Man GLG Undervalued Assets invests in the shares of cheap UK firms of all sizes. The managers aim to identify undervalued and unloved companies that they believe have the potential to recover in the longer term, using both quantitative and qualitative research.
Our opinion
Henry and Jack have worked together for many years with great success on this and other strategies. Their detailed focus on balance sheets means that they understand the minutiae of each company before they invest. We like the fact that the team members are materially invested in the fund, meaning that their interests are aligned with those of their clients and further incentivising them to ensure the fund performs well.
Company description
GLG, a member of Man Group since 2010, is listed in the UK, USA, Switzerland and Hong Kong. With an on-the-ground presence in key markets, GLG delivers investment strategies across various asset classes, sectors and geographies. GLG funds were rebranded in August 2015 to Man GLG. The group was awarded the Elite Equities Provider Rating each year from 2016 to 2020.
Fund manager
Henry Dixon joined the UK Equities team at Man GLG in October 2013. He has more than a decade's experience in equity investment management, having previously worked for New Star Asset Management, The Families Charities Ethical Trust, and more latterly as founder and portfolio manager of Matterley.
Jack Barrat also joined Man GLG in October 2013, having moved with Henry from Matterley. Before that he worked at UBS for four years. He attained a first class degree in Politics and History from Cambridge University.
Henry DixonFund manager
Investment process
The investment process is initiated using screening tools to identify suitable stocks, whittling down an investable universe of over 1500 companies to around 500. The managers target two types of stocks - those trading below what the team believes to be their true replacement cost (the cost it would take to replicate a business today) that are generating cash, and those whose profit streams are undervalued by the market.
They carry out extensive research into a company, focusing on its balance sheet, to create an in-depth understanding of the business and its true value. They believe the market puts too much emphasis on forecasting the profits, losses and future reported earnings of a company, rather than seeing a strong balance sheet as a basis for sustainable future earnings.
The team will continuously monitor all stocks held and will sell if a price target is reached based on the team’s definition of fair value, if a share above replacement cost receives an earnings downgrade or if a share below replacement cost ceases to generate cash.
Man GLG Undervalued Assets must invest predominantly in UK equities, but may also invest up to 20% in European equities. The portfolio will hold around 60 names, with an average position size of around 3% and an average holding period of 12 months.
ESG
ESG - Limited
Man Group has a firm-wide exclusions list as a minimum set of standards to which Henry and Jack must adhere to with this fund. They also consider the potential negative or positive impact of ESG factors in the context of overall company analysis. Within this, governance risks are a particularly strong focus, as they want to determine whether management is willing and capable of behaving in a way that would be beneficial for minority shareholders. To support this work, Henry and Jack have access to Man Group’s proprietary ESG Analytics tool which collates data from a mix of third-parties.
Going forward, they are looking to incorporate a way of scoring this data and adding it to the process. However, for the time being, the primary quantitative analysis in the process is focused on the financial position of the business and the investment opportunity.
Risk
Positions and weights are conviction-led so each position can have a positive and negative impact on performance. As the investment process is based on absolute returns from strong companies and balance sheets, the team aims to perform well in all market conditions where business strength is rewarded. However, it is not suited to a thematic bull market, for example a tech bubble or a highly growth-oriented environment, so would not perform well in these circumstances.
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