In a recent report issued on Monday, J.P. Morgan analysts downgraded Man Group (LON:EMG) from their previous rating to ‘neutral’. This adjustment comes as a result of persistent underperformance in the company’s pivotal trend-following strategies, prompting a revision of their earnings projections.
The company’s stock, which has declined approximately 23% since the beginning of the year, is reeling from a significant downturn in its AHL Alpha strategy. This strategy has faced underperformance over the last two years, and its performance further deteriorated in April 2025.
Despite positive net cash flow during the first quarter, J.P. Morgan expressed concerns about potential outflows later in the year, leading to a conservative revision of their net cash flow forecast. They predict a slight decrease of 1% in assets under management in 2025. This forecast is a reflection of the negative returns for AHL Alpha, which is down 10% year-to-date as of April 23, 2025. Previously, it delivered modest returns of 1% in 2023 and 3% in 2024.
Facing these challenges, the brokerage has slashed its earnings per share (EPS) estimates for Man Group. They have reduced the 2025 EPS by 30%, with similar cuts anticipated for the following years.
Consequently, J.P. Morgan adjusted its price target for Man Group, reducing it by 31% from 242 pence to 167 pence. Despite this downgrade, Man Group’s valuation appears relatively low, with a 2026 price/earnings ratio of 7x compared to around 11x for its global peers.
Nevertheless, analysts advise caution, indicating that any potential recovery in the stock price hinges on a substantial improvement in performance. Given the current challenges, such a rebound seems improbable in the near term.
Key risks to the company’s outlook include market conditions that could lead to further performance setbacks and greater than expected asset outflows. These factors present significant hurdles for the success of trend-following strategies.
While Man Group’s shares have already absorbed much of the negative sentiment, analysts remain skeptical about a near-term recovery unless there is a marked improvement in the performance of AHL strategies.
Yorum Yap