncertainty in benefit payments: the value of our liabilities for
post-retirement benefits will ultimately depend on the amount of benefits paid
out. This in turn will depend on the level of inflation (for those benefits
that are subject to some form of inflation protection) and how long
individuals live.
· Volatility in asset values: we are exposed to future movements in
the values of assets held in the plans to meet future benefit payments.
· Uncertainty in cash funding: movements in the values of the
obligations or assets may result in us being required to provide higher levels
of cash.
The two material defined benefit plans operated are the Man Group plc Pension
Fund in the UK (the UK Plan) and the Man Group Pension Plan in Switzerland
(the Swiss Plan).
- UK Plan
The UK Plan is operated separately from Man Group and managed by independent
trustees. The trustees are responsible for payment of the benefits and
management of the UK Plan's assets. Under UK regulations, Man Group and the
trustees of the UK Plan are required to agree a funding strategy and
contribution schedule for the UK Plan. We have concluded that we have no
requirement to adjust the balance sheet to recognise either a current surplus
or a minimum funding requirement on the basis that we have an unconditional
right to a refund of a current or projected future surplus at some point in
the future.
The UK Plan was closed to new members in May 1999, to future accrual in May
2011 and has no active members.
- Swiss Plan
In Switzerland, we operate a retirement foundation whose assets are held
separately from Man Group. This foundation covers the majority of employees in
Switzerland and provides benefits on a cash balance basis. Each employee has a
retirement account to which the employee and Man Group make contributions at
rates set out in the plan rules based on a percentage of salary. Every year
the pension fund commission (composed of employer and employee
representatives) decides the level of interest, if any, to apply to retirement
accounts based on their agreed policy. At retirement, an employee can take
their retirement account as a lump sum or have this paid as a pension.
As the Swiss Plan is essentially a defined contribution plan with guarantees,
the assets held aim to be at least as much as the total of the member account
balances at any point in time. Member account balances cannot reduce, but
interest is only applied to the account balances when sufficient surplus
assets are available. As such, there is no specific asset/liability matching
strategy in place, but if the liabilities (the sum of the member account
balances) ever exceed the value of the assets, we will consider how to remove
a deficit as quickly as possible. The Swiss Plan surplus is restricted by the
value of the employer contribution reserve, which provides the asset ceiling
on amounts available to Man Group.
Defined contribution plans
Defined contribution plan costs totalled $14 million for the year to 31
December 2023 (2022: $13 million).
Defined benefit plans
At 31 December 2023, the UK Plan comprised 89% (31 December 2022: 90%) of our
total defined benefit pension obligations.
2023 2022
$m
$m
Present value of funded obligations (292) (272)
Fair value of plan assets 304 294
Net pension asset 12 22
Impact on the Group financial statements
Changes in the present value of the defined benefit obligations and the fair
value of the plan assets are as follows:
$m 2023 2022
Assets Liabilities Net pension asset/(liability) Assets Liabilities Asset ceiling adjustment Net pension asset/(liability)
At beginning of the year 294 (272) 22 473 (444) (2) 27
Amounts recognised in profit and loss:
Current service cost to employer - (1) (1) - (1) - (1)
Interest income/(cost) 13 (12) 1 8 (8) - -
Past service cost - (1) (1) - - - -
Running costs (1) - (1) - - - -
Foreign exchange movements - - - (49) 46 - (3)
Amounts recognised in other comprehensive income:
Remeasurements due to:
- changes in financial assumptions - (9) (9) - 124 - 124
- changes in demographic assumptions - 4 4 - 3 - 3
- experience adjustments - (2) (2) - (3) - (3)
- actual return on plan assets less interest (3) - (3) (128) - - (128)
on plan assets
- adjustment due to change in asset ceiling - - - - - 2 2
Employer contributions (including plan funding) 1 - 1 1 - - 1
Employee contributions 1 (1) - 1 (1) - -
Foreign currency translation 17 (16) 1 - - - -
Benefit payments (18) 18 - (12) 12 - -
At end of the year 304 (292) 12 294 (272) - 22
The allowance for the estimated cost of removing Guaranteed Minimum Pension
inequalities in the UK Plan of $1 million at 31 December 2023 is unchanged
from 31 December 2022.
No contributions were paid to the UK Plan in 2023 (2022: none).
Actuarial assumptions used
The most significant actuarial assumptions used in the valuations of the two
plans are as follows:
UK Plan Swiss Plan
2023 2022 2023 2022
% p.a.
% p.a.
% p.a.
% p.a.
Discount rate 4.5 4.8 1.5 2.2
Price inflation 3.1 3.3 1.2 1.2
Future salary increases - - 1.2 1.2
Pension payment increases 3.7 3.7 - -
Deferred pensions increases 5.0 5.0 - -
Interest crediting rate - - 1.5 2.2
Social security increases - - 1.0 1.0
Illustrative life expectancy assumptions are set out in the table below.
UK Plan Swiss Plan
Years 2023 2022 2023 2022
Life expectancy of male aged 60 at year-end 26.5 26.9 27.8 27.7
Life expectancy of male aged 60 in 20 years 28.0 28.4 30.2 30.1
Life expectancy of female aged 60 at year-end 29.3 29.7 29.7 29.6
Life expectancy of female aged 60 in 20 years 30.7 31.1 31.7 31.6
The duration of a pension plan is the average term over which the plan's
benefits are expected to fall due, weighted by the present value of each
expected benefit payment. The duration of the UK Plan is approximately 12
years, and the duration of the Swiss Plan is approximately 15 years.
Sensitivity analysis
The table below illustrates the impact on the assessed value of the benefit
obligations from changing the most sensitive actuarial assumptions in
isolation. The calculations have been carried out using the same method and
data as our pension figures. A combination of changes in assumptions could
produce a different result.
Increase in obligation at 31 December 2023
$m UK Plan Swiss Plan
Discount rate decreased by 0.5% p.a. 16 3
Inflation rate increased by 0.5% p.a. 5 -
One-year increase in assumed life expectancy 10 -
Pension asset investments
The assets held by the two plans at 31 December 2023 are as follows:
UK Plan Swiss Plan
$m 2023 2022 2023 2022
Fund investments 82 90 3 2
Liability-driven investments (LDI) 83 77 - -
Bonds 52 66 13 12
Index-linked government bonds 33 21 - -
Equities - - 11 9
Property - - 2 2
Cash 23 12 1 2
Other - - 1 1
Total assets 273 266 31 28
The UK Plan investment strategy is set by the trustees. The current strategy
is broadly split into growth and matching portfolios. The growth portfolio is
invested in diversified growth funds and Man Diversified Risk Premia. The
matching portfolio is invested primarily in government and corporate bonds
(the latter through absolute return bonds holdings), and LDI funds. The UK
Plan investment strategy hedges around 100% of the movement in the 'technical
provisions' funding measure (as opposed to the accounting measure under IAS 19
'Employee Benefits') for both interest rate and inflation expectation changes.
Part of the investment objective of the UK Plan is to minimise fluctuations in
the UK Plan's funding levels due to changes in the value of the liabilities.
This is primarily achieved using the LDI funds, which aim to hedge movements
in the pension liability due to changes in interest rate and inflation
expectations. LDI primarily involves the use of government bonds (including
repurchase agreements) and derivatives such as interest rate and inflation
swaps. There are no annuities or longevity swaps. These instruments are
typically priced and collateralised daily by the UK Plan's LDI manager and/or
central clearing houses. Given that the purpose of LDI is to hedge
corresponding liability exposures, the main risk is that the investments held
move differently to the liability exposures. This risk is managed by the
trustees, their advisers and the UK Plan's LDI manager, who regularly assess
the position.
A relatively volatile backdrop for interest rates and inflation over the year
to December 2023 saw some significant movements of the UK Plan's hedging
assets during the year. There was a limited impact on the UK Plan other than a
fall in fund values due to the high level of hedging in early 2023. The UK
Plan's investments were rebalanced regularly, and the target hedging level of
100% of interest rates and inflation was preserved throughout the period, with
the funding level volatility relatively muted as a result. At 31 December
2023, the UK Plan's hedging assets continued to hedge around 100% of interest
rates and inflation on the technical provisions basis. The level of leverage
utilised was in line with regulatory requirements. The UK Plan maintains a
collateral waterfall and has additional sources of short-term cash from the
trustee bank account, and access to daily-dealing funds should further
collateral calls be made.
The government bond assets and diversified growth funds have prices quoted in
active markets and the absolute return bonds, LDI and Man Diversified Risk
Premia are primarily unquoted. At 31 December 2023, around 28% of the UK Plan
assets relate to those with quoted prices and 72% with unquoted prices (2022:
around 33% quoted and 67% unquoted). The UK Plan does not invest directly in
property occupied by Man Group or our shares.
24. 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.
Put options on the interests in subsidiaries held by employees which can be
forfeited should they become 'bad leavers' are accounted for as cash-settled
share-based payments. Cash-settled share-based payments are measured at fair
value on grant date and recognised as an employment-related expense in the
Group income statement over the relevant service period. They are remeasured
to fair value at each reporting date, with the change in fair value recognised
as other employment-related expenses in the Group income statement. The credit
entry is recognised as a liability in the Group balance sheet within trade and
other payables.
Share awards
The fair values of equity-settled share awards granted in the year and the
assumptions used in the calculations are as follows:
Deferred share plan Executive directors' long-term incentive plan
Grant dates 28/02/2023 - 02/08/2023 11/03/2022 - 02/08/2022 10/03/2023 - 04/09/2023 11/03/2022
Share awards granted in the year 19,200,689 21,255,153 2,784,001 2,028,460
Weighted average fair value per share award granted ($) 3.4 2.6 3.1 2.6
Movements in the number of equity-settled share awards outstanding are as
follows:
2023 2022
Share awards outstanding at beginning of the year 41,252,837 42,602,119
Granted 21,984,690 23,283,613
Forfeited (2,214,057) (2,363,058)
Exercised (18,705,570) (22,269,837)
Share awards outstanding at end of the year 42,317,900 41,252,837
Share awards exercisable at end of the year 137,769 25,518
Share options
The fair values of share options granted in the year under the Sharesave
employee share option scheme, and the assumptions used in the calculations,
are as follows:
2023 2022
Grant date 11/09/2023 06/09/2022
Weighted average share price at grant date ($)1 2.6 2.9
Weighted average exercise price at grant date ($)2 2.1 2.3
Share options granted in the period 2,843,261 1,440,991
Vesting period (years) 3-5 3-5
Expected share price volatility (%) 30 30
Dividend yield (%) 5 5
Risk-free rate (%) 4.7 0.2
Expected option life (years) 3.4 3.5
Number of options assumed to vest 2,172,378 1,095,521
Average fair value per option granted ($) 0.6 0.7
Notes:
1 Sterling share price at grant date each year of £2.06 and £2.48
respectively.
2 Sterling exercise price each year of £1.69 and £2.01 respectively.
The expected share price volatility is based on historical volatility over the
past five years. The expected option life is the average expected period to
exercise. The risk-free rate of return is the yield on zero-coupon UK
government bonds of a term consistent with the assumed option life.
Movements in the number of share options outstanding are as follows:
2023 2022
Number Weighted average Number Weighted average
exercise price(1) exercise price(1)
($ per share) ($ per share)
Share options outstanding at beginning of the year 5,976,777 1.7 6,221,056 1.6
Granted 2,843,261 2.2 1,440,991 2.4
Forfeited (691,948) 2.3 (682,302) 1.6
Exercised(2) (2,988,952) 1.4 (1,002,968) 1.5
Share options outstanding at end of the year 5,139,138 2.1 5,976,777 1.7
Share options exercisable at end of the year 361,340 1.5 251,882 1.6
Notes:
1 Calculated at 31 December exchange rates each year.
2 The sterling weighted average share price of options exercised was £2.24
(2022: £2.23) (USD-equivalent $2.73 and $2.59 respectively).
The share options outstanding at year-end had expected remaining lives as
follows:
Range of exercise prices ($ per share) 2023 2022
Number of share options Weighted average expected remaining life (years) Number of share options Weighted average expected remaining life (years)
0.00-3.00 5,139,138 2.7 5,976,777 2.0
Cash-settled share-based payments
The carrying value of the cash-settled share-based payment liability at 31
December 2023 was $23 million (2022: nil). Details of the charge in the year
and a sensitivity analysis to key assumptions is set out in Note 5.
25. 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 $100 million 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 are therefore deducted from equity and included within the
Treasury share reserve. 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.
2023 2022
Total Weighted Nominal Total Weighted Nominal
number
average
value
number
average
value
$m
$m
Number of shares at beginning of year 1,350,556,782 1,350,556,782 46 1,473,107,813 1,473,107,813 51
Cancellation of own shares held in Treasury (37,206,823) (30,339,448) (1) (122,551,031) (52,130,209) (5)
Number of shares at end of the year 1,313,349,959 1,320,217,334 45 1,350,556,782 1,420,977,604 46
Shares held in Treasury share reserve (110,774,081) (107,401,080) (80,604,707) (99,038,830)
Man Group plc shares held by Employee Trust (35,289,202) (35,073,864) (33,745,908) (33,453,409)
Basic number of shares 1,167,286,676 1,177,742,390 1,236,206,167 1,288,485,365
Dilutive impact of:
Employee share awards 27,671,674 36,356,550
Employee share options 1,641,378 2,467,128
Dilutive number of shares 1,207,055,442 1,327,309,043
2023 2022
Statutory profit ($m) 234 608
Basic EPS 19.9¢ 47.2¢
Diluted EPS 19.4¢ 45.8¢
Share buybacks 2023 2022
Shares repurchased during the year (including costs) ($m) 223 386
Average purchase price (pence) 241.2 227.7
Shares repurchased (million) 76 135
Accretive impact on diluted earnings per share (%) 5.2 6.0
Man Group actively manages its 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 repurchases.
The $223 million of shares repurchased in the year comprise the completion of
the remaining $98 million of the share repurchase programme announced in
December 2022, and the completion of the $125 million programme announced in
March 2023. 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 6.3% of issued share capital
(excluding Treasury shares) as at 31 December 2023 and shares held in Treasury
which were cancelled during the year represent 3.1% of issued share capital
(excluding Treasury shares). At 28 February 2024, we had an unexpired
authority to repurchase up to 116,279,809 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
120,265,662 ordinary shares, representing 10% of the issued share capital
(excluding Treasury shares) at 28 February 2024.
In 2023, we funded $99 million via contribution or loan (2022: $91 million) to
enable the Employee Trust to meet its current period obligations.
At 31 December 2023, the net assets of the Employee Trust amounted to $196
million (2022: $146 million). These assets include 35,289,202
(2022: 33,745,908) ordinary shares in the Company, and $88 million of fund
product investments (2022: $65 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.
26. 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. Dividends are payable on
the Company's ordinary shares.
¢/share 2023 ¢/share 2022
$m
$m
Final dividend paid for the previous financial year to 31 December 10.1 118 8.4 110
Interim dividend paid for the six months to 30 June 5.6 63 5.6 69
Dividends paid 181 179
Proposed final dividend for the current financial year to 31 December 10.7 125 10.1 125
27. Geographical information
Accounting policy
Disclosure of revenue by geographic location is based on the registered
domicile of the fund entity or managed account paying our fees.
Non-current assets are allocated based on where the assets are located and
include goodwill and acquired intangibles, other intangibles, leasehold
improvements and equipment, and right-of-use lease assets. For goodwill and
other acquired intangibles, we consider that the location of the intangibles
is best reflected by the location of the individuals managing those assets.
$m 2023 2022
Revenue Non-current assets Revenue Non-current assets
Cayman Islands 555 - 956 -
Ireland 198 - 197 -
United Kingdom and the Channel Islands 108 606 217 657
United States of America 193 391 235 228
Other countries 114 15 127 8
1,168 1,012 1,732 893
Revenue from no single fund exceeded 10% of total annual revenue in 2023. In
2022, revenue from one fund of $213 million exceeded 10% of total annual
revenue driven by high levels of performance fees crystallising during the
year. Excluding performance fees, revenue from no single fund exceeded 10% of
revenue in 2022.
28. 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 2023 2022
$m
$m
Salaries and other short-term employee benefits(1) 31 80
Share-based payment charge 19 24
Fund product-based payment charge 22 21
Pension costs (defined contribution) 1 1
Total 73 126
Note:
1 Includes salary, benefits and cash bonus.
29. 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 $156 million (plus compound
interest) and certain other remedies which are unquantified in the claim. We
dispute the allegations and consider there is no merit to the claim (in
respect of liability and quantum) and will therefore vigorously and robustly
defend the proceedings.
We are subject to various other claims, assessments, regulatory enquiries and
investigations in the normal course of business. The Board does not expect
such matters to have a material adverse effect on our financial position.
30. Unconsolidated structured entities
Accounting policy
We have evaluated all exposures and concluded that where we hold an
investment, fee receivable, accrued income, or commitment with an investment
fund or a CLO, this represents an interest in a structured entity as defined
by IFRS 12 'Disclosure of Interests in Other Entities'.
Investment funds are designed so that their activities are not governed by way
of voting rights, and contractual arrangements are the dominant factor in
affecting an investor's returns. The activities of these entities are governed
by investment management agreements or, in the case of CLOs, indentures.
Our maximum exposure to loss from unconsolidated structured entities is the
sum total of any investment held, fee receivables and accrued income.
Our interest in and exposure to unconsolidated structured entities is as
follows:
2023 Total Less infrastructure mandates and consolidated Total AUM unconsolidated structured Number Net management Fair value of investment held Fee Maximum exposure
AUM
entities
of funds
receivables and accrued income
to loss
($bn) fund entities(1)
($bn) fee margin(2) ($m)
($m)
($m)
($bn) (bps)
Alternative
Absolute return 47.7 (0.3) 47.4 123 112 130 158 288
Total return 42.5 (1.3) 41.2 88 64 137 60 197
Multi-manager solutions 19.4 (12.8) 6.6 51 17 3 14 17
Long-only
Systematic 36.5 - 36.5 84 24 4 36 40
Discretionary 21.4 (0.2) 21.2 56 59 15 22 37
Total 167.5 (14.6) 152.9 402 289 290 579
2022 Total Less infrastructure mandates and consolidated Total AUM unconsolidated structured Number Net Fair value of investment Fee Maximum exposure
AUM
entities
of funds
management
held
receivables
to loss
($bn) fund entities(1)
($bn)
and accrued income
($m)
fee margin(2) ($m)
($m)
($bn)
(bps)
Alternative
Absolute return 46.0 (0.3) 45.7 107 112 108 284 392
Total return 28.8 (0.2) 28.6 80 63 168 40 208
Multi-manager solutions 20.2 (12.5) 7.7 54 20 3 14 17
Long-only
Systematic 31.6 (0.2) 31.4 73 25 5 31 36
Discretionary 16.7 (0.2) 16.5 61 57 19 21 40
Total 143.3 (13.4) 129.9 375 303 390 693
Notes:
1 For infrastructure mandates where we do not act as investment manager or
adviser, our role in directing investment activities is diminished and
therefore these are not considered structured entities.
2 Net management fee margins are the categorical weighted average. Performance
fees can only be earned after a high-water mark is achieved.
Five-year record
2023 2022 2021 2020 2019
Income statement ($m)
Core net management fee revenue 963 927 877 730 751
Core performance fees 180 779 569 179 325
Core profit before tax 340 779 658 284 384
Core management fee profit before tax 280 290 266 180 170
Core performance fee profit before tax 60 489 392 104 214
Core profit 271 647 557 240 325
Statutory profit before tax 279 745 590 179 307
Statutory profit 234 608 487 138 285
Statutory EPS (diluted) 19.4¢ 45.8¢ 33.8¢ 9.3¢ 18.4¢
Core EPS (diluted) 22.4¢ 48.7¢ 38.7¢ 16.2¢ 21.0¢
Core management fee EPS (diluted) 18.4¢ 18.4¢ 15.7¢ 10.3¢ 9.7¢
Balance sheet ($m)
Net cash and cash equivalents 136 457 387 351 281
Net assets 1,612 1,699 1,651 1,497 1,624
Net financial assets 555 983 907 716 674
Other metrics
Core cash flows from operating activities before working capital movements 362 810 700 341 385
($m)
Ordinary dividends per share (¢) 16.3 15.7¢ 14.0¢ 10.6¢ 9.8¢
AUM ($bn) 167.5 143.3 148.6 123.6 117.7
Average headcount 1,716 1,595 1,453 1,456 1,413
USD/sterling exchange rates:
Average 0.8042 0.8081 0.7267 0.7789 0.7830
Year-end 0.7855 0.8276 0.7390 0.7315 0.7544
'Core' measures are alternative performance measures. Further details of our
alternative performance measures, including non-core items, are set out on
pages 58 to 63.
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, accounting for the acquisition of Varagon in accordance with the
requirements of IFRS has resulted in the recognition of all future payments to
selling shareholders remain in employment post-acquisition as
employment-related expenses. This arises because each of these payments can be
forfeited should those employees become 'bad leavers' during specified periods
following the acquisition. Economically, the payments are transactions with
the individuals in their capacity as owners. Recognising that these owners
also hold significant roles in the organisation, the 'bad leaver' clauses were
protective in nature and not to compensate the individuals for employment
services.
As these transactions are related to an acquisition, we consider it
appropriate to adjust the expense recognised in the year to reflect the
proportion of the profits which have been generated in the same period and are
attributable to these employees through an adjustment to core profit. This
more closely aligns the charges with the associated cash flows.
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 in profit before tax comprise the following:
Note to the Group financial statements 2023 2022
$m
$m
Acquisition and disposal related:
Amortisation and impairment of acquired intangibles 18 (28) (51)
Acquisition-related costs 17 (9) -
Other employment-related expenses1 5.1 (21) -
Share of post-tax loss of associates 22 (3) (5)
Gain on disposal of investment property - right-of-use lease assets 16.2 12 -
Other costs - claims 5.2 (1) -
Foreign exchange movements 12.1 (11) 22
Non-core items (61) (34)
Note:
1 Adjustment to align acquisition-related employment-related expenses with
proportionate share of earnings in the year.
Core measures: reconciliation to statutory equivalents
The statutory line items within the Group income statement can be reconciled
to their core equivalents as follows:
2023 Core measure Reclassification Non-core items Per Group income statement
$m
of amounts relating to consolidated
fund entities
Management and other fees( APM ) 995 (5) - 990
Performance fees( APM ) 180 (2) - 178
Revenue( APM ) 1,175 (7) - 1,168
Net income or gains on investments and other financial instruments( APM ) 48 39 (11) 76
Third-party share of gains relating to interests in consolidated funds - (24) - (24)
Rental income 5 1 - 6
Distribution costs (32) - - (32)
Net revenue( APM ) 1,196 9 (11) 1,194
Asset servicing costs (58) - - (58)
Compensation costs (595) - - (595)
Other employment-related expenses( APM ) (2) - (21) (23)
Other costs( APM ) (179) (9) (10) (198)
Net finance expense (21) - - (21)
Gain on disposal of investment property - right-of-use lease assets - - 12 12
Amortisation and impairment of acquired intangibles - - (28) (28)
Share of post-tax loss of associate - - (3) (3)
Third-party share of post-tax profits (1) - - (1)
Profit before tax( APM ) 340 - (61) 279
Tax expense( APM ) (69) 24 (45)
Profit( APM ) 271 (37) 234
Core basic EPS 23.0¢
Core diluted EPS 22.4¢
2022 Core measure Reclassification Non-core items Per Group income statement
$m
of amounts relating
to consolidated
fund entities
Management and other fees( APM ) 958 (4) - 954
Performance fees( APM ) 779 (1) - 778
Revenue( APM ) 1,737 (5) - 1,732
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
Rental income 5 - - 5
Distribution costs (31) - - (31)
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 intangibles - - (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¢
APM The core equivalents of these statutory measures are defined as
alternative performance measures.
Core costs comprise asset servicing, compensation costs, core other
employment-related expenses, core other costs and third-party share of
post-tax profits.
The statutory line items within the Group balance sheet can be reconciled to
their core equivalents as follows:
2023 Core measure Reclassification of Per Group
$m
amounts relating to consolidated
balance sheet
fund entities
Assets
Cash and cash equivalents( APM ) 180 96 276
Fee and other receivables( APM ) 463 88 551
Investments in fund products and other investments( APM ) 787 1,492 2,279
Investments in associates 11 - 11
Current tax asset 15 - 15
Finance lease receivable 67 - 67
Leasehold improvements and equipment 53 - 53
Leasehold property - right-of-use lease assets 112 - 112
Investment property - right-of-use lease assets 17 - 17
Investment property - consolidated fund entities - 30 30
Other intangibles 54 - 54
Deferred tax assets 128 - 128
Pension asset 12 - 12
Goodwill and acquired intangibles 776 - 776
Total assets 2,675 1,706 4,381
Liabilities
Borrowings 140 - 140
Trade and other payables( APM ) 620 116 736
Provisions 16 - 16
Current tax liabilities 3 - 3
CLO liabilities - consolidated fund entities - 1,036 1,036
Third-party interest in consolidated funds - 554 554
Third-party interest in other subsidiaries 1 - 1
Lease liability 283 - 283
Total liabilities 1,063 1,706 2,769
Net assets 1,612 - 1,612
2022 Core measure Reclassification of amounts relating Per Group
$m
to consolidated
balance sheet
fund entities
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
Other intangibles 50 - 50
Deferred tax assets 105 - 105
Pension asset 22 - 22
Goodwill and acquired intangibles 627 - 627
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
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.
2023 Core measure Reclassification of amounts relating to consolidated Non-core items Per Group
$m
fund entities
income statement
Management and other fees 995 (5) - 990
Distribution costs (32) - - (32)
Net management fee revenue 963 (5) - 958
Rental income 5 1 - 6
Asset servicing costs (58) - - (58)
Compensation costs (management fee) (439) - - (439)
Other employment-related expenses (2) - (21) (23)
Other costs (179) (9) (10) (198)
Net finance expense (management fee) (9) - - (9)
Third-party share of post-tax profits (1) - - (1)
Management fee profit before tax 280 (13) (31) 236
Tax expense (58)
Management fee profit 222
Core basic management fee EPS 18.8¢
Core diluted management fee EPS 18.4¢
Performance fees 180 (2) - 178
Net income or gains on investments and other financial instruments 48 39 (11) 76
Compensation costs (performance fee) (156) - - (156)
Net finance expense (performance fee) (12) - - (12)
Performance fee profit before tax 60 37 (11) 86
Tax expense (11)
Performance fee profit 49
Core basic performance fee EPS 4.2¢
Core diluted performance fee EPS 4.0¢
2022 Core measure Reclassification of amounts relating to consolidated Non-core items Per Group
$m
fund entities
income statement
Management and other fees 958 (4) - 954
Distribution costs (31) - - (31)
Net management fee revenue 927 (4) - 923
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¢
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:
Note to the Group financial statements 2023 2022
$m
$m
Net gains/(losses) on seeding investments portfolio 12.1 47 (12)
Net gains/(losses) on fund investments held for deferred compensation 12.1 1 (3)
arrangements and other investments
Core gains/(losses) on investments 48 (15)
Non-core items:
Consolidated fund entities: gross-up of net gains on investments 12.1 39 -
Foreign exchange movements 12.1 (11) 22
Net income or gains on investments and other financial instruments 76 7
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:
2023 2022
$m
$m
Statutory tax expense 45 137
Tax on non-core items:
Amortisation and impairment of acquired intangibles 2 6
Gain on disposal of investment property - right-of-use lease assets (3) -
Foreign exchange movements 3 (4)
Non-core tax item on US deferred tax assets 22 (7)
Core tax expense 69 132
Comprising:
Tax expense on core management fee profit before tax 58 46
Tax expense on core performance fee profit before tax 11 86
The core tax rate is 20% for 2023 (2022: 17%). The increase in the rate is
largely due to the increase in the UK corporation tax rate on 1 April 2023 to
25% from 19%.
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:
Note to the Group financial statements 2023 2022
$m
$m
Cash flows from operating activities 337 737
Plus changes in working capital: 9
(Decrease)/increase in fee and other receivables (104) 68
(Decrease)/increase in other financial assets (71) 45
Decrease/(increase) in trade and other payables 200 (40)
Core cash flows from operations excluding working capital movements 362 810
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,
liabilities for put options over non-controlling and employee interests and
payables under repo arrangements, as follows:
Note to the Group financial statements 2023 2022
$m
$m
Seeding investments portfolio 12 595 688
Available cash and cash equivalents 8 180 349
Borrowings 8 (140) -
Contingent consideration payable 11 (3) -
Put option over non-controlling interests in subsidiaries 11 (9) -
Put option over employee interests in subsidiaries 24 (23) -
Payables under repo arrangements 11 (45) (54)
Net financial assets 555 983
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