Man GLG, the discretionary investment management business of Man Group, has launched the Man GLG UK Absolute Value Fund.
Managed by Jack Barrat, the UK-domiciled UCITS fund aims to provide investors with attractive absolute returns by taking long and short positions in UK mid-cap equities (market capitalisation typically between £350m and £5bn) whose assets or returns have been identified as being either undervalued or overvalued. The fund intends to invest in 40-60 positions, seeking to return 10% per annum with a target volatility of 5-6%.
The Absolute Value Strategy has been in existence for more than two and a half years as a successful trading book within the Man GLG Alpha Select Alternative fund, during which time it has contributed significantly to that fund’s returns.
The Absolute Value investment process will leverage bespoke models developed as part of the £723m Man GLG Undervalued Assets Fund, co-managed by Barrat and Henry Dixon. Using these models, first employed by Dixon in 2008, the long book will target companies trading below their estimated replacement cost or whose profit streams appear undervalued. The short book will look for companies trading significantly over their tangible asset bases with negative earnings momentum or pricing-in improving returns over time despite falling incremental return on capital employed and a deteriorating balance sheet.
Commenting on the launch of the fund, Jack Barrat says: “We have employed an absolute value-based framework in the Man GLG Undervalued Assets Fund for a number of years in order to identify companies that we believe are undervalued by the market. Leveraging the same framework to monetise the opportunities it also identifies as overvalued was the next step for the process and we are pleased this strategy has performed well since inception in 2014.
“It is exciting to launch a fund based on the full extent of our work on the market and we look forward to continuing our focus on the wide valuation dispersion in the UK mid-cap space in the coming months and years.”
Teun Johnston, CEO of Man GLG, says: “This is a robust and proven strategy run by a manager who, alongside Henry Dixon, has played an important role in building our UK equity proposition in recent years. We believe it is an exciting time to launch a long/short equity fund that concentrates on an area of the UK market which is under-researched and offers compelling opportunities for alpha generation.”