investment
strategies
80+
700+
markets
Quantifying
Man Group:
Our year in
numbers
funds under
management
institutional
clients
Man Group plc
Annual Report
for the year ended
31 December 2019
def write(self, symbol, data): pandas = False # Check for overlapping data if isinstance(data, list): start = data[0][‘index’] end = data[-1][‘index’] elif isinstance(data, pd.DataFrame): start = data.index[0].to_datetime() end = data.index[-1].to_datetime() pandas = True else: raise UnhandledDtypeException(“Can’t persist type %s to tickstore” % type(data)) self._assert_nonoverlapping_data(symbol, to_dt(start), to_dt(end)) if pandas: buckets = self._pandas_to_buckets(data, symbol) else: buckets = self._to_buckets(data, symbol) self._write(buckets)def _to_buckets(self, x, symbol): rtn = [] for i in range(0, len(x), self.chunk_size): rtn.append(self._to_bucket(x[i:i + self.chunk_size], symbol)) return rtn Man Group is a technology-empowered active
investment management firm with over
employees
from more than
We are
made up of
diverse
investment
engines
countries.
and aim to achieve outperformance and
create innovative solutions for our clients
and the over
pensioners and savers
worldwide that they represent.
We seek to maximise shareholder returns
by focusing on delivering alpha for our
clients, and have achieved
helping to generate
outperformance
vs. peers over the
last five years,
in performance fees
over the same period.
We also aim to operate efficiently,
which has enabled us to deliver
in adjusted profits
before tax¹
and to return
Contents
Strategic report
At a glance
Chairman’s statement
Our business model
Our market
Chief Executive Officer’s review
Our strategy
Key performance indicators
Chief Financial Officer’s review
Risk management
Responsible business
Governance report
Chairman’s governance overview
Board of Directors
Corporate governance
Audit and Risk Committee report
Nomination Committee report
Directors’ Remuneration report
Directors’ report
1
2
4
10
14
18
22
24
26
34
42
56
58
60
70
76
78
99
Directors’ responsibility statement
101
Financial statements
Independent auditor’s report
Group income statement
Group statement of comprehensive income
Group balance sheet
Group cash flow statement
Group statement of changes in equity
Notes to the Group financial statements
Five year record
Alternative performance measures
Shareholder information
Shareholder information
Glossary
103
111
111
112
113
114
116
147
148
152
154
The strategic report was approved by the
Board and signed on its behalf by:
Luke Ellis
Chief Executive Officer
to shareholders through
dividends and share buybacks
over the past five years.
1 The Group’s alternative performance measures are outlined
on pages 148–151.
2
At a glance
Our proposition
is strong
We offer a diverse range
of long-only and alternative
strategies on a discretionary
and systematic basis.
We actively manage
investments of
We harness the power
of technology across
infrastructure, alpha
generation and trading
and execution.
We develop deep client
relationships with a single
point of contact for everyone.
This is how we stay at the
forefront of investment
management, risk
management, trading
and operations.
n
b
4
3
$
–
L
H
A
n
a
M
n
b
6
3
$
–
c
i
r
e
m
u
N
n
a
M
n
b
2
3
$
–
G
L
G
n
a
M
n
b
4
1
$
–
M
R
F
n
a
M
n
b
2
$
–
M
P
G
n
a
M
Within Man Group’s single operating
platform, we have five investment engines
that house numerous investment teams and
work both autonomously and collaboratively.
Man Group plc Annual Report 2019
3
and invest across diverse
styles and asset classes
for our global
client base.
FUM by product category ($bn)
30.5
27.0
27.5
18.7
14.0
EMEA
Americas
Asia
55%
28%
17%
Absolute
return
Total
return
Multi-manager
solutions
Systematic
long-only
Discretionary
long-only
We leverage our robust infrastructure
to provide a range of strategies across
investment approaches, styles, and
asset classes.
We develop long-term partnerships
with our clients through one key point of
contact, enabling us to truly understand
their individual needs and create innovative
solutions for them.
Strategic report 4
Chairman’s statement
Funds under
management
$117.7bn
2018: $108.5bn
Statutory EPS
18.4¢
2018: 17.0¢
Adjusted EPS¹
21.1¢
2018: 13.5¢
Proposed dividend
per share
9.8¢
2018: 11.8¢
+8%
+8%
+56%
-17%
At the start of 2020 it was my
honour to become Chairman of
Man Group and it is my pleasure
to present to you the Annual
Report for 2019.
John Cryan
Chairman
Man Group plc Annual Report 2019 5
Overview of the year
Last year the investment markets continued
to be influenced by political and economic
uncertainty countered by accommodative
central bank policies in the major western
markets. Low to negative interest rates
and central bank asset purchases have
generally provided sufficient support
for asset prices such that overall public
markets increased their levels over the year.
Traditional discretionary investment styles
remained under secular pressure from the
trend of many investors choosing to switch
into simple, low- or zero-priced products
designed to track the major market indices.
Overall, 2019 was a rather accommodating
year for many asset classes and investment
styles, particularly for growth strategies.
This was reflected in our $10.1 billion of
gains for clients across the firm. This overall
performance masks some dispersion in
outcomes for the year, especially some
underperformance in many of our long-only
strategies, notably where the fund style is
biased towards capturing value opportunities.
Relative performance was generally
weaker, with average underperformance
of 1.1%¹. A positive turnaround in net
flows in the last quarter of the year wasn’t
enough to offset the net outflows we
experienced in the first nine months.
The investment management industry
continues to be heavily impacted by pressure
on profit margins on fees charged to clients.
At Man Group we are not immune to this
trend, though to some extent our business
mix now more closely reflects current
fee levels, as much of the historical, high-
margin business, especially at Man AHL,
has now largely run off. Nevertheless, our
adjusted management fee profits¹ – the
metric we use to give you a clearer insight
into the profitability of our base investment
management fees – decreased by 21%
driven by a number of non-operating
factors and margin compression due
to the change in mix during the year.
More positively, our overall profitability
was significantly boosted by adjusted
performance fee profits¹, which increased
over six-fold year on year. We start 2020 with
many of our funds relatively well positioned
to capture further performance fees. Overall,
our adjusted profit before tax¹ for the Group
as a whole for 2019 increased by more
than 50% compared to 2018. Statutory
profit before tax increased by 10%.
Our capital policy remains unchanged. It is
to pay dividends each year in an aggregate
amount equivalent to management fee
earnings per share. Additionally, we seek
to return to shareholders – recently through
share buyback programmes – remaining
retained earnings not deemed required
to meet foreseeable business needs.
In line with that policy, the Board has
recommended a final dividend of 5.1c per
share, which, when taken together with the
interim dividend already distributed, amounts
to a full-year dividend of 9.8c per share.
The final dividend recommendation is, as
usual, subject to approval by shareholders
at the AGM to be held in May 2020. In 2019
we also repurchased $92 million of shares
through our buyback programmes.
Our role as an asset manager
Our core strategic intent is to meet the
needs of our clients in creating or preserving
value for the many millions of individual
savers and pensioners that they represent.
We seek to outperform the markets through
active management of the funds under our
stewardship. To achieve this, we employ
experienced investment professionals and
highly skilled technologists and combine their
strengths to create strategies that we believe
can generate the desired outperformance.
The Board spends a significant amount
of time reviewing the performance of our
investment strategies. We monitor the
sourcing and development of business
partnerships with our major clients.
We ensure that management is focused
on the creation of customised solutions
to meet investor needs. Investment
in our people and our technology is
critical to our continuing success.
We at Man Group recognise that part of our
fiduciary duty to our clients is the responsible
investment of the funds we manage on
their and their clients’ behalf. In ensuring the
sound stewardship of our investors’ capital
we seek not only to ensure that our approach
closely aligns us with the values of our clients
but also balances the expectations of our
shareholders and all the other stakeholders
of Man Group. To this end, we employ
a formalised process that quantifies the
degree of responsible investment focus
for each and every one of Man Group’s
funds. We offer our investment managers
proprietary tools to monitor and manage
Environmental, Social and Governance
(ESG) factors as well as maintaining a list of
companies whose securities are ineligible for
inclusion in our portfolios. We thereby seek
to ensure a clear and consistent approach
to responsible investment across our entire
range of strategies and to inform the way
we deliver on our approach to ESG matters
in a manner that can meet the broad palette
of preferences expressed by our clients.
Our strategic intent is to meet
the needs of our clients to
create or preserve value for
the many millions of individual
savers and pensioners they
represent.
Corporate restructuring
In May 2019, we completed the corporate
reorganisation that we had announced
back in October 2018. The effect of the
reorganisation was to introduce a new,
listed holding company for the Group.
The newly incorporated company Man
Group plc (the Company) is registered
in Jersey. Shareholders approved the
reorganisation on 10 May 2019. The
shares of the new holding company were
introduced to the premium listing segment
of the Official List and to trading on the
London Stock Exchange on 28 May 2019.
The background to the reorganisation was
the desire to adjust our corporate structure
and the governance of our overseas
operations such that they are better aligned
with the global footprint of the business.
The Group has seen significant growth
in the size of its US business over the
past five years, alongside growth in other
overseas markets. The new structure is
intended to provide greater flexibility for
the Group, to support the effective and
efficient governance of the business and
to be consistent with market practice for
many global institutional asset managers.
Prior to the reorganisation, Man Group’s
businesses in the US and Asia were
prudentially regulated by the UK authorities
as well as by local regulators. The new
structure means the Group is no longer
subject to global consolidated capital
requirements. This provides us with greater
flexibility in the manner in which we finance
the Group, including, for example, in how
we manage the seed capital programme
that supports product innovation in our
overseas businesses. The Board continues
to judge the Group’s capital needs against
its operational and strategic requirements.
As a result of the Group reorganisation
we have seen no change in our dividend
and capital management policies.
1 The Group’s alternative performance measures are outlined
on pages 148–151. Performance figures shown net of
representative management and performance fee. Past
performance is not indicative of future performance.
Strategic report 6
Chairman’s statement continued
People and culture
The development of a deep and diverse
pool of human talent is vital to our continued
success. The promotion of management
ambition has been a key area of focus for
the Board during the year. We encourage
proactive career development and, where
appropriate, mobility of talent within the
business. The Board has also overseen
management’s alignment of Man Group’s
culture with the ethical values we embrace.
We also encourage management in its
promotion of diversity and inclusion of staff
at all levels of the organisation. It is very
important to us that Man Group be widely
considered an employer of choice. As an
element in assessing progress, an employee
survey was undertaken during the year. The
Board reviewed the results of this survey,
which identified what is working well and
which are the areas where we might look
for further improvement. We also reviewed
management’s consequent plan of action
and its focused initiatives for the coming year.
Community
We are conscious of the impact our
organisation has on the broader community,
and we aim to give back and contribute
positively to those around us. We achieve
this primarily through our work with the Man
Charitable Trust in the UK and our US-based
Man Charitable Foundation. Our charitable
focus is on promoting literacy and numeracy.
Our employees are actively involved in
charitable initiatives and volunteering
opportunities local to the firm’s offices
through our ManKind Programme.
ManKind gives employees the opportunity
to take two days’ paid leave each year to
volunteer with charities supported by the
two trusts or with a charity of their choice.
The Group will continue to develop its work
to promote diversity and social mobility in
education and STEM subjects (science,
technology, engineering and mathematics)
particularly. In July 2019, the Group made
a significant donation to King’s College
London Mathematics School, to support the
school as it brings high quality mathematics
education to students, aged 16 to 19, who
have a particular aptitude for the subject.
Shareholders
The Board gives high priority to shareholder
and investor communications. It receives
regular investor reports which detail the
feedback from investor meetings.
I would like to thank all my colleagues for
their dedication and hard work. On behalf
of the Board I would like to thank all our
shareholders for their continuing support
and look forward to meeting those who
attend the Group’s annual general meeting.
John Cryan
Chairman
Board changes
In September, Jon Sorrell informed
us of his decision to leave the Group
to pursue an opportunity elsewhere.
Jon’s contribution to Man Group over
the years has been invaluable, especially
as Chief Financial Officer and then as
President. We would like to thank him for
his leadership, dedication, guidance and
unstinting hard work. He will be missed.
In December, Lord Livingston of Parkhead
left the Board. Ian had served as our
Chairman since January 2016. On behalf
of the entire Board, I would like to thank
Ian for his leadership and for the significant
contribution he made to the firm. I wish him
the very best in his future endeavours.
In February 2020 we announced that after
serving on the Board for nine years Matthew
Lester was to step down on 26th February.
Matthew has seen significant change at
Man Group and has made an excellent
contribution to the work of the Board. I
wish him the very best for the future.
I am delighted to welcome to the Board
Lucinda Bell and Ceci Kurzman, who joined
us on 28 February 2020, and Anne Wade
who will be joining us on 30 April 2020.
Workforce engagement
In line with the new Corporate Governance
Code, we are including in our report to
shareholders for the first time this year a
so-called Section 172 (1) statement on how
your Board has considered and balanced,
among other matters, the interests of all
of the Group’s stakeholders in coming to
its decisions. Implicit in this is the Board’s
consideration of the impacts of corporate
decision-making on our employees. We
have chosen to engage formally and directly
with our employees across the globe. Dame
Kate Barker and Zoe Cruz agreed to be the
Board’s appointed representatives to lead
this engagement. I would like to thank Kate
and Zoe for their tremendous efforts in this
regard and to thank our participating staff,
who matched their enthusiasm for direct
engagement. The Board has discussed
and considered the feedback to date.
Over time we will assess what may be the
most effective means whereby the interests
of our staff can inform Board discussions,
both in the light of our own staff feedback
and by comparing how other UK-listed
public companies interpret and use the
new Corporate Governance Code.
Man Group plc Annual Report 2019 Our commercial
differentiators
enable us to deliver
stakeholder value
7
Diversification
Strength lies in diversity, both
in terms of a broad global offering
to help meet our clients’ investment
goals, and fostering a diverse and
inclusive working environment
that encourages new ideas and
perspectives from our employees.
Relationships
We look to forge deep and long-lasting
relationships with our clients, our
employees and our shareholders.
These relationships help us to
understand our clients’ needs,
to retain talent within our firm, and
to serve our shareholders’ interests.
Go to page
8
Go to page
12
Technology
Technology is at the heart of
everything we do; it not only
helps create efficiencies within
our business, but also helps
us to capture more alpha
and deliver better returns
for our clients.
Responsibility
We aim to be responsible stewards
of our clients’ and shareholders’
capital, and to run our business
in a socially responsible way, taking
into account our impact on the
environment and on society as
a whole.
Go to page
16
Go to page
40
Strategic report 8
markets traded across the firm
Diversi-
investment strategies
Man Group plc Annual Report 2019 nationalities
Diversi-
institutional clients, including some
of the world’s largest investors
fication
9
employees
Strategic report 10
Our business model
A sustainable and
cash-generative
business model
We aim
to deliver…
…high quality active
management solutions
for our clients, deploying
the latest technology
across our business
to ensure we stay at
the forefront of our
evolving industry.
Products and solutions are distributed
to institutions, and to private investors
via a global network of intermediaries.
Each client has one point of contact
whose role is to be an expert in that
client’s requirements and maintain
client relationships on behalf of the
entire business. In addition to growing
the business through investment
performance and fund flows, we look
to grow by attracting talent, adding
investment teams and taking advantage
of acquisition opportunities which can
generate an attractive return on capital.
At the core of Man Group’s investment
management and distribution are
strong operational infrastructure, risk
management, people management
and governance which ensure the
sustainability of the business model
and enable us to take advantage
of new business opportunities.
How we create value…
…through a diverse range of strategies,
a client-centric culture, an ongoing focus
on operational efficiency and continuously
thinking about our responsibilities to our
stakeholders.
Dedicated
portfolio
adviser
APPROACH
Long-only
Alternative
INVESTMENT STYLE
Quantitative
Discretionary
Multi-manager
ASSET CLASS
Equity
Multi-asset
Real estate
Currency
Credit
Volatility
Commodities
A single operating platform
Our business model is underpinned by our:
People and culture Page 44
Risk management Page 34
Governance framework Page 56
Strong capital base Page 33
Man Group plc Annual Report 2019 11
How we generate
cash flows
The long-term success of an asset
management business is centred
around the ability to generate
outperformance for clients and
to develop and strengthen client
relationships. This will generate
cash flows which in time can
be returned to shareholders.
Outperformance
We seek to achieve this through the quality of our
research and innovation, our ability to understand
and meet the needs of our clients and operating the
business efficiently to generate long-term value for
our shareholders.
Revenue generation
Management fees are typically charged as a
percentage of each fund entity’s gross investment
exposure or NAV. Performance fees are typically
charged as a percentage of investment performance
above a benchmark return or previous higher
valuation ‘high water mark’.
Costs
Man Group is fundamentally a people business and
the majority of the Group’s costs comprise payments
to individuals whether they are investment managers
who manage investor assets, internal sales staff who
distribute products or the teams that manage the
Group’s operations and infrastructure.
Central execution
We have brought together traders, trading
technologists and researchers with the aim to deliver
superior execution results and reduce trading cost
for all of our investment engines to the benefit of
our clients.
The value we deliver
to our stakeholders
Clients
Absolute
performance
$10.1bn
of gains for clients
in 2019
Go to page
19
Servicing
clients’ needs
72%
of FUM from clients invested
in two products or more
Shareholders
Shareholder
returns
$1.5bn
of dividends and buybacks
in the last five years
Dividends and
share buyback
$248m
in relation to 2019
Go to page
33
Employees
Employee
engagement score
77%
Go to page
44
Community
Man Charitable Trust
$1.2m
in charitable donations
and initiatives in 2019
Go to page
50
Employee
turnover
10.8%
Volunteering
28%
of UK employees
volunteered in 2019
Strategic report 12
dedicated
point of
contact
Relation-
of FUM from clients invested in
more than one investment engine
Man Group plc Annual Report 2019 13
Relation-
of FUM from clients invested
in two products or more
ships
years average tenure
of ExCo members at
the firm, including time
pre-acquisition
Strategic report 14 Our market
Market environment
and industry trends
Industry
trends
Margin compression
Description
The average margin across the industry
has been reducing over time as clients
allocate towards cheaper products or
seek to renegotiate fees.
Brexit
Description
The UK left the European Union (EU) on
31 January 2020 and is now in a transition
period where it continues to follow EU rules
whilst negotiating the future relationship
with the EU.
The UK Government has committed to this
transition concluding by the end of 2020.
Global and
macro trends
Macro environment
Description
2019 opened with significant macro-
economic concerns about global economic
growth, trade and Brexit. As uncertainty rose,
central banks signalled stimulus and markets
rallied, led in particular by growth equity as
well as fixed income.
By the fourth quarter as economic
uncertainty receded in the US and the
Eurozone, US/China trade hostilities paused
and a decisive UK election provided political
direction, equities finished the year strongly
with growth significantly outperforming
value over the year.
Client allocations
Liquidity
Technology
Description
Description
Description
Clients reduced their active equity and hedge
There has been much public discussion
Asset management has been slower than
fund exposure in 2019, which has resulted
of liquidity issues on daily traded funds
other financial services industries to embrace
in outflows across the industry. On the flip
with several high-profile cases in the news
new technologies.
side of this, clients increased their exposure
during 2019. As a result, there has been
to credit and fixed income, leading to inflows
much political and regulatory commentary
Firms that place technology, whether
into these asset classes during the year. The
regarding liquidity, particularly in the UK.
investments in data, analytics, distribution
other area of continued growth in the asset
management industry is private markets.
and/ or client experience at the centre of their
asset management strategy can benefit from
improvements across multiple metrics.
What this means to the Group
What this means to the Group
What this means to the Group
What this means to the Group
What this means to the Group
What this means to the Group
• We are not focused on the value
• Man Group has planned for a range
or timing of the exact peak or trough
of any economic cycle; that is the way
to miss opportunities in the present
of Brexit scenarios that may impact its
employees, business or clients, including
a no-deal at the end of the transition period
• Instead we ensure that our risk
• At the beginning of 2019, Man Group
management maintains high standards
so that if markets deteriorate we are
able to react
• Man Group exists to add value through
sophisticated, active management and
we believe the future provides us with the
opportunity to capitalise on this core skill
received regulatory approval to upgrade
the regulatory permissions of its existing
Irish entity and opened a physical office
in Dublin
• This has allowed Man Group to remain
able to service its existing European clients
and to access new business in the EU
• Most of the reduction in the fee margin
at the Group level over recent years has
been due to a change in business mix
from retail-focused guaranteed products
to diversified alternative and long-only
strategies sold to institutions
• Fee pressure has impacted certain areas
of our business where price competition
is more intense, however innovative
products with a strong track record
continue to attract higher fees
• We also believe there are a number
of opportunities to work profitably for
our clients on larger-scale business at
a lower margin fee, which is attractive
to shareholders
• Given our skew to active equities and
• Our management team has direct
• Man Group has over 30 years of
liquid alternatives, allocation trends have
experience from the 2008 financial crisis
quantitative investment management
an impact on short-term flows
• We focus on managing liquidity
experience
• Our client and quant focus continues to
conservatively in all our funds
• We have over 500 quants and
drive sector-weighted flow outperformance
over the cycle
• Man Global Private Markets (Man GPM)
has solid long-term growth trends and
gives us some private markets capability.
Today, it’s a small part of the Group and
while it is an area which takes time to build
traction its a key focus area going forward
• We frequently close strategies to new
investments to ensure they can continue to
deliver returns and do not become too big
• We close funds at the lower of where the
portfolio manager or our risk-analysis team
think size is affecting style or our ability to
deliver the prospectus liquidity
technologists across the firm and
multiple examples of using technology
to drive improved shareholder returns
• As an example, we estimate recent
execution technology improvement
adds up to 2% to expected returns
in one strategy
Man Group plc Annual Report 2019 Global and
macro trends
Industry
trends
Global indices 2019
15
+30.4%
+28.2%
+27.2%
+32.8%
FTSE
All-World
Index
S&P
Global
100 Index
S&P
Global
1,200 Index
Dow Jones
Global
Titans 50
Macro environment
Brexit
Margin compression
Client allocations
Liquidity
Technology
Description
Description
Description
2019 opened with significant macro-
The UK left the European Union (EU) on
The average margin across the industry
economic concerns about global economic
31 January 2020 and is now in a transition
has been reducing over time as clients
growth, trade and Brexit. As uncertainty rose,
period where it continues to follow EU rules
allocate towards cheaper products or
central banks signalled stimulus and markets
whilst negotiating the future relationship
seek to renegotiate fees.
rallied, led in particular by growth equity as
with the EU.
well as fixed income.
The UK Government has committed to this
transition concluding by the end of 2020.
Description
Clients reduced their active equity and hedge
fund exposure in 2019, which has resulted
in outflows across the industry. On the flip
side of this, clients increased their exposure
to credit and fixed income, leading to inflows
into these asset classes during the year. The
other area of continued growth in the asset
management industry is private markets.
Description
There has been much public discussion
of liquidity issues on daily traded funds
with several high-profile cases in the news
during 2019. As a result, there has been
much political and regulatory commentary
regarding liquidity, particularly in the UK.
Description
Asset management has been slower than
other financial services industries to embrace
new technologies.
Firms that place technology, whether
investments in data, analytics, distribution
and/ or client experience at the centre of their
asset management strategy can benefit from
improvements across multiple metrics.
By the fourth quarter as economic
uncertainty receded in the US and the
Eurozone, US/China trade hostilities paused
and a decisive UK election provided political
direction, equities finished the year strongly
with growth significantly outperforming
value over the year.
What this means to the Group
What this means to the Group
What this means to the Group
What this means to the Group
What this means to the Group
What this means to the Group
• We are not focused on the value
or timing of the exact peak or trough
of any economic cycle; that is the way
to miss opportunities in the present
• Man Group has planned for a range
of Brexit scenarios that may impact its
• Most of the reduction in the fee margin
at the Group level over recent years has
employees, business or clients, including
been due to a change in business mix
a no-deal at the end of the transition period
from retail-focused guaranteed products
• Instead we ensure that our risk
• At the beginning of 2019, Man Group
management maintains high standards
received regulatory approval to upgrade
to diversified alternative and long-only
strategies sold to institutions
so that if markets deteriorate we are
the regulatory permissions of its existing
• Fee pressure has impacted certain areas
able to react
Irish entity and opened a physical office
of our business where price competition
• Man Group exists to add value through
in Dublin
sophisticated, active management and
• This has allowed Man Group to remain
we believe the future provides us with the
able to service its existing European clients
is more intense, however innovative
products with a strong track record
continue to attract higher fees
opportunity to capitalise on this core skill
and to access new business in the EU
• We also believe there are a number
• Given our skew to active equities and
• Our management team has direct
• Man Group has over 30 years of
liquid alternatives, allocation trends have
an impact on short-term flows
• Our client and quant focus continues to
drive sector-weighted flow outperformance
over the cycle
• Man Global Private Markets (Man GPM)
has solid long-term growth trends and
gives us some private markets capability.
Today, it’s a small part of the Group and
while it is an area which takes time to build
traction its a key focus area going forward
experience from the 2008 financial crisis
• We focus on managing liquidity
conservatively in all our funds
• We frequently close strategies to new
investments to ensure they can continue to
deliver returns and do not become too big
• We close funds at the lower of where the
portfolio manager or our risk-analysis team
think size is affecting style or our ability to
deliver the prospectus liquidity
quantitative investment management
experience
• We have over 500 quants and
technologists across the firm and
multiple examples of using technology
to drive improved shareholder returns
• As an example, we estimate recent
execution technology improvement
adds up to 2% to expected returns
in one strategy
of opportunities to work profitably for
our clients on larger-scale business at
a lower margin fee, which is attractive
to shareholders
Strategic report 16
lines of Python code
supporting our
investment strategies
Tech-
annual increase in technology
headcount over the past five years
Man Group plc Annual Report 2019 17
Tech-
quants and technologists
nology
years of quant
investing experience
Strategic report 18 Chief Executive Officer’s review
Absolute
performance
$10.1bn
2018: $-7.7bn
Asset weighted
relative performance
-1.1%
2018: 1.0%
Funds under management
$117.7bn
2018: $108.5bn
+8%
Statutory profit
before tax
$307m
2018: $278bn
Adjusted profit
before tax2
$386m
2018: $251m
+10%
+54%
Absolute performance was
strong in 2019, particularly
in our long-only and quant
alternative strategies,
which drove the increase
in FUM and profits.
Luke Ellis
Chief Executive Officer
Man Group plc Annual Report 2019 19
Overview¹
After the equity market sell-off at the end
of 2018, 2019 was characterised by a
more supportive market backdrop for
most asset classes.
This led to positive performance across
our long-only strategies as well as strong
absolute performance from our quant
alternative strategies. However, it was a more
challenging period for alpha generation,
particularly for our strategies with a
valuation focus, which led to asset weighted
underperformance versus peers of 1.1%
for the year¹ (2018: 1.0% outperformance).
Across the industry we have seen clients
reducing their active equity allocations and
increasing their allocations to bonds. This
is an area where we have historically been
under-represented, which contributed to
net outflows in the year. Going forward,
we would hope to grow our fixed income
and credit capabilities. Nevertheless, we
continued to see ongoing engagement with
clients on new mandates and in particular
strong demand for our alternative risk premia
strategies. Funds under management
increased by 8% to $117.7 billion in the
year, as strong absolute investment
performance more than offset net outflows.
In 2019 we progressed with the evolution of
our business away from legacy guaranteed
products to an institutional client base.
For absolute return strategies FUM from
guaranteed products is now negligible. This
is noteworthy as the shift in the product
mix has been a contributory factor in its
declining net management fee margin. For
multi-manager solutions the shift away from
traditional funds of fund manager products to
an institutional solutions provider is expected
to have a better growth profile though at
a lower net management fee margin.
Adjusted profit before tax² increased by
54% to $386 million compared to 2018
reflecting higher performance fees and seed
investment gains in the year, partially offset
by a decline in net management fees which
was largely driven by margin compression
due to the change in mix during the year.
Core profit before tax², one of our
financial KPIs, reached a ten year
high in 2019, increasing by 62% to
$384 million compared to 2018.
Statutory profit before tax increased by
10% to $307 million compared to the
previous year.
Performance¹
2019 was characterised by a rebound in
equity markets and most other asset classes
as central banks grew more accommodative.
It was a strong period for momentum and
growth strategies but a more difficult period
for valuation-focused strategies.
FUM¹ movements during 2019 ($bn)
108.5
-1.3
10.1
0.4
117.7
31 Dec
2018
Net
flows
Investment
movements
FX and
other
31 Dec
2019
Against this backdrop, absolute performance
across our product categories was positive,
which resulted in us delivering $10.1 billion
of investment performance for clients. Our
absolute return strategies were up 7%,
driven by strong performance from our
major quant alternative strategies. Within
total return strategies, the AHL TargetRisk
strategy delivered very strong performance,
up 28.4%, and the Emerging Market Debt
Total Return strategy was down 2.8%.
Systematic long-only strategies, were up
on average 19.1%, having benefited from
the rebound in equity markets. Returns
in the discretionary long-only strategies,
benefited from the performance of the
Japan CoreAlpha strategy which was up
9.2%. In addition, the UK and European-
focused discretionary strategies delivered
strong returns with the continental European
strategy up 30.7% and the undervalued
assets strategy up 19.3% in the year.
Relative performance across the firm
was more mixed, with asset weighted
underperformance versus peers1 across
our strategies of 1.1% in the year. Relative
outperformance in the absolute return
category was driven by our quant alternative
strategies up 2.3% versus peers. Across
our total return strategies, Alternative
Risk Premia continued its strong relative
performance since launch and TargetRisk
significantly outperformed peers. However,
this was offset by underperformance by the
emerging market debt strategy due to its
bearish positioning. Relative performance
of the systematic long-only strategies was
weaker with underperformance of 2.2%
in the year due to their valuation bias. The
Japan CoreAlpha strategy underperformed
by 8.9% due to its value bias while the
European-focused long-only strategies
performed well on a relative basis.
Progress against
strategic priorities
Strong client relationships
Following excellent flows in 2017 and 2018,
the short-term underperformance of some
of our strategies, coupled with clients de-
risking more generally, impacted our flows
in 2019. Despite this, we continued to widen
and deepen the long-term relationships
with clients and add new relationships with
strategically important asset allocators and
distributors. As a result of this focus, we
continue to see the trend of clients investing
in more strategies across the firm, with 72%
of FUM at 31 December 2019 relating to
clients invested in two or more products,
and 45% relating to clients invested in four
or more products. Our 50 largest clients
are invested in approximately three of
our strategies on average. This illustrates
the strength and breadth of our offering,
and the value of providing clients with a
single point of contact who understands
them and their unique requirements.
Absolute and relative performance in 2019
Absolute
Relative1
Absolute return
Total return
Multi-manager solutions
7.0%
2.9%
2.7%
2.3%
-3.8%
-1.2%
Systematic long-only
19.1%
-2.2%
Discretionary long-only
14.0%
-2.5%
Group
10.2%
-1.1%
1 Past performance is not indicative of future results. Returns may increase or decrease as a result of currency fluctuations.
Performance figures are shown net of representative management and performance fees.
2 The Group’s alternative performance measures are outlined on pages 148-151.
Strategic report
20
Chief Executive Officer’s review continued
Numeric – a case study
In September 2014, Man Group
acquired Numeric, a Boston-based
quantitative equity manager with
$15.2 billion of funds under
management across a range of long-
only and long/short, fundamentally
based strategies. From the point of
acquisition to the end of 2019, Man
Numeric’s FUM have more than doubled
to a total of $35.9 billion, driven by strong
absolute performance and flow into both
long-only and alternatives strategies.
Total net inflows from acquisition to the
end of 2019 have been $10.6 billion.
Man Numeric has helped to expand the
Group’s footprint in North America with
7% of FUM from clients in the Americas
in 2013 increasing to 28% at the end
of 2019. Since the acquisition, the Man
Numeric team has worked closely
with our other investment engines, in
particular Man AHL and Man FRM, and
has very successfully developed and
marketed our Alternative Risk Premia
strategy, which has grown to $12.8 billion
of assets and has had strong relative
and absolute performance since launch.
The initial consideration was $219 million
and an additional $154 million was paid
out on the fifth anniversary of completion
in 2019. The acquisition has provided
strong returns for shareholders. Total
net management and net performance
fee revenues from Man Numeric over
that period have been $684 million.
More recently, clients have been reducing
their active equity exposure and have been
increasing their allocations to bonds. This
is an area where historically we have been
under-represented but over the last year
we have continued to build out our credit
offering and have added a number of teams
covering strategic bond strategies, high yield
opportunities and European real estate debt.
Whilst this is a near-term cost, we expect it
to add over time to FUM and profits as well
as diversify our product range still further.
Innovative investment strategies
Developing innovative investment strategies
across our business and enhancing our
existing offering for clients is core to the
Group’s strategy.
We continue to make progress in
innovating and building a more diversified
business. An example of this is our
TargetRisk strategy, which applies Man
AHL’s expertise in systematic alternative
investment to a long–only approach.
The strategy currently manages $2.7
billion and has significantly outperformed
its peers. Within our discretionary
business, we are embedding quantitative
techniques to enrich the fundamental
process of the portfolio managers.
Following the centralisation of much of
our trading and execution function last
year, we continue to focus on building
our own firm-wide centre of execution
excellence in trading, trading technology
and trading research. Efficient execution
is key to the success of our business
and to the delivery of performance for
clients. It enables them to capture more
of the alpha that our portfolio managers
Relative performance (%)
are generating. It also enables continued
innovation, for example, the expanded use
of machine learning, which is helping us
to trade more efficiently on behalf of our
clients and to capture more of the alpha
that our portfolio managers are seeking.
Leveraging our firm’s technology and data
science expertise, we have continued
to build out our responsible investment
capabilities. We introduced Man Group
ESG Analytics, our proprietary tool allowing
investment teams to assess ESG risk across
both traditional and alternative investment
strategies, and which integrates an ESG
data scoring system developed in-house by
Man Numeric. Moreover, the Responsible
Investment team has been expanding
and enhancing Man Group’s stewardship
and corporate action efforts, developing
processes that allow for engagement in a
way that is practical, achievable and relevant
to the firm’s diverse investment strategies.
Efficient and effective operations
Our central infrastructure is the foundation
on which the firm operates. This includes
our proprietary central operational platform,
which enables us to evolve and adapt as
markets and our clients’ needs do, as well
as our infrastructure teams more broadly,
which include enterprise and trading
technology, compliance, legal, human
resources, finance and operations functions.
As well as its ongoing benefits, our
infrastructure positions us to integrate
acquisitions or new teams rapidly, with the
potential for significant operational cost
synergies while preserving the investment
process. We continue to review a large
number of acquisition opportunities to
0.2%
0.6%
Discretionary long-only (excluding Japan)
Absolute return
(0.6)%
Japan long-only
(0.6)%
Emerging market debt
(0.6)%
(0.1)%
Systematic long-only
Multi-manager solutions
Man Group plc Annual Report 2019
21
Regarding gender diversity specifically, in
2018, Man Group became a signatory to
the Women in Finance Charter, a pledge for
gender balance across financial services.
As part of this, we introduced a target
of at least 25% female representation in
senior management roles by December
2020. We are pleased to report a positive
trajectory, having seen the proportion
of women in senior management roles
increase from 16% in 2016 to 20% at the
end of 2019. We previously set a target
of at least 25% by the end of 2020 and
we expect to increase this target by at
least 1% per year in the years ahead.
We are pleased with the number of
employees who have taken enhanced
parental leave in 2019. We updated our
policy in 2018 so that all new parents at the
firm globally are entitled to 18 weeks’ full
pay. This is not dependent on location or
gender, and applies to both biological and
non-biological new parents. We believe
that these initiatives will allow our people
to take leave at one of the most significant
times in their lives, underscoring our
commitment to enabling our employees
to have a true work-life balance.
I believe that we do our best work for our
clients when we support our employees,
and value their different perspectives and
experience. I would like to thank everyone
at Man Group for their contribution to
the progress we made during 2019.
Outlook³
Over the course of the year, we saw
continued inflows into our alternative
strategies, although overall we recorded a
small outflow as our clients reduced their
equity allocations. In the fourth quarter, we
returned to net inflows and that momentum
has continued into this year.
We continue to enhance the aspects of our
business that differentiate us by investing
in talent and innovative new technologies,
enriching our culture, diversifying our
investment capabilities, and developing
deep client relationships. In doing so, we
remain well positioned to help our clients
meet their investment goals and thus deliver
sustainable value for our shareholders.
Luke Ellis
Chief Executive Officer
$1.5bn
returned to shareholders
over five years
30%
of revenues over
that period
~50%
of current
market cap
Returns to shareholders2 ($m)
Buybacks
Dividends
382
200
275
250
100
248
100
175
182
148
345
175
100
150
170
2015
2016
2017
2018
2019
1 The Group’s alternative performance measures are outlined
on pages 148-151.
2 Dividends are shown for the related financial year and
buybacks are shown in the year of announcement
3 Past performance is not indicative of future results. Returns
may increase or decrease as a result of currency.
fluctuations. Performance figures are shown net of
representative management and performance fees.
expand our product and geographic reach.
In May 2019 we successfully completed
the corporate reorganisation announced
in October 2018. Our structure is now
consistent with other global asset managers,
providing us with more flexibility in financing
the business. In line with other global asset
managers, we view our net financial assets¹
as the best summary of our balance sheet
position. The reorganisation has enabled us
to look at more efficient ways of financing
the seeding book and provided us with
greater capital flexibility going forward.
People and culture
We are fundamentally a people business.
To best serve our clients and shareholders,
attracting and retaining the best people and
creating an environment in which they can
achieve their potential remain top priorities for
us. We place great importance on being an
employer of choice and a good place to work
for all employees.
We are a true meritocracy where we succeed
through talent, commitment, diligence
and teamwork. We are committed to
supporting our employees so that everyone
at Man Group has the opportunity to be
the best they can be. Over the past 18
months, we have developed a dedicated
talent function separate to HR which
focuses on helping our people achieve
their potential, individually and as teams.
We also believe that by celebrating
diversity and building an inclusive working
environment, we can attract the best talent
to our business and encourage original
and collaborative thinking with multiple
and differing perspectives which position
us to deliver results for our clients. We
are committed to increasing diversity in
all forms, at all levels, because we think it
makes Man Group a better, stronger firm.
We operate Drive, an employee-led diversity
and inclusion network, which seeks to
inform, support and inspire our people.
Through reporting annually on our
commitment to diversity and inclusion,
we assess and monitor the progress of
our strategy in this area over time. We
introduced Paving the Way, our campaign
for enhancing diversity at the firm and
across the industry more broadly. When it
comes to achieving real change in diversity
in the industry, there is no doubt that a
less diverse pool of potential candidates is
an inhibitor. We believe that we can, and
must, take steps to address this ‘pipeline’
issue proactively. We have introduced a
number of initiatives to support this in recent
years, and our Paving the Way campaign
seeks to build our efforts in this area.
Strategic report 22 Our strategy
Driving sustainable
growth and
generating value
We have four strategic pillars
that drive value for the Group.
Innovative
investment
strategies
Strong client
relationships
Efficient
and effective
operations
Returns
to shareholders
We are an active investment management firm
focused on delivering attractive performance
and client portfolio solutions.
The backdrop for active asset managers today sees increasing allocations
to passive investment strategies and a decline in average revenue margins.
Our strategic priorities focus on what drives the success of our business against
that industry backdrop. Firstly, we need innovative investment strategies
to deliver outperformance as markets evolve. Genuinely active managers need
to outperform or clients will move to competitors, whether active or passive.
Secondly, we need strong client relationships to understand clients’ needs
and ensure we are offering solutions that meet them. Thirdly, we have to have
efficient and effective operations, particularly given that backdrop of declining
revenue margins, to translate performance for clients to growth in profitability.
If we deliver on our first three priorities then we will grow our management fee
and performance fee profitability over time. These profits drive our fourth priority
of returns to shareholders, whether through dividends, capital returns or
reinvestment in the business.
Our strategies underperformed competitors in 2019, while also delivering strong
absolute gains for clients. We remain confident in the strength of our investment
capability. We have outperformed by 6.2% over 5 years, and we devote significant
resources to research and innovation. We also saw small outflows from clients
during the year. This reflects weaker short-term performance compared to
competitors and the broader outflows from the active industry. We have seen
$20 billion of total net inflows over the past three years against a backdrop of
industry outflows. We are continuing to invest in our client servicing capability,
particularly in North America to continue to outperform competitors. We remain
focused on efficiency, delivering a reduced compensation ratio and fixed cash
costs below guidance in 2019. Our strong absolute performance for clients has
also delivered strong profit growth, with core profitability at a ten year high in 2019.
That profit growth supports our returns to shareholders with $1.5 billion returned
through dividends or buybacks in the past 5 years.
The Group’s alternative performance measures are outlined on pages 148-151.
Strategic priority
Innovative investment
strategies
Description
Generating outperformance for clients
through high quality research, developing our
people, and the strength of our technology.
How we performed in 2019
• Absolute performance was strong in 2019
with $10.1 billion of investment gains for
clients, and closing FUM of $117.7 billion
• Man GLG performance was impacted
by underperformance of larger valuation-
focused strategies, reflecting the broader
market environment
• Continued growth in Man AHL, with
TargetRisk strategy being a notably
strong performer
• Appointed a Chief Investment Officer
for ESG at Man Group to further develop
our capabilities and strengthening our
commitment to ESG
• Number of new strategies seeded with
a focus on income-generating strategies,
whether quantitative or discretionary.
In addition we completed the work
developing a multi-strategy hedge fund
using capabilities from across the firm
• Improvement in trading and execution
process continues, delivering improved
outcomes for clients
+28.4%
performance of AHL
TargetRisk in 2019
Objectives for 2020
• Improve consistency of performance
within Man GLG and Man Numeric
• Develop new strategies, particularly
through collaboration between the
capabilities of Man AHL, Man FRM,
Man GLG, Man Numeric and Man GPM
• Continue deployment of machine learning
techniques to aid investment decision-
making and to reduce execution
and trading costs
• Generate incremental high value
add capacity in Man AHL
Strategic priority
Strong client
relationships
Description
Strategic priority
Efficient and
effective operations
Description
Strategic priority
Returns to
shareholders
Description
Building long-term partnerships with
clients, through a single point of contact,
to understand their needs and offer
Building institutional quality technology
and infrastructure, providing scalable
options for growth, whilst operating the
Generate excess capital to either return
or re-invest to maximise long-term returns
to shareholders.
solutions across our range of strategies.
business efficiently.
How we performed in 2019
How we performed in 2019
How we performed in 2019
• Continued growth in clients investing
• Fixed cash costs were better than target
• Completed corporate reorganisation
across our products, with 72% of FUM
from clients in two or more products,
45% in four or more products
• Hired additional talent in sales and
provided improved development
and training across all levels
• Effort to increase the delivery of content
from around the firm to clients to broaden
and strengthen client relationships
in 2019
• Investment in our technology continued
on both investment and support side
of the firm. Successful go live and
which provides greater flexibility for the
Group going forward
• $214 million of adjusted performance
fee profit before tax¹ generated in 2019
adoption of new finance and HR system
vs $34 million in 2018
• Man Group’s investment managers
• Completed the $100 million share
trade across many different asset
classes, geographies and product
styles. We invest in technology to
improve performance for clients
through central trading and execution
• Culture remains a key focus for the
firm with continued effort devoted to
our Drive networks and Paving the Way
campaign. We monitor culture through
a regular survey, Board engagement
and day-to-day management focus
repurchase announced in October 2018
• In October 2019 announced our intention
to repurchase a further $100 million
of shares
• Refinanced and converted our revolving
credit facility which is now ESG-linked
$22.3bn
cumulative net flows
over the past 3 years
43%
$1.5bn
compensation ratio, versus
48% in 2018, driven by significant
increase in performance fees
returned to shareholders
through dividends and buybacks
over the past 5 years
Objectives for 2020
Objectives for 2020
Objectives for 2020
• Attract and develop talent in sales,
• Continued focus on our cost base
• Maintain focus on balance sheet efficiency
focusing on hiring required additional
people and providing relevant training
and development across all levels
to ensure we run the business efficiently
while addressing risks and opportunities
and active management of capital
• Generate additional capital through
• Selective investment in certain areas of
performance fee profits
• Target resources effectively, balancing
the Group, particularly in Man GPM and
near-term sales and asset retention with
distribution in North America to accelerate
the need to build the business longer term
our growth in private markets and extend
from a product and client perspective
our reach among North American clients
• Assess capital returns alongside any
potential acquisition opportunities to
ensure the best risk-adjusted investment
of capital
• Broaden and deepen existing client
relationships and continue to develop
relationships with key target clients
• Further develop and expand North
American distribution capabilities
1 The Group’s alternative performance measures
are outlined on pages 148-151.
Man Group plc Annual Report 2019 For more information on how KPIs relate to our strategy
go to page 24
For more information on how Risks relate to our strategy
go to page 34
23
Strategic priority
Innovative investment
strategies
Description
Generating outperformance for clients
through high quality research, developing our
people, and the strength of our technology.
How we performed in 2019
• Absolute performance was strong in 2019
with $10.1 billion of investment gains for
clients, and closing FUM of $117.7 billion
• Man GLG performance was impacted
by underperformance of larger valuation-
focused strategies, reflecting the broader
market environment
• Continued growth in Man AHL, with
TargetRisk strategy being a notably
strong performer
• Appointed a Chief Investment Officer
for ESG at Man Group to further develop
our capabilities and strengthening our
commitment to ESG
• Number of new strategies seeded with
a focus on income-generating strategies,
whether quantitative or discretionary.
In addition we completed the work
developing a multi-strategy hedge fund
using capabilities from across the firm
• Improvement in trading and execution
process continues, delivering improved
outcomes for clients
+28.4%
performance of AHL
TargetRisk in 2019
Objectives for 2020
• Improve consistency of performance
within Man GLG and Man Numeric
• Develop new strategies, particularly
through collaboration between the
capabilities of Man AHL, Man FRM,
Man GLG, Man Numeric and Man GPM
• Continue deployment of machine learning
techniques to aid investment decision-
making and to reduce execution
and trading costs
• Generate incremental high value
add capacity in Man AHL
Strategic priority
Strong client
relationships
Strategic priority
Efficient and
effective operations
Strategic priority
Returns to
shareholders
Description
Building long-term partnerships with
clients, through a single point of contact,
to understand their needs and offer
solutions across our range of strategies.
Description
Building institutional quality technology
and infrastructure, providing scalable
options for growth, whilst operating the
business efficiently.
Description
Generate excess capital to either return
or re-invest to maximise long-term returns
to shareholders.
How we performed in 2019
How we performed in 2019
How we performed in 2019
• Continued growth in clients investing
• Fixed cash costs were better than target
• Completed corporate reorganisation
across our products, with 72% of FUM
from clients in two or more products,
45% in four or more products
• Hired additional talent in sales and
provided improved development
and training across all levels
• Effort to increase the delivery of content
from around the firm to clients to broaden
and strengthen client relationships
in 2019
• Investment in our technology continued
on both investment and support side
of the firm. Successful go live and
adoption of new finance and HR system
• Man Group’s investment managers
trade across many different asset
classes, geographies and product
styles. We invest in technology to
improve performance for clients
through central trading and execution
• Culture remains a key focus for the
firm with continued effort devoted to
our Drive networks and Paving the Way
campaign. We monitor culture through
a regular survey, Board engagement
and day-to-day management focus
which provides greater flexibility for the
Group going forward
• $214 million of adjusted performance
fee profit before tax¹ generated in 2019
vs $34 million in 2018
• Completed the $100 million share
repurchase announced in October 2018
• In October 2019 announced our intention
to repurchase a further $100 million
of shares
• Refinanced and converted our revolving
credit facility which is now ESG-linked
$22.3bn
cumulative net flows
over the past 3 years
43%
compensation ratio, versus
48% in 2018, driven by significant
increase in performance fees
$1.5bn
returned to shareholders
through dividends and buybacks
over the past 5 years
Objectives for 2020
Objectives for 2020
Objectives for 2020
• Attract and develop talent in sales,
• Continued focus on our cost base
• Maintain focus on balance sheet efficiency
focusing on hiring required additional
people and providing relevant training
and development across all levels
• Target resources effectively, balancing
near-term sales and asset retention with
the need to build the business longer term
from a product and client perspective
to ensure we run the business efficiently
while addressing risks and opportunities
• Selective investment in certain areas of
the Group, particularly in Man GPM and
distribution in North America to accelerate
our growth in private markets and extend
our reach among North American clients
and active management of capital
• Generate additional capital through
performance fee profits
• Assess capital returns alongside any
potential acquisition opportunities to
ensure the best risk-adjusted investment
of capital
• Broaden and deepen existing client
relationships and continue to develop
relationships with key target clients
• Further develop and expand North
American distribution capabilities
1 The Group’s alternative performance measures
are outlined on pages 148-151.
Strategic report 24 Key performance indicators
Measuring our success
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.
For more information see the
Directors’ Remuneration
Report on pages 80–84.
Investment
performance
Target
0-2%
Target not met
2019
2018
-1.1%
1.0%
Link to strategy
• Innovative investment
strategies
• Returns to
shareholders
What we measure
The asset weighted
performance¹ of Man Group’s
strategies compared to
peers gives an indication
of the competitiveness of
our investment performance
against similar alternative
investment styles offered by
other investment managers.
How we performed
We had asset weighted
underperformance of 1.1% in
2019, despite strong absolute
performance, and therefore we
did not achieve this KPI target.
Net
flows
Target
1-6%
Target not met
2019
-1.2%
2018
9.9%
Link to strategy
• Innovative investment
strategies
• Strong client
relationships
• Returns to
shareholders
Go to page
19
Go to page
28
What we measure
Net flows¹ are the measure of
our ability to attract and retain
investor capital. FUM drives
our financial performance
in terms of our ability to
earn management fees.
How we performed
Net outflows of 1.2% in 2019
are below the target range, and
indicative of the challenging 2019
fund raising environment for
active long-only equity strategies.
Net flows of 9.9% and 15.8%
in 2018 and 2017 respectively
were particularly strong.
Change to net flows KPI
The net flows KPI will change to
relative net inflows for the 2020
financial year, in order to reflect
benchmark performance against
industry peers. This KPI will
therefore better represent
performance that management
can control. This aligns with the
Directors’ Remuneration policy
(see page 84).
1 Details of the calculation of our alternative performance measures are provided on pages 148–151.
2 The target range for 2018 was $272m–$473m. The target range for each financial year is established by the Board upon approval of the Group’s Medium Term Plan.
Man Group plc Annual Report 2019 25
Core profit
before tax
Target
$234m-$388m
Target met
2019
2018
$384m
$237m2
Link to strategy
• Innovative investment
strategies
• Strong client
relationships
• Efficient and effective
operations
• Returns to
shareholders
What we measure
Core profit before tax¹ is a
measure of overall profitability
and cash generation. This
measure excludes legacy
income streams in relation
to guaranteed products and
profits from Nephila, so better
represents the core business
of Man Group today. As this
incorporates both management
and performance fee profits,
it reflects that performance
fees, although volatile in nature,
are a key earnings stream for
Man Group and a significant
component of value creation
for shareholders over time.
How we performed
Core profit before tax of
$384 million for 2019 was at
the upper end of the target
range, reflecting our strong
performance fee generation.
Adjusted management
fee EPS growth
Target
5-12%
Target not met
2019
2018
-16.9%
9.3%
Link to strategy
• Innovative investment
strategies
• Strong client
relationships
• Efficient and effective
operations
• Returns to
shareholders
What we measure
Adjusted management fee EPS¹
growth in the year measures
the overall effectiveness of our
business model, and drives both
our dividend policy (outlined
on page 33) and the value
generation for shareholders from
our more stable earnings stream.
How we performed
The adjusted management fee
EPS decline of 16.9%, from
11.8 cents to 9.8 cents, did
not meet the target range for
2019. The decline in adjusted
management fee EPS is
largely driven by the lower net
management fee revenues due
to a decline in net management
fee margins and certain non-
operating headwinds, partially
offset by the impact of share
repurchases which reduce
the number of shares.
Go to page
31
Go to page
151
Strategic report
26 Chief Financial Officer’s review
Returns to shareholders over five years
$1.5bn
Core profit before tax¹
$384m
2018: $237m
+62%
Performance fee revenues
$325m
2018: $127m
+156%
We continue to generate and
return strong cash profits to
shareholders, with the value
of our performance fee earning
capabilities reflected in 2019.
Mark Jones
Chief Financial Officer
Man Group plc Annual Report 2019 27
Overview
Our funds under management grew by $9.2 billion to $117.7 billion
in 2019, largely due to positive absolute performance for our clients
of $10.1 billion, partially offset by net outflows of $1.3 billion
driven by our long-only strategies off the back of weaker relative
performance in the short term. Performance fee generation was
strong with $325 million earned in the year compared to $127 million
in 2018. Our relative performance was around 1.1% below our peers,
with absolute return outperforming but our long-only strategies
underperforming given their valuation focus and the more
challenging environment for such strategies.
Net management fee revenue¹ was $753 million for the year, a
decrease of 5% from prior year despite average FUM remaining flat.
This was largely driven by margin compression due to the change
in mix during the year. Performance fee revenues of $325 million
were largely generated by Man AHL’s Dimension, Alpha and
Evolution strategies. We made a gain of $20 million on our seed
book, compared to a loss of $5 million in 2018.
Total costs were $710 million, up from $657 million in 2018, largely
as a result of higher performance fee related variable compensation
and higher fixed compensation due to increases in headcount, as well
as non-operating impacts from foreign exchange headwinds on fixed
costs (due to a less favourable US dollar to sterling hedged rate in
2019) and the higher accounting charges as a result of the adoption
of the new IFRS 16 leases accounting standard from 2019 (see
page 30 for further details).
We are pleased to report the successful completion of a number of
specific initiatives during 2019. In addition to the Group reorganisation
which took effect in May 2019, we successfully implemented a new
cloud-based finance and HR system. We are proud to have delivered
these projects, which adjust our structure to align with the global
nature of our business today, and ensure we are using technology
to improve how we operate all facets of the firm. We also refinanced
the Group’s revolving credit facility in December 2019, which now
incorporates specific ESG targets (see further detail on page 54).
Statutory profit before tax
Statutory earnings per share
Adjusted profit before tax1
Core profit before tax1
Adjusted earnings per share1
Adjusted management fee profit before tax1
Adjusted performance fee profit before tax1
Year ended
31 December
2019
$307m
18.4¢
$386m
$384m
21.1¢
$172m
$214m
Year ended
31 December
2018
$278m
17.0¢
$251m
$237m
13.5¢
$217m
$34m
Statutory profit before tax increased by $29 million from 2018 driven
by the higher performance fee profits in 2019. Please note 2018
included a non-recurring gain of $113 million on the sale of our stake
in Nephila. The increase in adjusted profit before tax¹ and adjusted
earnings per share¹ was driven by our performance fees. Core profit
before tax¹, which excludes legacy business profits, reached a ten
year peak in 2019 (see page 31).
Our balance sheet remains strong and liquid, with net tangible
assets of $739 million or 48 cents per share at 31 December 2019,
and net financial assets¹ of $674 million (see page 33 for further detail).
We have a net cash (cash less borrowings) position of $220 million
(2018: $194 million) and continue to be strongly cash generative, with
operating cash flows of $483 million (2018: $319 million). We have
reduced certain liabilities in 2019 following the repayment of our Tier 2
notes of $150 million, as well as the final Man Numeric earn-out
payment of $154 million which completes this successful 2014
acquisition (see page 20 for more detail). We have returned over
$1.5 billion to shareholders via dividends and share repurchases
over the past five years (see page 21) and continue to focus on
ensuring the business generates strong cash flows which we can
in turn reinvest or return to shareholders.
1 The Group’s alternative performance measures are outlined on pages 148–151.
Adjusted profit before tax1 ($m)
223
(27)
386
251
(12)
(15)
(26)
(8)
2018
Guaranteed and
associate income
FX and
lease impact
Reduced core net
management fee
revenues
Other cost
increases
Increase in
performance fees
Increase in
variable
compensation
2019
Strategic report 28
Chief Financial Officer’s review continued
Funds under management (FUM)
$bn
Alternative
Long-only
Total excluding Guaranteed
Guaranteed
Total
Absolute return
Total return
Multi-manager solutions
Total
Systematic
Discretionary
Total
Absolute return
Absolute return FUM increased by 6% largely as a result of positive
investment performance, driven by AHL’s momentum strategies,
Evolution, Dimension and Alpha. Outflows from Man GLG’s alternative
strategies were partially offset by inflows into Man AHL Institutional
Solutions. Other movements primarily relate to leverage changes.
Total return
Total return FUM increased by 20% due to net inflows of $4.6 billion.
Net inflows included $2.8 billion into alternative risk premia strategies
and $1.5 billion into Man AHL’s TargetRisk strategy, with these
strategies also generating the positive absolute performance in
the year. Our global private markets FUM remained broadly flat.
Other movements relate to CLO and global private markets
maturities during the year.
Multi-manager solutions
Multi-manager solutions FUM increased by $0.5 billion, with positive
investment performance from infrastructure mandates and other
movements, partially offset by net outflows. Net outflows are largely
due to a $1.3 billion redemption from a segregated mandate being
partially offset by inflows of $1.0 billion into infrastructure mandates.
FUM at
31 December
2018
28.9
22.5
13.5
64.9
24.7
18.8
43.5
108.4
0.1
108.5
Net inflows/
(outflows)
(0.6)
4.6
(0.4)
3.6
(1.8)
(3.0)
(4.8)
(1.2)
(0.1)
(1.3)
Investment
movements
1.8
0.4
0.5
2.7
4.8
2.6
7.4
10.1
–
10.1
Foreign
currency and
other
movements
0.4
(0.5)
0.4
0.3
(0.2)
0.3
0.1
0.4
–
0.4
FUM at
31 December
2019
30.5
27.0
14.0
71.5
27.5
18.7
46.2
117.7
–
117.7
Systematic long-only
Systematic long-only FUM increased by 11% to $27.5 billion, driven
by positive absolute investment movements across all strategies.
Net outflows of $1.8 billion were from institutional clients across a range
of strategies, off the back of weaker relative short-term performance.
Discretionary long-only
Discretionary long-only FUM ended the year broadly flat. Net outflows
of $3.0 billion were mainly due to redemptions from Man GLG’s Japan
CoreAlpha and US equity strategies and single investor mandates.
Equity market moves were the main driver for positive absolute
performance of $2.6 billion.
Guaranteed products
Guaranteed product FUM reduced from $100 million to $39 million
during the year as a result of maturities.
Man Group plc Annual Report 2019
29
Revenue
Net management fee margins and revenue
The Group’s total net management fee margin¹ decreased by three
basis points during the year to 67 basis points, with the reduction
continuing to be driven by mix effects.
Within their categories, net management fee margins stayed broadly
in line with the prior year, with the exception of absolute return and
multi-manager solutions which continued their gradual decline over
recent years. The absolute return net management fee margin
decreased by seven basis points to 120 basis points as a result of the
continued mix shift towards institutional assets which are at a lower
margin. The multi-manager solutions net management fee margin
decreased to 31 basis points in 2019, from 36 basis points in 2018,
as a result of Man FRM’s continued shift towards a solutions provider
from traditional fund of funds manager. We expect this to decline
further as the shift towards lower margin services continues.
The systematic run rate net management fee margin has declined,
following a period of stability, as clients adjusted their allocations
in the latter part of the year.
The Group’s run rate net management fee margin¹ at 31 December
2019 was 65 basis points, and the run rate net management fee
revenue¹ (which applies internal analysis of run rate margins to
31 December 2019 FUM) was $771 million (31 December 2018:
$751 million). This has increased from 2018 as a result of higher
closing FUM, partially offset by a decrease in run rate net
management fee margin.
Core net management fee revenue¹ decreased by 3% to $751 million
in 2019, driven by the decline in our average margin as outlined
opposite. We sold our remaining stake in Nephila in late 2018,
generating a gain on sale of $113 million, and therefore no longer
receive a share of associate profits.
$m
Absolute return
Total return
Multi-manager solutions
Systematic long-only
Discretionary long-only
Core net management fee revenue1
Guaranteed
Share of post-tax profit of associates
Net management fee revenue1
Year ended
31 December
2019
354
139
43
93
122
751
2
–
753
Year ended
31 December
2018
370
111
54
97
145
777
7
7
791
Performance fees and investment gains and losses
Performance fees for the year were $325 million compared to
$127 million in 2018, which included $291 million from Man AHL
(2018: $92 million), $34 million from Man GLG (2018: $31 million),
with no performance fees from each of Man Numeric (2018:
$2 million), Man FRM (2018: $2 million) and Man GPM (2018: nil).
Investment gains of $20 million (2018: losses of $5 million) primarily
relate to gains on seed investments. The seeding book was $514 million
at year end, down from $662 million in 2018, partially as a result of the
use of total return swaps whichhough reducing our investment, mean
we retain the risk exposure (see page 32). We had $62 million
of exposure via total return swap (TRS) at year end.
1 The Group’s alternative performance measures are outlined on pages 148–151.
Net management fee margin1 (bps)
138
127
120 120
56
57
56
57
45
36
31
27
36
36
35
31
67
69
67
68
75
70
67
65
2017 2018 2019 Run
rate
2017 2018 2019 Run
rate
2017 2018 2019 Run
rate
2017 2018 2019 Run
rate
2017 2018 2019 Run
rate
2017 2018 2019 Run
rate
Absolute return
Total return
Multi-manager solutions
Systematic
Discretionary
Group (excl. Guaranteed)
Alternatives
Long-only
Strategic report 30
Chief Financial Officer’s review continued
Summary income statement
$m
Gross management and other fees1
Share of post-tax profit of associates
Distribution costs
Net management fee revenue
Performance fees1
Gains/(losses) on investments1
Sub-lease rental income2
Net revenue
Asset servicing
Fixed compensation3
Variable compensation
Other costs – cash costs1,2
Other costs – depreciation and amortisation2
Total costs
Net finance expense2,3
Adjusted profit before tax3
Adjusting items3 (see page 31)
Statutory profit before tax
Adjusted management fee profit
before tax3
Adjusted performance fee profit
before tax3
Core profit before tax3
Statutory diluted EPS
Adjusted management fee EPS3
Adjusted EPS3
Year ended
31 December
2019
791
–
(38)
753
325
20
14
1,112
(55)
(193)
(284)
(131)
(47)
(710)
(16)
386
(79)
307
Year ended
31 December
2018
835
7
(51)
791
127
(5)
–
913
(51)
(179)
(257)
(146)
(24)
(657)
(5)
251
27
278
172
217
214
384
18.4¢
9.8¢
21.1¢
34
237
17.0¢
11.8¢
13.5¢
1 Management and other fees, performance fees and other costs exclude amounts for
line-by-line consolidated fund entities (per Group financial statements Note 13.2 on page 128),
with these reclassified to gains/(losses) on investments together with the third-party share.
Refer to pages 148–151 for details of the Group’s alternative performance measures.
2 The 2018 comparatives have not been restated as a result of the adoption of the new leases
accounting standard (IFRS 16) in 2019. See further detail below.
3 The Group’s alternative performance measures are outlined on pages 148–151.
Lease accounting change – impact on other costs,
depreciation and net finance expense
The IFRS 16 change in accounting for leases has brought our office
lease commitments onto the Group’s balance sheet in 2019 and
changed the classification and recognition profile of associated net
costs. Net rental charges for leased premises of around $15 million in
2018, which were previously included net within other costs, are from
2019 recognised through depreciation ($20 million), interest expense
($14 million) and sub-lease rental income ($14 million). Although this
accounting change does not impact the Group’s cash flows, the new
framework has increased the Group’s net lease related costs by
$5 million in 2019.
In addition, the balance sheet recognition of the lease liability may
give rise to accounting foreign exchange exposure in US dollars (the
Group’s reporting currency), largely driven by our Riverbank House
premises which is payable in sterling and expires in 2035. Given this
is an unrealised, non-cash impact, any unrealised foreign exchange
movements arising from the revaluation of these lease liabilities, and
the associated deferred tax, are classified as adjusting items (see
page 31). Additional detail on the new leases accounting standard
is provided in Note 1 to the Group financial statements (page 117).
We anticipate our main sub-tenant in our London office may move to
new premises in 2020. This would require some project expenditure
and increase our sub-let exposure, which we expect would primarily
impact in 2021.
Costs
Asset servicing
Asset servicing costs vary depending on transaction volumes,
the number of funds, and fund NAVs. Asset servicing costs were
$55 million (2018: $51 million), which equates to around 7 basis
points of average FUM, excluding systematic long-only and Man
GPM strategies.
Compensation costs
Total compensation costs, excluding adjusting items³, were $477 million
for the year, up by 9% compared to $436 million in 2018. Overall
compensation costs increased as a result of higher performance fee
revenues, partially offset by lower management fee revenues. Fixed
compensation increased by 8% as a result of the less favourable
hedged US dollar to sterling rate in 2019 (1.36 compared to 1.29 in
2018) and higher average headcount, incorporating the full year impact
of investment in the business during 2018. The overall compensation
ratio³ decreased to 43% in 2019 from 48% in 2018, which reflects the
significant increase in performance fee revenue generated in 2019.
The Group’s compensation ratio is generally between 40% and 50%
of net revenues, depending on the mix and level of revenue. We
expect to be at the higher end of the range in years when absolute
performance fees are low and the proportion from Man Numeric and
Man GLG is higher, and conversely we expect to be at the lower end
of the range when absolute performance fees are high and the
proportion from Man AHL is higher.
Other costs
Other costs, excluding adjusting items as outlined on page 31,
were $178 million for the year (2018: $170 million). Within these,
other cash costs decreased largely as a result of IFRS 16 which drove
reclassification of around $15 million of net lease costs. Depreciation
and amortisation increased by $23 million in 2019, driven by $20 million
of lease related depreciation as well as continued capital investment
across our operating platforms in recent years.
We also incurred a further $7 million of other costs in relation to
completion of the Group’s corporate reorganisation in May 2019,
in addition to the $3 million recognised in 2018, which are included
as adjusting items on page 31.
As previously communicated, we are no longer hedging our fixed
costs to US dollars from 2020 onwards, and therefore our US dollar
cost base will be impacted by currency moves during the year
from now on. For the year to 31 December 2019, we had sterling
denominated net management fee revenues of around $114 million
and costs of $190 million.
Net finance expense
Net finance expense, excluding the unwind of discount on contingent
consideration which is classified as an adjusting item1, increased
to $16 million from $5 million in 2018 due to an additional $14 million
of unwind of discount recognised on the Group’s lease liabilities (see
opposite), partially offset by a decrease due to a partial year of interest
on the Tier 2 notes which were repaid in September 2019. We expect
the Tier 2 repayment together with the Group’s use of TRSs from
2019 (see page 33) to generate around $5 million of annual net
interest savings.
Man Group plc Annual Report 2019 31
Tax
The majority of Man Group’s profits are earned in the UK, with
significant profits also arising in the US, where our tax rate is effectively
nil as a result of available tax assets, and in Switzerland, which has
a lower rate than the UK.
The underlying rate on adjusted profit of 15% (2018: 14%) represents
the statutory tax rates in each jurisdiction in which we operate,
including nil for the US, applied to our geographical mix of profits.
The adjusted tax rate¹ was 15% (2018: 14%).
Tax on statutory profit for the year was $22 million (2018: $5 million),
which equates to a statutory effective tax rate of 7% (2018: 2%).
The increase in the tax rate is largely due to the gain on the sale
of Nephila in 2018 not being subject to tax under UK tax legislation,
partially offset by higher US deferred tax asset recognition in 2019.
In the US, we have accumulated federal tax losses as well as tax
deductible goodwill and intangibles of $89 million (2018: $108 million),
which can be offset against future US profits and will therefore reduce
taxable profits. The Group has recognised all $89 million of these US
deferred tax assets on the balance sheet at 31 December 2019 (2018:
$62 million recognised), which has resulted in a $27 million credit to
the tax expense in the year (2018: $20 million). We expect the Group
may begin to pay federal cash taxes on profits earned in the US in the
next three to four years, with the adjusted tax rate¹ remaining at nil until
cash taxes are payable, as movements in the deferred tax asset are
classified as an adjusting item¹. As a result of the earlier recognition
of these US deferred tax assets the 2020 statutory effective tax rate
on US profits is expected to be materially in line with the prevailing
US federal tax rate.
The principal factors that we expect to influence our future underlying
tax rate are the mix of profits by tax jurisdiction, changes to applicable
statutory tax rates, including in the UK, and the consumption of US tax
assets. As a result of the recognition of the US deferred tax assets
in full, should the earnings profile of the Group in the US increase
significantly in the future, the adjusted tax rate for the Group would
then be affected by the prevailing corporation tax rate in the US
and the proportion of the Group’s profits generated in the US.
The underlying tax rate in 2020 is currently expected to remain
consistent with 2019, dependent on the factors outlined above.
Adjusted profit before tax
and core profit before tax
Adjusted profit before tax¹ was $386 million compared to $251 million
in 2018. The majority of this relates to core profit before tax¹ of
$384 million, which excludes legacy business profits from guaranteed
products and associate income from adjusted profit before tax in
order to better represent our core business, which increased by
$147 million from $237 million in 2018. In 2019 our core profitability
reached a ten year peak (see below), driven by our strong
performance fee generation (further detail is provided in the
KPIs section on page 25).
Adjusting items¹ pre-tax in the year totalled a net expense of $79 million
(2018: net gain of $27 million), as summarised below. The directors
consider that the Group’s profit is most meaningful when considered
on a basis which reflects the revenues and costs that drive the
Group’s cash flows and inform the base on which the Group’s variable
compensation is assessed, and therefore excludes acquisition and
disposal related items (including non-cash items such as amortisation
of purchased intangible assets and deferred tax movements relating
to the recognition of tax assets in the US), impairment of assets, costs
relating to substantial restructuring plans, and certain significant event
driven gains or losses.
Core profit before tax1 ($m)
450
400
350
300
250
200
150
100
50
0
2015
2016
2017
2018
2019
Adjusting items¹
$m
Revaluation of contingent consideration creditors
Unwind of contingent consideration discount
Unrealised foreign exchange movements on lease liabilities
Compensation restructuring costs
Other restructuring costs
Gain on sale of Nephila
Amortisation and impairment of acquired intangible assets
Total adjusting items (excluding tax)
Recognition of US deferred tax asset (see opposite)
Year ended
31 December
2019
37
(18)
(10)
1
(7)
1
(83)
(79)
27
1 The Group’s alternative performance measures are outlined on pages 148–151.
Strategic report 32
Chief Financial Officer’s review continued
Cash earnings
Balance sheet
Given the strong cash conversion of our business, we believe our
adjusted profit after tax is a good measure of our underlying cash flow
generation, although the timing of cash conversion is impacted by the
seasonal movements in our working capital position through the year
and the size of our seeding book over time. Operating cash flows,
excluding working capital movements, were $465 million during
the year and cash balances at year end were $220 million¹.
$m
Opening cash¹
Operating cash flows before working capital
movements, excluding contingent
consideration
Working capital movements
(excluding seeding)
Working capital movements – seeding¹
Payment of dividends
Share repurchase (including costs)
Repayment of Tier 2 notes
Payment of acquisition related contingent
consideration
Proceeds from sale of investment
in Nephila
Other movements
Cash at year end¹
Year ended
31 December
2019
344
Year ended
31 December
2018
356
465
(127)
145
(152)
(92)
(150)
(169)
1
(45)
220
311
201
(193)
(189)
(211)
–
(25)
140
(46)
344
1 Excludes cash relating to consolidated fund entities (Note 13.2 to the Group financial
statements).
Working capital movements in 2019 principally relate to the year-on-
year increase in performance fee receivables and a reduction in the
Group’s seeding portfolio (which includes the impact of the Group’s
use of total return swaps). We had two significant one-off cash outlays
in the year as a result of repayment of the Tier 2 notes and our final
deferred consideration payment in relation to the Group’s 2014
acquisition of Numeric.
As at 31 December 2019, the Group’s cash, less those balances
ring-fenced for regulatory purposes, amounted to $186 million and
the undrawn committed revolving credit facility, which was refinanced
in December 2019 and now matures in 2024, was $500 million.
The management of liquidity is explained in Note 12 to the Group
financial statements.
The Group has a strong and liquid balance sheet. Fees and
other receivables have increased as a result of the higher level of
performance fees earned in December compared to the prior year.
Payables have decreased due to the final Numeric earn-out payment,
partially offset by an increase in compensation accruals. The decrease
in investments in funds is driven by seeding investments, as outlined
below. As outlined on page 30, the adoption of IFRS 16 has led to a
gross up of the Group’s balance sheet with a right-of-use lease asset
and associated lease liability being recognised for the first time in 2019
(resulting in a net liability position of $98 million at 31 December 2019).
$m
Cash and cash equivalents2
Fee and other receivables2
Payables2
Net investments in fund products and other
investments2
Pension asset
Right-of-use lease asset
Leasehold improvements and equipment
Total tangible assets
Borrowings
Lease liability
Net deferred tax asset
Net tangible assets3
Goodwill and other intangibles
Shareholders’ equity
31 December
2019
220
424
(570)
31 December
2018
344
286
(733)
615
16
209
40
954
–
(307)
92
739
885
1,624
752
24
–
46
719
(150)
–
60
629
964
1,593
2 Cash and cash equivalents, fees and other receivables and payables balances exclude
amounts relating to line-by-line consolidated fund entities. These are presented net within
net investments in fund products and other investments, together with third-party interest
in consolidated funds and non-current assets and liabilities held-for-sale (see Group financial
statements Note 13.2 on page 128).
3 Equates to net tangible assets per share of 48 cents (2018: 39 cents).
Seeding investments
Man Group uses capital to invest in new products to assist in the
growth of the business. At 31 December 2019, the Group’s seeding
investments were $514 million (refer to Note 13 to the Group financial
statements), which have decreased from $662 million at 31 December
2018 as a result of the use of total return swaps to finance certain seed
investments (total exposure of $62 million at 31 December 2019) and
other net decreases as a result of funds being marketed to clients.
Man Group plc Annual Report 2019 33
Capital management
Capital management, including dividends
and share repurchases
We successfully reorganised the Group’s structure in May 2019,
with Man Group’s worldwide group consequently no longer subject
to UK consolidated supervision, consistent with other global asset
managers. This has provided us with more flexibility in financing the
business, and led to the calling of our $150 million Tier 2 notes in
September as we no longer require qualifying capital instruments
to finance the business. In addition, we have started to use total return
swaps in financing some of our seed book, which has the effect of
releasing liquidity while maintaining the risk exposure and commercial
benefit of our seeding programme.
During the year we completed the $100 million share repurchase
announced in October 2018, and in October 2019 announced our
intention to repurchase a further $100 million of shares ($29 million
of shares had been repurchased at 31 December 2019).
We continue to generate strong cash flows. Adjusted management fee
EPS¹ is considered the most appropriate basis on which to routinely
pay ordinary dividends as this represents the most stable earnings
base and underlying cash generation of the business, and as such
the Group’s dividend policy is to pay out at least 100% of adjusted
management fee EPS in each financial year by way of ordinary
dividend. In addition, the Group expects to generate further significant
capital over time, primarily from net performance fee earnings. We
actively manage Man Group’s capital to seek to maximise value to
shareholders and support the Group’s strategy by either investing that
capital to improve shareholder returns in the future, or returning it to
shareholders through higher dividends or share buybacks, after taking
into account required capital (including liabilities for future earn-out
payments) and potential strategic opportunities to ensure we maintain
a prudent balance sheet. Over the past five years we have returned
$825 million through dividends and announced $675 million of share
buybacks for shareholders (see page 21).
We have a capital and liquidity framework which allows us to invest in
the growth of our business. We utilise capital to support the operation
of the investment management process and the launch of new fund
products. We monitor our capital requirements through continuous
review of our regulatory and economic capital, including monthly
reporting to the Risk and Finance Committee and the Board.
We have maintained prudent capital and available liquidity throughout
the year. The Group’s $500 million revolving credit facility provides
additional liquidity (see Note 12 to the Group financial statements
on page 126). We view our net financial assets¹ as the best summary
of our balance sheet position (comprising cash and seed investments,
excluding repos, less borrowings and contingent consideration).
At 31 December 2019, net financial assets were $674 million, up
from $644 million in 2018.
The Board is proposing a final dividend for 2019 of 5.1 cents per share,
in line with our dividend policy, which together with the interim dividend
of 4.7 cents per share equates to a total dividend for 2019 of 9.8 cents
per share, a 17% decrease from 2018. The proposed final dividend
equates to around $76 million, which is more than covered by the
Group’s available liquidity and capital resources. Key dates relating
to the proposed final dividend are provided in the Shareholder
information section on page 152.
Mark Jones
Chief Financial Officer
1 The Group’s alternative performance measures are outlined on pages 148–151.
Net financial assets ($m)
Net financial assets1 ($m)
Total revenue 2019
$79bn
+4.9%
Cash
Seeding
Contingent Creditor
(36)
(24)
674
220
514
Cash and
seeding
Repo obligations
and contingent creditor
Net financial
assets
Cash
Seeding
Repo obligations
Contingent creditor
Strategic report
34 Risk management
A unified approach
Risk management is fully embedded into our approach,
both to the management of funds on behalf of our investors,
and the management of Man Group’s business on behalf
of our shareholders.
Ultimate responsibility for risk management
rests with Man Group’s Board, however
accountability is embedded throughout the
business. Our risk management framework
requires that the business operates within
acceptable risk tolerances, as defined by
the Board’s risk appetite. Our governance
structure provides a foundation for ongoing
oversight in a changing environment.
Independent fund boards are responsible
for protecting the interests of fund investors.
Developments in 2019
Investment underperformance is the
biggest risk facing the Group. Absolute
performance in 2019 was good, particularly
for the Man AHL and equity long-only
products benefiting from rallying markets.
However, relative performance to peers
or benchmarks was weaker, being pulled
down by valuation focused strategies
within Man Numeric and Man GLG’s
Japanese equity and emerging markets
debt strategies. Performance fees rose by
156% compared to 2018, as described on
page 29. Funds under management rose by
$9.2 billion in 2019, as described on page
28, largely driven by rallying equity markets
but there were modest outflows following
weaker short-term relative performance.
Our product offering is supported by our
balance sheet, which we have utilised to
continue the Group’s seeding programme.
2019 saw the launch of several quantitative
and discretionary funds. Whilst the
Group is exposed to a decline in the
value of seed investments, supporting
the development of new products is an
important way to increase and diversify
revenues. We have accessed attractive
swap and repo financing rates for some
of the positions in order to free up liquidity.
Markets in 2019 were better suited
to Man Group’s core strategies, with
rallying bond and equity markets driving
the Man AHL and equity long-only fund
performances. However, valuation focused
investing suffered in the same markets.
The corporate reorganisation completed
in May 2019 led to some enhancements
in the risk governance framework as we
implemented Europe and Rest of World
sub-groups under a Global parent. Man
Group entities continue to be regulated
locally while FCA consolidated supervision
now applies to the Europe sub-group
only. The changes provide more flexibility
to ensure our operational, capital and risk
management frameworks are appropriate
for our evolving global business.
Our operating model is reliant on technology,
therefore the evolving threat from cybercrime
requires ongoing focus for the Group.
We are actively monitoring the situation with
the coronavirus (COVID-19) and have
implemented appropriate precautionary
measures.
In early October, we completed the $100 million
share repurchase programme announced in
October 2018. Later in October, we began a
new share repurchase programme which will
return $100 million of capital to shareholders.
As at 31 December 2019, the programme
was 29% complete.
Man Group’s risk
appetite statements
The risk appetite statements are set by
the Board and cover all significant risk
categories. They apply to both the investment
management functions and Man Group itself.
The statements express the Board’s appetite
for risk, promote a risk aware culture and set
out objectives and boundaries for Man
Group’s business.
The primary goal of risk management is
to support the achievement of the Group’s
objectives by encouraging an appropriate
balance between risk and benefit, in a
controlled and regulatory compliant context.
The governance framework and control
environment within the Group have been
designed to manage risks in accordance
with risk appetite. The Board and Audit and
Risk Committee (ARCom) receive regular
reporting on the Group’s risk profile and
adherence with risk appetite. In the event
that breaches to risk appetite occur, these
would be resolved in line with the Group’s
procedures and processes. The statements
are reviewed periodically by the Board.
The risk appetite statements were reviewed
during 2019 and there were no material
changes to the risk tolerances of the
business. A summary of the risk appetite
statements is available on our website.
Brexit
The UK left the European Union (EU)
on 31 January 2020 and is now in a
transition period where it continues
to follow EU rules while negotiating
the future relationship with the EU. The
UK government has committed to this
transition concluding by the end of 2020.
This process has political, regulatory,
legal and tax implications for the UK
and may impact market access and
general economic conditions in the
UK and other European countries.
Man Group has planned for a range
of Brexit scenarios that may impact
its employees, business or its clients,
including a no-deal at the end of the
transition period. At the beginning of
2019, Man Group received regulatory
approval to upgrade the regulatory
permissions of its existing Irish entity
and opened a physical office in Dublin,
with locally based staff. Branches of the
regulated Irish entity were established
in various European countries. This
has allowed Man Group to remain able
to service its existing European clients
and to access new business in the EU.
Man Group will continue to monitor
developments closely throughout 2020,
and will take necessary steps to ensure
that the impact of the future agreement
on its employees, business and its clients
is minimised.
Climate change
Asset management businesses such as
Man Group have a relatively limited direct
exposure to the consequences of climate
change due to their location and relatively
small physical presence.
The Group’s size also limits its direct
impact on climate change. Nevertheless
Man Group has sought to reduce its
carbon emissions through increased
use of renewable energy and improved
energy efficiency. The Group will
offset its remaining emissions by
contributing to externally audited
carbon reduction projects. Further
details can be found on pages 53-55.
Climate change does carry potentially
significant implications for the underlying
assets in our funds. In light of this,
Man Group’s Responsible Investment
backbone combines formal policy
and organisational frameworks;
active stewardship; a sophisticated
Environmental, Social and Governance
(ESG) analytics platform leveraging Man’s
quantitative capabilities; and proactive,
award-winning educational efforts within
the investment community. Further
details can be found on pages 48-49.
Man Group plc Annual Report 2019 The Medium-Term Plan assessment is
augmented throughout the year by regular
briefings at the ARCom on strategy, risk and
controls, as well as dashboards across risk,
compliance, finance and internal audit. The
principal and emerging risks are considered
within the Board’s risk appetite framework.
During the year, the Board reviewed and
approved the output from the annual refresh
of Man Group’s Risk Governance and
Appetite Framework. This included changes
to the qualitative statements to reflect the May
2019 corporate reorganisation. There was no
material change to the Board’s risk appetite.
35
Whilst the Board retains overall responsibility
for the Group’s risk management and
internal control systems, it has delegated
oversight to the ARCom. The report from
the Chairman of the ARCom on pages
70-75 provides further information on
how the ARCom has discharged its risk
oversight responsibilities during the year.
Corporate reorganisation risk
governance implementation
The corporate reorganisation in May 2019
included the creation of Europe and Rest
of World holding companies and boards.
Each board has its own authorisation
framework to ensure a consistent approach
to business decisions in accordance
with the Group’s risk appetite.
The Risk and Finance Committee
(RAF) continues to be the Group’s
principal mechanism for the sharing and
tracking of risks. There are now three
committees focused on the Global,
Europe and Rest of World entities.
Board oversight of risk
management and internal controls
The Board oversees and monitors the
Group’s risk management and internal
control systems on an ongoing basis and,
at least annually, carries out a review of their
effectiveness. A summary of the Group’s risk
management and internal control systems,
including those relating to the financial
reporting process, is given below.
Objectives and
governance framework
The Group’s risk management framework
and internal control systems aim to safeguard
assets, maintain proper accounting records
and provide assurance that the financial
information used in the business and
published externally is robust and reliable.
The framework is designed to manage key
risks, but cannot eliminate the risk of failure
to achieve business objectives, and can
only provide reasonable and not absolute
assurance against material misstatement
or loss. The risk management framework
and internal control systems, which have
been in place throughout the year and
up to the date of this Annual Report,
comply with the FRC’s Guidance on Risk
Management, Internal Control and Related
Financial and Business Reporting.
Viability statement
The directors believe that there continues
to be robust global demand for asset
management firms, such as Man Group,
to provide fund management services
and make active investment decisions
on behalf of their clients in order to manage
their capital. Man Group’s value-adding
services form the basis of a sustainable
business model.
A failure to deliver superior performance is
the main risk to the Group’s ability to maintain
a capital and liquidity surplus, but is mitigated
through its diversified offerings.
The directors confirm that they have a
reasonable expectation that the Group will
continue to operate and meet its liabilities,
as they fall due, for the next three years.
A three-year period is consistent with the
Group’s business planning horizon.
The directors’ assessment has been made
with reference to the Group’s current
position and prospects, the Group’s
strategy, the Board’s risk appetite and the
Group’s principal and emerging risks and
how these are managed, as described
later in this section of the Annual Report.
The principal risks are linked to each
of the Group’s strategic priorities.
The strategy and associated principal risks
form the basis of the Group’s Medium-Term
Plan. This covers a three-year period, and
includes downside scenario testing.
The Group’s Medium-Term Plan is built
by aggregating the expected business
performance across the Group, and then
stressing key business assumptions
(particularly investment performance
and fund flows).
Three lines of defence
1st
2nd
3rd
Business
management
Compliance
Internal Audit
External Audit
‘In business’
risk management
Risk
Operational
management
The overall risk management framework at Man
Group is based on the three lines of defence model,
and is overseen by the ARCom as delegated by
the Board.
The framework instils the principles of direct
responsibility for risk management in each business
unit. Embedding accountability with each employee
at the business level is the ‘first line of defence’.
The business units are monitored by the Risk
and Compliance control functions which form
the ‘second line of defence’.
The independent review and oversight provided
by Internal Audit is the ‘third line of defence’,
which independently evaluates the adequacy and
effectiveness of the Group’s risk management,
control and governance processes against
best practice.
Although Man Group and the investors in its products
are susceptible to losses, we believe our risk
management framework supports long-term value
through the process of risk-aware decision making.
Strategic report
36
Risk management continued
The Europe entities are regulated on a
consolidated prudential basis by the FCA.
Consequently the Internal Capital Adequacy
Assessment Process (ICAAP) required by the
FCA now applies to the Europe entities and
is owned and approved by the Europe board.
In addition, and as a result of the upgraded
regulatory permissions in Ireland, an ICAAP
for the Irish entity is prepared for the CBI. As
for all regulatory submissions, the ARCom
satisfies itself that the appropriate ICAAP
preparation process steps are being followed.
Financial reporting controls
The Group’s financial controls framework
is designed to provide assurance
that proper accounting records are
adequately maintained and that financial
information used within the business and
for external publication is reliable and
free from material misstatement, thereby
safeguarding the Group’s assets. This
framework is managed through a process
whereby control owners certify that
key preventative and detective controls
have been performed and are operating
effectively. These include balance sheet
reconciliations and the financial statements
preparation process. During the year, senior
management monitored the results of
the certification process and a sample of
the certifications was independently spot
checked each month to provide assurance
that the certifications were correct.
Ongoing risk reporting
The Board receives regular reports from
the chairman of the ARCom, business
management and Group Risk on the
risks to the achievement of the Group’s
operational and financial objectives,
together with assurance that the level
of risk taken is consistent with and being
managed in accordance with the Board’s
risk appetite and with business planning.
These reports include a summary
‘risk dashboard’ and a quantitative
assessment of the downside risks faced
by the Group. The Board reviewed and
discussed the Group’s emerging risks
and Man Group’s response to these.
Specific annual review of risk
management and internal controls
In addition to its ongoing monitoring of
the Group’s risk management and internal
controls, the Board has conducted a
specific annual review of their effectiveness
in respect of 2019 and up to the date of this
Annual Report. This review included a robust
assessment of the Group’s principal and
emerging risks (see details on pages 34-39)
and all significant operational risk events
and Internal Audit findings raised during
the period. The Board also considered the
potential impact of certain risks identified by
the business, the outcome of the Risk and
Control Self Assessment (RCSA) process
performed by business management
and the quality of the controls in place to
mitigate these risks. Following this review,
the Board concluded that the Group’s risk
management processes were effective and
that there were no significant weaknesses
or failings in the system of internal controls.
Assessment of principal
and emerging risks
Our comprehensive risk framework
includes business, credit, liquidity,
market, operational and reputational risks
to both Man Group and our funds.
The Group’s risk profile has not changed
materially in 2019. However, risks linked
to a no-deal Brexit have been a focus.
The Group does not currently have any
integration risk. Business risks continue
to represent the biggest risks to the Group;
of these, investment underperformance is
the single biggest risk facing the Group.
Given its wide range of investment products
and strategies, the Group has to manage a
wide array of operational risks. The breadth
and complexity of the regulations that Man
Group and its funds are subject to across
multiple jurisdictions also represent significant
operational risks should the Group fail to
comply with these regulations. Man Group
supports proportionate and thoughtful
regulation and initiatives that develop the
regulatory environment. However, regulatory
change can also result in increased
operational complexity and costs.
The directors confirm that they have carried
out a robust assessment of the principal and
emerging risks facing the Group, including
those that would threaten its business model,
future performance, solvency or liquidity.
The directors have described and
assessed these principal and emerging
risks on pages 37-39 and explained how
they are being managed or mitigated.
Man Group’s governance
The committees below have been given a mandate by the Board and the CEO to oversee the risk management framework. These committees provide assurance to the
Board that risk has been managed according to the risk appetite statements.
Board
CEO
Audit and Risk Committee
Senior Executive Governance Committee
The Audit and Risk Committee (ARCom) is a committee of the Board which has
oversight of the assurance functions (see pages 70-75 for further detail).
The Senior Executive Governance Committee is accountable for all risks assumed
in the business and is responsible for the execution of appropriate risk management
discipline.
Risk and Finance Committees
The Risk and Finance Committees (RAF) oversee the operational, regulatory and reputational risks and the internal control environment. There are three committees
covering Global, Europe and Rest of World Man Group entities. The committees also monitor balance sheet financial risks and the adequacy of economic capital and
liquidity buffers. The RAFs are chaired by the Chief Financial Officer and the Chief Operating Officer.
Man Group plc Annual Report 2019 37
Business
risks
1. Investment performance
Link to strategy
• Innovative investment strategies
• Strong client relationships
• Efficient and effective operations
• Returns to shareholders
Change in status and trend:
Increased
Risk
Fund underperformance on an absolute basis, relative
to a benchmark or relative to peer groups could reduce
FUM and may result in lower subscriptions and higher
redemptions. This risk is exacerbated at times of volatile
markets. This may also result in dissatisfied clients,
negative press and reputational damage.
Mitigants
Man Group’s investment businesses each have
clearly defined investment processes designed to
target and deliver on the investment mandate of each
product. We focus on hiring and retaining highly skilled
professionals who are incentivised to perform within the
parameters of their mandate.
Status and trend
2019 has seen good absolute performance, particularly
for Man AHL and the equity long-only products. However,
relative performance to peers has been weaker for
the large valuation focused strategies such as Japan
CoreAlpha, Emerging Market Debt and those within Man
Numeric.
Lower FUM results in lower management fees and
underperformance results in lower performance fees,
if any.
Man Group’s diversified range of products and strategies
limits the risk to the business from underperformance
of any particular strategy.
Although FUM increased largely due to the rallying equity
market, there were modest outflows following weaker
short-term relative performance.
2. Key person risk
Risk
A key person to the business leaves or is unable
to perform their role.
Retention risk increases in years of poor performance.
Mitigants
Business and investment processes are designed
with a view to minimise the impact of losing any key
individuals. Diversification of strategies reduces the
overall risk to Man Group.
Succession plans and deferred compensation
schemes are in place to support the retention of senior
investment professionals and key management.
The discussion of Man Group’s performance is on pages
18-21.
Change in status and trend:
Unchanged
Status and trend
Man Group has continued to be able to attract and
retain an array of talented individuals across the Group,
however voluntary staff turnover has been increasing.
The departure of the Group President and the transition
to the new Board Chairman has proceeded smoothly.
We continue to operate a succession planning process
to manage this risk.
Risk
A counterparty with which the funds or Man Group have
financial transactions, directly or indirectly, becomes
distressed or defaults.
Shareholders and investors in Man Group funds and
products are exposed to credit risk of prime brokers,
custodians, sub-custodians, clearing houses, depository
banks and guarantee providers.
Mitigants
Man Group diversifies its deposits across a number
of strong financial counterparties, each of which is
approved and regularly reviewed for creditworthiness
by the Counterparty Monitoring Committee (CMC).
The CMC also oversees contingency planning ahead
of significant market or political events.
The Group Risk function monitors credit metrics,
such as CDS spreads and ratings, of the approved
counterparties on a daily basis.
Credit
risks
3. Counterparty
Liquidity
risks
4. Corporate and fund
Link to strategy
• Innovative investment strategies
• Strong client relationships
• Efficient and effective operations
• Returns to shareholders
Change in status and trend:
Unchanged
Status and trend
Increased regulatory scrutiny, stress testing and capital
requirements for investment banks and central clearing
houses supports the overall stability of Man Group’s
core counterparties.
2019 saw credit spreads tighten for most names and
there were no periods of heightened concern for any
material names.
Link to strategy
• Innovative investment strategies
• Efficient and effective operations
• Returns to shareholders
Risk
Volatile markets can place additional, often short-term,
demands on the balance sheet. Man Group is exposed
to having insufficient liquidity resources to meet its
obligations.
Mitigants
Man Group has access to a revolving credit facility (RCF),
and maintains a liquidity surplus. Liquidity forecasting,
including downside cases, facilitates planning and
informs decision making.
Adverse market moves and high volatility may sharply
increase the demands on the liquid resources in Man
Group’s funds. Market stress and increased redemptions
could result in the deterioration of fund liquidity and in
the severest cases this could lead to the gating of funds.
The investment risk teams conduct regular liquidity
tests on Man Group’s funds as well as peer fund reviews.
We endeavour to manage resources in such a way
as to meet all demands for fund redemptions according
to contractual terms.
Change in status and trend:
Unchanged
Status and trend
The RCF has been renewed at $500 million for 5–7 years
across 14 Tier 1 banks, providing the Group with a robust
liquidity backstop.
The asset liquidity distribution across funds has remained
broadly unchanged. In response to liquidity issues faced
by other asset managers, detailed case reviews have
been carried out. This has led to enhancements in our
liquidity analysis toolkit and reporting.
Strategic report 38 Risk management continued
Market
risks
5. Investment book
Risk
Man Group uses capital to seed new funds to build
our fund offering and expand product distribution.
Man Group is therefore exposed to a decline in
value of the seeding book.
Link to strategy
• Innovative investment strategies
• Efficient and effective operations
• Returns to shareholders
Change in status and trend:
Unchanged
Mitigants
A disciplined framework ensures that each request for
seed capital is assessed on its risk and return on capital.
Approvals are granted by a Seed Investment Committee
(SIC), which is comprised of senior management, Risk
and Treasury. Investments are subject to risk limits, an
exit strategy and are hedged to a benchmark where
appropriate. The positions and hedges are monitored
regularly by Group Risk and reviewed by the SIC.
Status and trend
The seeding book reduced in size over 2019, along with
its downside risks. Overall seeding book returns for 2019
were positive, with the hedges performing as expected.
Some liquidity has been released by sourcing repo
financing for CLO risk retention positions and swap
financing for hedged long-only fund positions. Man Group
retains the market risk to these positions.
6. Pension
Change in status and trend:
Unchanged
Risk
Man Group underwrites the risks related to the UK
defined benefit pension plan which closed to new
members in 1999 and future accrual in 2011. The plan
is well funded, but is exposed to changes in net asset
versus liability values.
Mitigants
The UK pension plan has a low net exposure to UK
interest rates. The return seeking assets are low volatility
and have a low correlation to equity markets. Longevity
is the largest remaining risk, but is uncorrelated to Man
Group’s other risks.
Status and trend
The scheme has a surplus on an accounting basis and
a small deficit on an actuarial basis. The actuarial deficit
has reduced over 2019 with improved performance of the
underlying assets.
Operational
risks
7. Internal process failure
Link to strategy
• Innovative investment strategies
• Efficient and effective operations
• Returns to shareholders
Change in status and trend:
Unchanged
Risk
Risk of losses resulting from inadequate or failed
processes within Man Group.
Mitigants
The Group’s risk management framework and
internal control systems are based on a three lines
of defence model.
Status and trend
The Group remains focused on enhancing its systems
and control processes where required and ensuring
internal process failures are kept to a minimum.
Internal Audit evaluates the effectiveness of the Group’s
risk management, control and governance processes.
8. External process failure
Risk
Man Group continues to outsource a number of functions
that were previously performed internally as well as
managing outsourcing arrangements on behalf of its
funds. The risk is that the outsourced service providers
do not perform as required, resulting in knock-on
implications for our business as a whole.
Change in status and trend:
Unchanged
Mitigants
Man Group’s operations team has implemented a robust
methodology (including ongoing third-party due diligence
and KPI monitoring) to confirm that outsourced service
providers are delivering as required.
Status and trend
The Group continues to concentrate its outsourcing
into a smaller number of carefully selected and proven
outsource providers with which it has established working
relationships allowing for greater process consolidation
and rationalisation.
9. Information and cybercrime security
Risk
The risk of loss resulting from cybercrime, malicious
disruption to our networks or from the theft, misplacing,
interception, corruption or deletion of information.
Mitigants
Man Group has a mature information security
management programme which governs current
and future strategy.
The Group has deployed cyber controls and counter-
measures which are continuously reviewed, maintained
and adjusted in line with our assessments and those
of trusted advisors. These security mechanisms are
deployed in a layered defence involving preventative,
detective, reactive and recovery controls. If one control
fails, other controls are in place to detect, prevent or
counter an attack. To keep pace with emerging risks,
some of the technology solutions are utilising
machine learning, artificial intelligence (AI) and
behavioural analysis.
The Group has a cyber-risk training programme and
has commissioned independent threat and security
assessments, including simulated staged attacks on our
network to test our detection and response capability.
Change in status and trend:
Unchanged
Status and trend
The threat from cybercrime groups continues to grow,
with many of these groups executing sophisticated attack
campaigns with expertise only seen in previous years
from nation states or state-sponsored hacking groups.
Throughout 2019 social engineering-based attacks
remained the primary delivery technique – criminal
elements attempt to gain access to sensitive corporate
or private data with an ultimate goal of stealing and then
selling the data to the highest bidder. Alternatively, they
may deny the data owner access to their data altogether
and then demand a ransom for its safe return.
Man Group plc Annual Report 2019 39
Operational
risks continued
10. Information technology
Risk
Risk of losses incurred by IT software and hardware
failures resulting in system downtime, severely degraded
performance or limited system functionality.
Link to strategy
• Innovative investment strategies
• Efficient and effective operations
• Returns to shareholders
Change in status and trend:
Unchanged
Mitigants
The Group recognises the fundamental role of
technology in delivering its objectives and IT functions
work closely with other business units to ensure work
is correctly prioritised and financed. The prioritisation
process considers the lifecycle of both hardware and
software to ensure both are adequately supported and
sized. The Group’s operational processes include mature
risk, incident and problem management procedures to
minimise the likelihood and impact of technology failures.
Status and trend
During 2019 the Group continued to improve its
technology capability with the completion of a new
Finance and HR platform and ongoing enhancements
across the trading and operations systems.
New hardware investments were made to support the
Group’s Quant Research platform, as well as a major
refresh of our end user computing systems.
11. Legal and regulatory
Risk
The global nature of Man Group’s business, the
expansion of its investment businesses and the
acquisition of new investment businesses, with corporate
and fund entities located in multiple jurisdictions and a
diverse investor base makes it subject to a wide range
of laws and regulations. Failure to comply with these
laws and regulations may put Man Group at risk of fines,
lawsuits or reputational damage.
Changes in laws and regulations can materially impact
Man Group or the sectors or the market within which
it operates.
Mitigants
Man Group operates a global legal and compliance
framework which underpins all aspects of its business
and is resourced by experienced teams. These teams
are physically located in Man Group’s key jurisdictions,
helping them to understand the context and impact
of any requirements.
Emphasis is placed on proactively analysing new legal
and regulatory developments to assess likely impacts
and mitigate risks.
Man Group continues to liaise directly and indirectly
with competent authorities e.g. FCA, SEC, FINMA, CBI.
Change in status and trend:
Unchanged
Status and trend
Man Group continues to experience new regulatory
requirements. In 2019 this included the Senior
Managers and Certification Regime (‘SMCR’)
which was successfully implemented.
Work is already underway on a number of regulatory
initiatives including IBOR transition and the new
prudential regime for EU investment firms.
12. Brexit
Risk
The Group faces legal, tax and regulatory uncertainty
which could impact the ability of funds to access markets
or cause investors to redeem.
Mitigants
Man Group has upgraded the regulatory permissions
of its Irish entity and has opened an office in Dublin
to serve European clients.
Fund performance may be adversely impacted by market
volatility or reduced liquidity.
The fund risk toolkit includes market and liquidity
scenarios focused on downside Brexit risks.
Operational events may result from an elevated volume
of legal or operational tasks.
Change in status and trend:
Unchanged
Status and trend
The UK Government has committed to fully exiting the
European Union at the end of 2020, following a transition
period. The exact nature of the final agreement may
impact market infrastructure and regulations.
The Group is monitoring developments closely and will
take the necessary steps to ensure that the impact on
the business, investors and employees is minimised.
Risk
The risk that an incident or negative publicity undermines
our reputation as a leading investment manager.
Reputational damage could result in significant
redemptions from our funds, and could lead to issues
with external financing, credit ratings and relations
with core counterparties and outsourcing providers.
Mitigants
Our reputation is dependent on both our operational
and fund performance. Our governance and control
structure mitigates operational concerns, and our
attention to people and investment processes are
designed to comply with accepted standards of
investment management practice.
Reputational
risks
13. Negative publicity
Emerging
risks
14. External risks
Link to strategy
• Innovative investment strategies
• Strong client relationships
• Efficient and effective operations
• Returns to shareholders
Change in status and trend:
Unchanged
Status and trend
Man Group continues to enjoy a good reputation and this
risk is assessed as stable.
Link to strategy
• Innovative investment strategies
• Strong client relationships
• Efficient and effective operations
• Returns to shareholders
Risk
Primarily external in nature and complementary to the
principal risks which are focused on current internal
risk. The emerging risk categories include natural
disasters, pandemics, disruption to financial markets
and business infrastructure, political risk and changes
in the competitive landscape.
Mitigants
The Board and Group Risk monitor emerging risks,
trends and changes in the likelihood of impact.
This assessment informs the universe of principal
risks faced by the firm.
Change in status and trend:
Unchanged
Status and trend
The emerging risks have been reviewed by the Board in
2019. No changes were made to the Group’s headline
principal risks.
The coronavirus (COVID-19) outbreak has transitioned
from an emerging risk to a business continuity
principal risk.
Strategic report 40
of environment-focused shareholder
proposals supported
Respon-
companies covered
by Man Group’s ESG
analytics tool
reduction in overall Man Group
MTCO2e emissions over 2019
Man Group plc Annual Report 2019 41
donated to charities and
charitable initiatives by the
Man Charitable Trust
Respon-
sibility
corporate meetings
voted on by Man Group
employee volunteer hours in 2019
Strategic report 42 Responsible business
Our stakeholders
s. 172 Companies Act 2006 Statement as required under Provisions of the UK Corporate Governance Code
Man Group places a high value on the consideration of its stakeholders’ views, whilst recognising that in some circumstances there will be
conflicting priorities between the different groups, and that it is important for the Board to exercise its independent judgement.
The Board has previously undertaken a stakeholder mapping analysis which identified its key stakeholders whose views and attitudes were
integral to the long term success of the Company. The Board agreed as part of its evaluation process in 2017 that it would schedule regular
reviews of its stakeholder groups and their interests and from this process has determined that its key stakeholders remain unchanged from
last year. Below we have expanded our disclosures to include how the Board considers stakeholder views in Board decision making and
discussions.
The Board recognises that understanding what is important for stakeholders and fully appreciating their needs and concerns will only
improve the Board’s decision making process. The Board commits to continually build upon its efforts towards stakeholder engagement
and to ensure that the reporting that it receives includes references and impacts on stakeholder groups. The Board will also allocate time
throughout the year to directly engage with different groups.
Our purpose
We are an active investment management firm focused on delivering attractive performance and client portfolio solutions, deploying the
latest technology across our business to help ensure we stay at the forefront of our evolving industry.
We provide long-only, alternative and private markets products on a single and multi-manager basis. We develop bespoke solutions and
fund of hedge fund services which utilise the firm’s advanced technology, infrastructure and expertise. We continuously invest in technology,
talent and research as we strive to deliver the best results for our clients.
Shareholders
Communication with shareholders is paramount to Man’s success and the Board considers these views when making its decisions
throughout the year
Key considerations
Key matters discussed
How did we engage?
Go to page
64
• Long term value creation
• Return of capital and
dividends
• Growth and Diversification
• Alignment of remuneration
A corporate reorganisation was agreed during
the year (further information can be found
on page 5) to allow a more flexible structure
for Man Group to engage in its core activities
which over the long term would be integral
to Man Group remaining competitive and
therefore increasing shareholder value.
Approval of share buyback programme
and dividends throughout the year.
Alignment of fund manger risk with
shareholders through remuneration policy.
The Board identified, through its dialogue with representatives from the IR Team and
the regular reporting it receives, that long term value creation is a key consideration
of shareholders and this was a consistent theme throughout discussions and external
advice received on the corporate reorganisation. This consideration formed part of the
strategic rationale underpinning the decision to proceed. Approval was also sought
from Shareholders by way of a General Meeting.
The approval of the share buyback programme and dividend payments throughout the
year formed part of the Company’s long term strategy of delivering improved returns
to shareholders. The Board considered the proposals in light of the other opportunities
that could impact shareholder value and further information on Man Group’s capital
management approach can be found on page 33. Approval was sought from
shareholders at the 2019 AGM for the share buyback programme.
The Chairman of the Remuneration Committee offers to meet with institutional
shareholders to discuss remuneration trends and feeds this information back to the Board.
Further information on the Board’s approach can be found on page 80.
Man Group plc Annual Report 2019
43
Employees
The Board recognises the impact employees have on Man Group’s success and is committed to understanding their needs and requirements
to ensure a positive working environment. The Board has appointed two designated non-executive directors to directly engage with our
employees. Further information can be found on page 67.
Key considerations
Key matters discussed
How did we engage?
Go to page
65
• Good work-life balance
• Flexible working
• Career development
• Diversity and inclusion
• Collaborative and open
working environment
Clients
The corporate reorganisation mentioned
throughout this report was also discussed by the
Board in relation to employees and the impact
on them. The Board throughout its advice and
discussions was clear that there should be
little or no impact on employees and this was
reiterated throughout the approval process.
The decision to introduce a long tenure award
policy, which seeks to acknowledge and support
employee wellbeing in response to feedback from
the annual employee survey, was made during
the year.
The Board ensured that the reorganisation did not adversely impact employees
or create any long-term consequences. The Board also considered that the
reorganisation would allow Man Group to compete in a broader range of
jurisdictions, which may allow for greater mobility opportunities for its employees.
An annual employee survey was used to ascertain employee sentiment and
areas that employees would like to see improvement. The feedback from this
survey, along with reporting from HR on market trends, formed the basis for the
introduction of new wellbeing initiatives for employees. Further information on the
results of the employee survey can be found on page 45.
Go to page
65
Clients are at the heart of the business and their views will dictate Man Group’s strategic direction
Key considerations
Key matters discussed
How did we engage?
• ESG considerations &
Responsible Investment
• Strong performance
of strategies
• Long-term partnerships
• Latest innovative technology
• Cost savings
• Reducing active equity
exposure
• The introduction of specific sustainable
investment funds and the creation and hiring
of a Chief Investment Officer for ESG.
• Requested that senior management consider
the need to leverage technology in order
to address ESG requirements.
• Aligned its revolving credit facility with meeting
non-financial goals, including the appointment
of women to senior roles and promoting
volunteering efforts among staff.
• Renewed and ensured cost saving initiatives
were on target.
The Board delegates the engagement with clients to the senior management team
and the executive directors. The Board receives regular deep dives on key clients
and as part of this requests that important issues are brought to their attention
so these can be incorporated within strategic discussions. The sales team are
invited to present to the Board at intervals throughout the year.
The importance of Responsible Investment (RI) to clients is clear to the Board
and the discussions on this topic throughout the year meant that Man Group
ESG analytics was launched allowing investment teams to assess ESG risks.
Further information on how we considered ESG throughout the year can be found
on pages 48 to 49.
External experts provided updates to the Board on industry trends and client
expectations. The Board uses these updates to make informed decisions regarding
its longer term strategy to build strong relationships with clients. Further information
on how client’s needs have influenced the Board’s decision can be found on
pages 19 to 20.
Communities & Environment
Man Group is committed to having a positive impact on the local and wider communities and the environment
Go to page
65
Key considerations
Key matters discussed
How did we engage?
• Improvement of knowledge
and opportunities within
the local community for
careers in finance
• Assisting in creating
diversity within the financial
services industry
• Environmental impact
• Improvement of opportunities within the
local community for career development.
• Assisting in creating diversity within the
financial services industry.
• Setting of the environmental objectives to 2022.
The Board receives updates on the work of the Charitable Trust, which identifies
charities within the local community. From these discussions, the Board agreed
a charitable donation to King’s College Mathematics School, a specialist state-
funded school for gifted mathematicians aged 16-19.
Opportunities are offered through the City Gateway Charity for young people to
participate in internships at the Company. Further information on how the Board
engages with communities can be found on pages 50 to 51.
The Company’s objectives and targets in relation to its impact on the environment
can be found on page 55.
Business Partners and Supply Chain
Good relations with business partners and suppliers are essential to Man Group’s day to day functioning
Go to page
65
Key considerations
Key matters discussed
How did we engage?
• Fair working relationships
• Mutual respect and
understanding
• Building long-term relationships
• Approval of the Company’s Modern Slavery
and Transparency Statement.
The executive directors regularly receive updates on the key elements of its supply
chain and feeds this information back to the Board.
The Board, as part of its commitment to high standards of business conduct,
approved the Company’s Modern Slavery Transparency Statement and also
commits to prompt payment of suppliers and remains a signatory to the CICM
Prompt Payment Code.
Strategic report 44 Responsible business continued
People and culture
At Man Group, we believe in the importance of a
meritocratic and collaborative environment, where success
is based on talent, commitment, diligence and teamwork.
By celebrating diversity, we seek to challenge consensus
and foster healthy debate, which we believe makes us a
better and more innovative business for our clients and
shareholders. Above all, we seek to attract and retain the
best people, and to ensure everyone at Man Group has
the opportunity to reach their full potential.
Nationalities
Internal transfers
Uptake of enhanced
parental leave
Focus on talent and commitment
to conscious inclusion
Attracting, developing and retaining talent at
all levels and across all functions and regions
continues to be a long-term business goal,
and therefore will always be a key focus
area for our executive team.
We celebrate difference and foster a
consciously inclusive culture and workplace,
which facilitates innovative thinking – a
vital component of our ability to deliver
results for our clients. Encouraging
diversity and inclusion in all aspects of
our business is therefore fundamental
to achieving our strategic goals.
Talent acquisition,
retention and development
Bringing top talent into our business is
imperative to our success, as is the retention
and continued development of our workforce.
We continue to source highly talented
employees via a number of entry-level
(graduate and intern) programmes within
investment management, finance and
operations. We on-boarded our highest
number of investment management trainee
analysts to date in 2019 and introduced three
focused streams on the programme –
quantitative, discretionary and generalist.
On completion of the two year programme,
our trainees possess a comprehensive
skillset along with good knowledge of our
business, and are well placed to move off
the programme into permanent positions.
The retention and development of our
workforce is of paramount importance and
we strive to make internal appointments
wherever possible to maximise career
progression and in turn maintain good
retention levels. During 2019, internal
promotions included the appointments
of Global Heads of Sales and COO for
Trading Platform & Core Technology.
We are a global firm and create opportunities
for our people to gain international experience
via short-term placements and permanent
relocations. We have continued to expand
our dedicated Talent function, further
improving the provision of career, development
and performance support for our workforce.
In the context of Britain’s withdrawal from
the European Union, we are committed to
ensuring that we continue to provide support
to those members of our workforce who are
EU nationals working in the UK. Hiring the
best talent from around the world, including
the EU, is fundamental to our business
and we remain committed to doing so.
We continue to be involved and liaise with
various industry forums, external advisors
and the UK Government. We closely monitor
immigration updates in relation to their potential
impact on our workforce to ensure staff have
the correct guidance and documentation
to travel between the UK and Europe.
Our remuneration policies and practices are
designed to enable us to remain competitive
in the increasingly global markets in which
we operate and are benchmarked annually.
Remuneration includes combinations of
salary, annual performance bonus and
deferred share or fund awards, alongside
non-cash benefits. The bonus deferral
arrangement is a key mechanism for focusing
our employees on long-term performance,
aligning their interests with those of our
clients and shareholders. During 2019 we
once again offered our UK-based employees
the opportunity to participate in the Man
Group Sharesave Scheme at the maximum
limit and discount allowed by HMRC and
saw a good uptake from staff.
See pages 78 to 98 for the Directors’
remuneration report.
At the start of 2019 we went live with
Workday as our new HR and Finance
system. The initial implementation brought
material benefits from an operational
perspective as HR and Finance data is
now housed on a single platform allowing
for enhanced reporting and data analytics.
The introduction of Workday has enabled
us to deliver against a number of strategic
objectives during the year. Talent reviews
were moved into the system in Q2, while
Workday Recruitment went live in Q4
meaning our applicants now have a seamless
experience from their first click on the job
advert, through the selection process, to
arriving at Man Group as a new joiner.
Man Group plc Annual Report 2019 45
FAM network – Testimonial
Melanie Walsh
Middle Office Service Provider Manager
PCO, UK
What are you parenting
responsibilities?
I have a two year old son who is looked
after by my parents 1 day per week and is
in nursery 3 full days per week. The nursery
is close to the office and the hours are
7.30am–6.30pm.
What family friendly initiatives
have helped you?
My request for part time and flexible
working was approved upon my return
to work after maternity leave. I am able to
work from home on Mondays when my
parents look after my son. I am based in
the office Tuesday-Thursday when my son
attends nursery. When I leave the office
to collect him I am able to log on to work
from home if necessary.
My part time working week is Monday-
Thursday so I no longer work on Fridays
to aid with the cost of childcare and so
I am able to spend time with my son.
What advice would you give for
anyone who is considering
making use of family friendly
offerings?
Man Group has fully supported my flexible
working requirements without any issues
so I would strongly encourage employees
to make use of the family friendly offerings.
My advice would be to be very clear about
requirements/days/times etc. from the start
of the process so that the firm can aim
to fully accommodate the request as much
as possible without the need for too many
changes in the future. I found that this
was helpful for all involved (Management,
HR team members etc. as well as
external parties).
Why do you feel that Man Group
is a supportive environment
for working parents?
Flexible and part time working opportunities
are available and fully supported. Unusual
circumstances are understood and
considered with the aim to provide full
support if able to. I see unhindered career
progression post requests.
Any other comments
e.g. reassurance regarding
career prospects.
Despite the fact that I reduced my working
hours by 20% and I am only present
in the office 3 days per week I was still
lucky enough to be provided with the
opportunity to become a Manager of
a sub team within Man FRM’s Middle
Office. In addition to this, I have recently
transitioned into a new role internally at
Man Group with increased responsibilities,
but was still able to maintain my part
time working hours and flexibility.
Man Group’s total headcount, including
contractors and consultants, has
remained broadly unchanged, moving
from 1,435 at 31 December 2018
to 1,436 at 31 December 2019.
Employee engagement
To ensure that Man Group’s employees are
aware of business priorities and the latest
developments across the firm, they receive
a range of communications and information.
We continue to share a daily email newsletter
with all employees, run programmes of
presentations from executives across the firm
(the ‘Business Education’ and ‘Lunch and
Learn’ series) and host regular business unit
town-halls and internal Man Group results
presentations. In addition, when travelling
across our international office network,
Executive Committee members regularly
host employee update events. We also
have two Non-Executive Directors focused
on staff engagement and during 2019 they
have undertaken a programme of events
in the UK and US to engage directly with
our staff across all levels and functions.
We have continued to place a particular focus
on employee well-being activities, running a
number of events and implementing changes
in order to enhance our offering in this area.
We have introduced a number of supporting
initiatives including mindfulness sessions,
healthy eating seminars, onsite cancer
checks, a children’s wellbeing workshop
and benefits roadshows.
We introduced a new global enhanced
gender neutral parental leave policy in 2018,
providing all new parents with 18 weeks
fully-paid leave, and were delighted to see
a good uptake of this benefit in 2019. Our
offering of emergency childcare/eldercare in
the UK has also been well received and we
saw a significant increase in usage.
We are pleased to report that our 2019
employee survey recorded an engagement
score of 77% and an increased response
rate of 83%. We also seek feedback from
employees across the firm on an ongoing
basis and use this information to inform
the initiatives we undertake to continually
enhance Man Group as a place to work.
Strategic report 46
Responsible business continued
People and culture continued
FAM network – Testimonial
What advice would you give
for anyone who is considering
making use of family friendly
offerings?
I seem to have become one of those
parents who says “it all goes so quickly”...
so in my view, these family friendly offerings
are invaluable. My advice would be that
these are absolutely being offered in good
faith, so don’t hesitate to take advantage
of the ones that work for you.
Why do you feel that Man Group
is a supportive environment
for working parents?
One can tell when something is truly in a
company’s culture. It is more about people
than policies, and at all levels of Man Group,
I have seen management supporting
working parents. The “little” touches –
having a day when parents can bring
children into work, recognising that
someone might want to leave early on their
kid’s birthday etc. – matter just as much as
the more formal policies we have in place.
Any other comments
e.g. reassurance regarding
career prospects.
The firm definitely recognises that a
work-life balance is important for working
parents to realise their potential as an
employee. Given that, I don’t think anyone
should feel nervous about the impact on
their career prospects and I haven’t seen
it to be negatively viewed on any occasion.
Hersh Gandhi
Head of Sales, Asia Pacific (ex Japan)
Sydney, Australia
What are you parenting
responsibilities?
I have three young, active children and
a wife who works in financial services two
days per week. Neither of our extended
families live in Sydney, and I travel quite
a bit, so it does get quite chaotic at times.
What family friendly initiatives
have helped you?
In my case, it has been mainly a case of
using flexible working arrangements when
practical to do things with my children that
I know they (and I) value, like reading
to them or having a kick of the footy.
Diversity and Inclusion
Man Group’s culture is based on mutual
respect for others, a commitment to
prioritising diversity and inclusion and a zero
tolerance approach to discrimination of any
kind. Our senior D&I steering group and
working groups continue to propel our
inclusion agenda under the umbrella of
“DRIVE”, our global network for all the firm’s
D&I initiatives. We remain well-connected
with peer organisations which gives us the
opportunity to host joint events and share
knowledge. Robyn Grew, Man Group’s COO
and GC, also chairs AIMA’s diversity group,
giving us external presence in this space.
We are delighted to have the following
active staff networks, which consist of both
members and allies, regularly running events
and supporting our workforce:
• BEAM Network (Black Employees At Man)
• FAM Network (Families At Man)
• PRIDE Network (LGBT+)
• WAM Network (Women At Man) –
launched in 2019
See page 77 for the Nomination Committee’s
diversity policy.
Staff by gender (at 31 December)
Total workforce
2016
364
891
2019
408
Senior managers1
2016
29
2019
37
Board of Directors
2016
1
2019
2
1,028
149
148
9
8
Female
Male
1 This figure includes the executive committee and their direct
reports, which includes the company secretary.
During 2019 we ran events on a global
scale to embed our commitment to
conscious inclusion. We celebrated
International Women’s Day across all our
offices and also marked Pride month in
various ways, including marching in the
Pride in London parade for the first time,
and with Pride social events in New York
and Hong Kong. Additionally we marked
Black History month with various events
and awareness campaigns, and also
highlighted International Day of Persons
with Disabilities by going “purple” across
our global offices and our website.
Man Group is supportive of the requirement
for employers in the UK to calculate and
publish their gender pay gap, and we have
again published our figures within our annual
diversity & inclusion report. The data still
demonstrates the lower representation
of females in investment management
and senior roles, but we are committed
to addressing this and continue to make
significant efforts to do so. Initiatives range
from hosting events to encourage the
pipeline of female talent at the firm and in
the broader industry, to internal mentoring
for women within the firm and our partnership
with Women Returners to support those
returning to work following a career break.
By working with Women Returners, we are
able to identify suitable candidates from
a high calibre, predominantly female talent
pool, as well as providing them with tailored
mentoring and support. During 2019
we recruited 5 returners onto fixed term
contracts, our largest cohort to date, and
so far have a 80% conversion rate into
permanent positions, demonstrating that this
is a successful means of hiring experienced
and high-quality women.
Man Group plc Annual Report 2019 While we do not see a gender pay gap
across similar roles, we recognise that this
isn’t enough to attract and retain talent and
we must take further action, through the
initiatives articulated in this section, to foster
better gender diversity particularly in senior
and front office roles.
We have seen ongoing progress in terms
of gender balance within our graduate
recruitment over the past few years, and we
continue to work proactively with schools,
societies and education providers to promote
careers in the financial services sector at
a grassroots level. For a number of years,
Man Group has also sponsored the UK
team at the European Girls’ Mathematical
Olympiad and activities such as the NSPCC’s
Number Day, the largest nationwide
numeracy event for children and young
people in the UK.
Having signed up to the Women in Finance
Charter in 2018, we published our first charter
update in 2019. We have set ourselves a
target of 25% female representation in senior
management roles by the end of 2020, and
expect to increase our target by at least 1%
per year in the years ahead. At the end of
2019, we were at 20%, up from 16% in 2016.
During 2019 we were again nominated
in multiple categories at the Women
in Investment awards and were thrilled
that Man Group’s Saachi Sharma won
the Rising Star award this year.
Academy and Girls Who Invest. In 2019, we
were delighted to commence a partnership
with the King’s College London Mathematics
School – a specialist state-funded school
for gifted mathematicians aged 16-19. The
school offers an access route for students
from backgrounds that are often under-
represented in mathematical sciences.
King’s Maths School plays
an important role in helping
exceptional mathematicians
sustain and grow their
interest in this subject, and
we are delighted to be able to
support the school’s mission
as it cultivates the pipeline
of young talent in this area.
Sandy Rattray
CIO, Man Group
We have a number of other partnerships
in place which feed into our broader D&I
agenda. In the UK, to increase our access
to candidates from under-represented
backgrounds, we work with SEO London,
an organisation which provides educational
support and career access, and Bright
Network, a career network of bright students
from a range of backgrounds. In the US, we
partner with the Young Women’s Leadership
Network in New York as well as Codman
47
Apprenticeship programmes also continue
to be a way for us to show our commitment
to tackling youth unemployment in London
and broadening our access to young people
who may not otherwise have considered a
career in financial services. We have been
hiring apprentices since 2013 and our current
cohort are working within our technology,
investment marketing and talent teams.
Man Group is committed to providing equal
employment opportunities and discrimination
by any individual on the grounds of age,
disability, gender, race, religion, sexual
orientation or educational background is
not tolerated. Full and fair consideration
is given by Man Group to all employment
applications, including from disabled people,
considering their aptitudes and abilities.
The Company also ensures that disabled
persons are fairly treated in respect of training
and career development. For those who
become disabled during their employment,
reasonable adjustments are made and
ongoing support is provided as required,
to enable the individual to continue working.
Man Group LGBT+ network
Man Group’s LGBT+ network seeks to
provide a platform to support, empower
and elevate the voices of the community
while educating the firm on a range of
LGBT+ themes.
Our Paving the Way campaign
In 2018 we launched Paving the Way, our
dedicated campaign to help encourage a
more diverse pipeline of candidates, both
within Man Group and across the investment
industry more broadly. We believe it is our
responsibility to address factors which lead
to a lack of diversity in our workforce;
this campaign represents our firm wide
commitment to do so robustly and vocally,
and is well aligned with our longstanding
charitable focus on promoting literacy and
numeracy at a grassroots level. We hope
these efforts will not only attract more diverse
candidates, but support them into senior
positions and front-office roles.
Strategic report 48 Responsible business continued
Responsible
Investing
We recognise that Responsible Investment (RI) is
fundamental to our fiduciary duty to our clients and
beneficiaries. We understand the importance of sound
stewardship in managing investors’ capital, and our
approach to RI ensures that our interests and values are
closely aligned to those of our clients and stakeholders.
Responsible Investment framework
Man Group takes a diversified approach to RI across its investment
engines, understanding the importance of emerging best practices
across all asset classes and investment strategies. In recognition
of these differing approaches, the RI fund framework is designed
to establish a baseline requirement of Environment, Social and
Governance (ESG) standards, and to provide credibility, clarity
and consistency in Man Group’s approach to RI across its range
of funds. Broadly funds fall under three categories:
PRI Strategy and Governance rating
Number of environment-focused
shareholder proposals supported
Our policies
The Man Group Responsible Investment
Website defines our commitment to
Responsible Investment and lists our RI
policies across our investment engines.
Man Group’s overall RI policy outlines its
recognition, commitment and support for
the development and integration of RI across
its business units. The diversified nature of
Man Group’s businesses means that no
single ESG framework is universally applied.
That said, each of Man Group’s investment
engines apply the norms and best practices
of responsible investing where relevant.
For Man Group as a whole, these norms
and best practices include:
1. Stewardship: enhancing the value and
interests of our clients’ assets through
voting and active engagement
2. ESG factors: considering ESG criteria in
the investment decision-making process
3. Education and Activities: educating on
and promoting responsible investing within
the investment community
Our approach
Man Group is a proud signatory of the
UN-supported Principles for Responsible
Investment (PRI) and is active in several
PRI committees. We have long recognised
how responsible investing is fundamental
to the firm’s fiduciary duty and acknowledge
the continued importance of the best
practices endorsed by the PRI. Man
Group, as a PRI signatory, submits annual,
compulsory transparency modules, which
report on ESG integration and active
ownership across the firm’s investment
engines. We received an A+ during the
most recent reporting year for Strategy
and Governance, which encompasses
our overall approach spanning our RI
policy, objectives, strategy, governance,
HR policies and the degree to which we
are promoting RI within the industry.
We believe that as stewards of our clients’
capital we owe it to them to manage
their entrusted resources actively and
responsibly in order to unlock long-term
and sustained value. Accordingly, Man
Group fully supports the UK Stewardship
Code, applying its seven principles
across the firm’s investment strategies.
Man Group plc Annual Report 2019
49
We view ESG analysis as a natural
complement to traditional financial analysis
and believe that the incorporation of
responsible investment practices into
the investment decision making process
can often result in a broader, more
comprehensive analysis of a company,
leading to an enhanced level of risk
assessment. We therefore seek to apply
the best practices in responsible investment
relevant to the particular investment strategy.
This necessitates Man Group addressing
responsible investment in a variety of ways
depending on the investment strategy
employed. These may include negative
screening, traditional ESG integration,
quantitative ESG integration, norms based
screening or engagement-led processes.
Our Responsible
Investment governance
Man Group’s Responsible Investment
Committee oversees and reviews
the implementation of all RI policies
and processes, as well as the firm’s
stewardship capabilities, across Man
Group’s investment businesses. The RI
Committee is chaired by Robert Furdak
and is comprised of senior representatives
from across Man Group’s businesses.
This not only underlines the strategic
importance of responsible investment to
Man Group’s corporate philosophy; it also
ensures that RI initiatives are organised
and managed from the highest level.
Man Group also established a dedicated
Stewardship and Active Ownership (SAO)
committee in 2018 that maintains the firm’s
stewardship policies and framework that
guide all our stewardship activities to uphold
the highest standards in ESG.
2019 Responsible
Investment milestones
• Created the position of CIO for ESG
• A+ Strategy and Governance rating
in PRI report
• Man Numeric develops Quantitative ESG
model for use in its investment strategies
• Man Group launches the Man Group ESG
Analytics Tool, a proprietary, dashboard-
style tool enabling the firm’s investment
teams to monitor non-financial risks and
analyse ESG factors on both a single-
stock basis and across portfolios
• A Sustainable Future’ Podcast wins ESG
Initiative of the year at the 2019 Sustainable
Investment Awards. Run by Jason Mitchell,
Man Group’s Co-Head of Responsible
Investment, the podcast discusses topical
ESG issues with key figures from across
the RI industry
• Man Group votes at nearly 6,100
corporate meetings
• 96% of environmental shareholder
proposals supported
It’s been gratifying to be
a part of the evolution of
responsible investment
at Man Group, and I look
forward to coordinating
the diverse and robust
responsible investment
efforts across the firm’s
investment engines in my
new role as CIO for ESG. As
a technology-empowered
and data-driven firm, our
ESG initiatives follow the
same scientific rigour we
apply to any investment
opportunity, staying true to
the data while ensuring that
an effective and repeatable
methodology underpins
every decision.
Robert Furdak
Chief Investment Officer for ESG
Please tell us about your role and
responsibilities at Man Group?
My new role will have many facets. I will
coordinate the ESG initiatives across the
Man Group investment engines and lead the
Responsible Investment (RI) research efforts
across the Firm. I will also continue to be an
active member of the RI community, helping
advance the debate around ESG and RI
through thought leadership pieces and active
participation in industry groups. Finally, I will
work with asset owners to help them analyse
their RI policies and implement solutions.
What differentiates Man Group
from your competitors?
We believe that RI is too broad and fluid
for a single approach to adequately address
the numerous challenges of doing business
in a manner that is ethically sound. First you
must have a deep understanding of the ESG
data, which is subjective and nuanced. Then
you must use all the tools at your disposal
to make the most informed decisions.
This includes quantitative and qualitative
analysis, exclusion lists, optimisation
constraints and targeted exposure.
What is the next frontier in
Responsible Investment?
There are two important themes emerging
in RI. The first is the explosion of new
data sources, some very specific, to help
analysts evaluate a company’s actions.
The second is stewardship. Asset owners
and investment managers are quickly
realising that to effect change, you
need to engage with management.
There has been a flood of
attention on ESG investing,
how do you protect from
greenwashing?
This is a topic that has recently come into
the focus of regulators and one that we are
very concerned about within our industry.
It is one of the reasons we developed
the Man Group ESG Analytics Tool. It
allows us to show asset owners, in a very
detailed way, how our portfolio stacks up
on a variety of ESG measures and allows
them to monitor our engagement efforts
and the carbon profile of the portfolio.
Strategic report 50 Responsible business continued
Contributing to
our communities
We are conscious of the impact our organisation has on our
community, and aim to give back and contribute positively to
those around us. Our charitable efforts globally are focused
on promoting literacy and education, and are run primarily
through the UK Man Charitable Trust established in 1978,
and the Man US Charitable Foundation established in 2019.
We also actively encourage our employees to volunteer,
providing them with two additional days of paid leave to
do so either with a charity supported by the Trust or with
one of their choice.
Man Charitable Trust
The Man Charitable Trust (‘the Trust’)
supports a diverse range of charities in the
UK, with a particular focus on improving
literacy and numeracy skills. The Trust also
seeks to increase employee engagement
in volunteering and charitable activities.
The Trust provided $1,234,168 in charitable
donations and charitable initiatives over 2019.
The Trust is led by a group of seven
trustees, comprised of: Teun Johnston,
Chairman of the Trust and CEO of Man
GLG; Steven Desmyter, Global Co-Head
of Sales and Marketing and Co-Head of
Responsible Investment at Man Group;
Antoine Forterre, Co-CEO of Man AHL;
Keith Haydon, Chairman of Man FRM
and CIO of Man Solutions; Carol Ward,
COO of Man GLG; Lydia Bosworth, Head
of Regulatory and Financial Reporting
at Man Group and Chris Pyper, Chief
of Staff, Infrastructure at Man Group.
The Trustees sought to extend and enhance
our engagement with the charities the
Trust supports over the course of the
year, deepening our relationships with
the organisations and looking at ways of
adding value above and beyond the financial
contribution the Trust provides. Man Group
employees volunteered their time, experience
and expertise to the Trust’s chosen charities
and offered office space to the charities
throughout the year so that they could hold
charitable events, trustee meetings and other
activities. These non-financial contributions
not only help the charities; volunteering also
brings real benefits to our employees in
terms of social engagement and fulfilment.
The Man Charitable Trust
reflects a longstanding
commitment to good
causes at Man Group;
we think hard about
the charities with whom
we engage and try to
be generous not only
financially, but also with
our time and expertise.
Teun Johnston
Chairman of the Man Charitable Trust
and CEO of Man GLG
Man Charitable
Trust networking
event (London)
In July, the Man Charitable Trust hosted its first networking
event for all the charities that it supports in the UK. This
provided an opportunity for the charity representatives
to catch up with the Trustees of the Man Charitable Trust
and also gave them each an opportunity to meet with
other charities that the Trust supports, as well as sharing
fundraising ideas and opportunities for collaboration.
Man Group plc Annual Report 2019 As Man Group’s business and geographical
footprint continues to grow, there has been
a significant effort to reflect this in the firm’s
charitable activities. The Man US Charitable
Foundation is now providing funding and
volunteering opportunities in the US under
the stewardship of Colin Bettison, Head
of Operations, Man Group Americas and
a previous UK Trustee; Eric Burl, Global
Co-Head of Sales and Marketing and Head
of Americas; Lisa Chua, Asset Manager,
Man GLG; Heidi Roderick, Strategic
Initiatives Project Manager, Man Numeric;
Hilary Junk, Senior Project Manager, Man
Numeric; and Rob Furdak, CIO for ESG,
Man Group. We plan to further encourage
staff members from our offices worldwide
to participate in volunteering so we contribute
to all communities in which we operate.
Finally, employees at Man Group are able
to support charitable programmes via their
Give As You Earn accounts. The Trust
proudly matches independent fundraising
by employees up to the value of £1,000.
ManKind programme at Man Group
ManKind is the firm’s community volunteering
programme, which enables UK employees
to take two additional days’ paid leave
per annum to volunteer with charities
supported by the Trust or a charity of
their choice. Participation again rose in
2019, with 28% of full time UK employees
utilising this benefit. Volunteering is a highly
valuable method of achieving positive
learning and development benefits for our
employees which is now being actively
encouraged throughout the firm and by
our senior management team. To increase
our volunteering levels globally going
forward, we have assigned ‘Volunteering
Captains’ in each of our regions.
Man Charitable
Trust donations
Employee volunteer
hours in 2019
51
Reading Partners is one of
Man Group’s longest standing
charitable sponsorships, and
has been a hugely fulfilling
collaboration for us. Year
on year, our employees form
strong bonds with the pupils
of Sir William Burrough
primary school, and year
on year the pupils make
noticeable improvements
in their literacy and social
skills. Man Group is full of avid
readers and this is a great way
for employees to give back
and share their love of books
with the next generation.
Mark Burnal
Head of Infrastructure Data Governance and
Man Group’s Reading Partner coordinator
Vision for literacy business pledge
Man Group is a signatory of the Vision for
Literacy Business Pledge 2019, having also
signed the 2016, 2017 and 2018 Pledge.
The Vision for Literacy Business Pledge
galvanises the business sector behind the
literacy challenge, with signatories committing
to taking practical action that will deliver
tangible benefits in helping to raise UK literacy
levels. Signing the Pledge demonstrates our
commitment to tackling the literacy challenge
by taking action within the workforce, the
local community and at national level.
Reading Partners
Man Group is pleased to have supported
the literacy and numeracy charity Reading
Partners for over a decade. Every week
throughout the academic year, employees
from the firm read to Year 2 pupils at the
Sir William Burrough primary school in
Tower Hamlets, London.
Strategic report 52 Responsible business continued
Our policies and practices
Anti-bribery and corruption
Man Group operates in multiple jurisdictions
globally and as such is either subject to or is
required to comply with various anti-bribery
and corruption laws and regulations. Man
Group takes its anti-bribery and corruption
obligations very seriously and has a
Group wide anti-bribery and corruption
programme designed to comply with all
applicable anti-bribery and corruption laws
and regulations including the US Foreign
Corruption Practices Act 1977 and the
UK Bribery Act 2010. The programme
includes policies, procedures and controls
designed to prevent and detect bribery and
corruption, including: ‘know your customer’;
due diligence and enhanced due diligence
checks; procedures to prevent, detect and
report suspicious activity; training employees
and issuing red flags; and undertaking
politically exposed persons (PEPs) screening.
Risk factors that are considered include
country, business activity, adverse
information, adverse media and sanctions.
We have various policies and procedures
in place to guide our staff and help us fight
financial crime, and annual training is given
on financial crime which includes anti-money
laundering; anti-bribery and corruption; fraud;
and financial sanctions regimes. Man Group
is committed to conducting its business with
honesty and integrity and complying with all
applicable anti-bribery and corruption and
financial crime laws. Man Group accordingly
also expects those who provide services
to us or who work on our behalf to have the
same commitment, wherever in the world
they are doing business. The annual report
from the Money Laundering Reporting Officer
is submitted to the Man Group Board and the
firm’s policies and procedures are subject to
regular review by the Internal Audit function.
Further policies that support the anti-bribery
and corruption policy include the Global Gifts
and Entertainment Policy which outlines
the requirements of staff when giving or
receiving gifts and entertainment in the
course of their employment. Additionally,
the Global Code of Ethics underlines Man
Group’s commitment to integrity and high
ethical standards and defines the standard
of conduct Man Group expects from its staff.
Slavery and human trafficking
Man Group is committed to ensuring that
modern slavery does not exist within our
supply chains or any part of our business.
Man Group has a zero tolerance approach
to slavery and human trafficking and we
expect all those in our supply chain to
comply with those values. Man Group
will not support or deal with any business
knowingly involved in slavery or human
trafficking. Please refer to our website for our
full Modern Slavery Transparency Statement.
Service providers and due
diligence
Information on our onboarding, oversight
and monitoring of our service providers
is also contained within our Service
Provider Management Policy and our
Counterparty Approval Policy. These
outline our governance structure and
approach in regard of our service providers
and the due diligence we follow.
Raising concerns
Staff are able to raise feedback and
concerns in various ways and this
includes an anonymous “whistleblowing”
hotline which is operated by an external
provider; the anonymity of whistleblowers
is protected by this service. Our Audit
and Risk Committee has oversight of
matters that have been raised and if
appropriate, can raise these to our Board.
Non-financial statement
Man Group plc, as a Jersey incorporated company, is not under any obligation to complete a non-financial information statement as required
by sections 414CA(1) and 414CB(1) of the Companies Act 2006. Nevertheless Man Group has chosen to comply with the requirement and the
below constitutes our non-financial information statement. We have cross referenced below where the descriptions of our policies governing
our approach to the reportable matters can be found, along with any due diligence we have undertaken and any notable outcomes.
Reporting requirement Policies and standards which govern our approach
Environmental
matters
• Environmental Policy
• Health and safety policy
• Green Buildings
Social matters
Anti-bribery &
corruption
Employees
• Global Code of Ethics
• Global Inclusion Statement
• Modern Slavery Statement
• Man’s activities in the wider community
• Responsible Investment Policy
• Global Anti-Money Laundering and Counter Terrorist
Financing Policy
• Global Anti-bribery and Corruption Policy
• Global Gifts and Entertainment Policy
• Global Whistleblowing Policy
• Whistleblowing Policy
• Global Code of Ethics
• Employee Inclusion
• Diversity approach
Information necessary to understand our business
and its impact on policy due diligence and outcomes
See pages 53 and 54
See above
Page 46
See above
Page 51 (ManKind and Vision for Literacy business pledge)
Pages 48-49
Page 52
‘Reputational risks’ within our risk management section within the Strategic report
See above and page 65
See above
CEO statement page 21
S 172(1) statement employee section of stakeholder engagement
Human Rights
• Modern Slavery Statement
• Service provider management Policy
See above
See above
Non-financial key
performance
indicators
• Company culture, diversity and development of people
• Build reputation of Man Group with key stakeholders
Business Model
• Counterparty risk
Chairman’s governance statement
People and culture section pages 44-47
Executive Director KPIs see page 89
S 172(1) engagement with stakeholders pages 42-43 and stakeholder engagement
pages 64-65
‘Reputational risks’ within our risk management section within the Strategic report
‘Our Business Model’ section of the Strategic report
Adverse impact by counterparties can be found in ‘Credit Risk’ section of our risk
management
Man Group plc Annual Report 2019 Managing our global
environmental impact
Man Group is committed to reducing its absolute carbon
footprint through a combination of direct and indirect
measures and to being consistent and transparent about the
progress we are making. Having exceeded our goals in 2019,
we have set new targets to 2022 to reduce our emissions
through technological upgrades and active estate
management strategies.
Environmental policy
We have an environmental policy in place
and we have undertaken initiatives to reduce
our environmental impact. Our policy is
to use natural resources responsibly and
to minimise the environmental impact of
our activities through maximising energy
efficiency, the reduction of greenhouse gas
emissions and the recycling or minimisation
of waste. Our UK offices, which account for
70% of our operation based on headcount,
are covered by environmental operating
procedures which are aligned to ISO 14001.
Board oversight of
environmental matters
The Board take overall and final responsibility
for Man Group’s environmental impact
and ensure that our environmental policy
statement1 is implemented and reviewed
and accept their collective role in providing
environmental leadership throughout Man
Group’s global operations. The Board has an
active commitment to continual improvement
in environmental performance and appoints
and delegates competent persons for
day-to-day environmental management.
1 Contained within Man Group’s Environmental Health and
Safety Policy.
Health and safety policy
Man Group is committed to ensuring the
health and safety (H&S) of its employees
and any other persons who may be affected
by Man Group’s activities. Man Group
recognises its responsibility to provide
and maintain a safe working environment
to prevent ill health, occupational injury
and promote mental wellbeing.
Our commitment is set out in the ‘Man
Group Environmental, Health and Safety
Policy Statement’ endorsed by the Group
CEO. Man Group has defined control
objectives to address H&S risks which
have been established for those who are
responsible in the management of H&S. Man
Group H&S policy objectives are aligned
to the requirements of an internationally
recognised H&S management system
to ensure that Man Group implements
a structured H&S management system,
which defines Man Group’s minimum
H&S standards, to support the safe
delivery of Man Group services globally.
Operational environmental
risk management
Man Group operates a multi-disciplinary
company-wide risk identification, assessment
and management process for operational
climate risks which are considered 15+ years
into the future. The types of risks considered
within our risk management process
include current and emerging regulation,
technological changes and upgrades,
market risks, reputational risks, acute and
chronic physical operational impacts as
well as upstream and downstream risks.
Man Group has also developed its own
proprietary Environmental, Social and
Governance (ESG) Analytics tool to monitor
ESG risk including climate change. This ESG
analytics platform synthesises a number
of different data feeds from external data
providers as well as internal, proprietary
ESG data to provide an ESG risk framework.
53
Environmental training
and awareness
All Man Group staff complete a mandatory
annual training module which outlines our
environmental policy and objectives. The
course describes ways in which staff can
contribute to minimising our environmental
footprint, such as reducing waste through
re-using and recycling, developing and
maintaining systems to monitor and measure
our use of resources, engaging with staff
and suppliers on environmental best practice
and ensuring anything we purchase comes
from sustainable and reputable sources.
Environmental awareness campaigns
are also run in offices focusing on areas
such as increasing recycling, reducing
energy use, cycling to work and minimising
single use plastics. Such campaigns
include ‘Disposable Free Zones’ in the
Riverbank House Restaurant, promotion
of the UK Cycle to work scheme and
applying energy intensity metrics to rank
the best and worst performing offices to
promote energy saving efforts. Global
environmental performance information is
also published on the company intranet.
Green buildings
Minimising our environmental impact is
at the centre of our real estate strategy.
We occupy six buildings certified by LEED
(Leadership in Energy Efficiency and Design)
and two by BREEAM (Building Research
Establishment Environmental Assessment
Method). These buildings provide
workspace for 86% of our staff globally.
Environmental data
compilation systems
We strive to deliver clear and transparent
reporting that captures the measurable
elements within our control. We monitor
and track our global environmental
impacts using specialist ESG tracking
software and an energy services
consultancy, which help us to mitigate
risk and reduce our carbon footprint.
Responsible procurement
Man Group offices procure renewable
sources of energy and implement zero waste
to landfill services in jurisdictions where
these services are available. We utilise ISO
standards and ratings systems such as
energy star for IT equipment and green star
for paper supplies to assist us in choosing
sustainable products. We also ensure all
our equipment complies with the Restriction
of Hazardous Substances EU Directive.
Strategic report
54
Responsible business continued
Managing our global
environmental impact continued
Performance
The information below details our mandatory
reporting of greenhouse gas emissions for
the year pursuant to the Companies Act
2006 (Strategic Report and Directors’
Report) Regulations 2013.
In 2019 total emissions (including scope 2
location-based) have decreased by 19%
from 2018. This has exceeded a target
of an 8% reduction set for the year. This
was achieved through the first phase of a
real estate strategy to streamline our data
centre provision and improve operational
efficiency of our property portfolio. 2019
will form a new baseline year for emission
and efficiency target reductions to 2022.
We also acknowledge that the reduction in
greenhouse gas grid emission factors has
contributed significantly towards the overall
decreasing trend in Man’s carbon footprint.
Emissions by scope
Scope 1 (Fuel)
Scope 2 Location-based
(Purchased Electricity)
Scope 2 Market-based
(Purchased Electricity)
Scope 3 Air Travel
Year End
2019
MTCO2e
1,136
Year End
2018
MTCO2e
1,388*
4,253
6,144
464
3,684
3,709
3,678
Total – Location-based
Total – Market-based
9,073
5,284
11,210
8,775
Scope 1
We have seen a reduction by 18% from 2018
in total scope 1 emissions. This achievement
has been enabled through heating and
generator efficiencies at Riverbank House
in London.
*Scope 1 emissions have been adjusted in
2018 and 2019 to reflect a wider reporting
boundary to ensure we are capturing all
the emissions that are directly under our
operational control. 2018 previously reported
as 223 MTCO2e.
Vendor management
As a condition of supplying services to
Man Group, our consultants, contractors
and sub-contractors are directed to use
natural resources responsibly and to
minimise their environmental impact through
maximising energy efficiency, the reduction
of greenhouse gas emissions, and the
recycling or minimisation of waste. Contract
managers and procurement specialists are
responsible for ensuring our consultants,
contractors and sub-contractors fulfil
their duties in this area through contract
audits and performance reviews.
Environmental
performance audits
In 2019, Man had all its UK operations
comprehensively audited in line with the
Energy Savings Opportunity Scheme.
The recommendations from this audit have
fed into our new energy saving objectives
looking ahead to 2022.
ESG-linked revolving credit facility
In 2019, Man Group converted its revolving
credit facility into one which incorporates a
range of ESG targets. The facility will be priced
according to Man Group’s performance
against three sustainability linked KPIs:
• To remain a signatory to the Women in
Finance Charter and increase the percentage
of women in senior management roles in line
with stated targets
• To increase the percentage of employees
volunteering in charitable initiatives
• To maintain the highest PRI rating of A+
for our strategy and governance approach
to responsible investment
If Man Group performs well against its targets,
then the borrowing margin will be reduced
slightly to reflect a “Sustainability Discount”.
If it underperforms against them, then the
borrowing margin will be increased slightly
to reflect a “Sustainability Premium”.
Task Force on Climate-related
Financial Disclosures (TCFD)
Man Group is working to bring its future
environmental reporting in line with the
recommendations from the Task Force
on Climate-related Financial Disclosures
(TCFD). The TCFD seeks to develop
consistent climate-related financial risk
disclosures for use by companies in
providing information to stakeholders.
Scope 2 Location-based
Employing country-level emissions factors,
we have seen a decrease in emissions saving
1,891 MTCO2e of carbon. This is largely due
to works in the United States to streamline
our data centre provision and LED lighting
upgrade projects in Switzerland and the UK.
Scope 2 Market-based
The reported scope 2 market based
emissions reflects our commitment
to using renewable energy in
jurisdictions where available. In 2019,
73% of our staff were based in offices
using 100% renewable power.
Percentage of occupancy in buildings
powered by 100% renewable electricity
100% renewable energy
Mixed energy sources
73%
27%
Scope 3
There has been a slight increase in scope 3
emissions due to business expansion and
operational requirements. We continue to
monitor our air travel with a robust travel
policy and approval measures in place.
Methodology
For 2019 we have reported Scope 1 and
Scope 2 carbon emissions on all sites where
we have operational control. This is made
up of sites that we operate less areas that
are sub-metered to tenants and sites which
we don’t operate but have sub-meters in
our demised areas. As per GHG Protocol
guidance, scope 2 emissions have been
reported according to a location-based
method and a market-based method.
We have applied the latest Department
for Energy, Food and Rural Affairs (DEFRA)
and the Intergovernmental Panel on Climate
Change (IPCC) emission factors. Where
emissions data was not available, annualised
estimates have been applied in order to
calculate the full year emissions. Based
on the nature of our emissions and the
consistency month on month, we believe
this is an appropriate representation of
Man Group’s global annual emissions.
Man Group plc Annual Report 2019
Disclosures of our voluntary scope 3
emissions are restricted to flight journeys.
We are continually working to improve our
tracking and reporting on other categories
of scope 3 emissions with the aim to increase
the number of metrics that we report on.
Intensity metric
The emissions we are reporting have been
calculated using an intensity metric which will
enable us to monitor emissions independent
of activity. As Man Group is a people-related
business, we expect that any changes to
headcount will impact the property space we
occupy and the amount of business travel we
use. Therefore, emissions per employee are
the most appropriate metric for our business,
as shown in the table below. The average
number of employees in 2019 was 1,413
(2018: 1,376), as disclosed in Note 4 to the
financial statements.
Emissions per Employee
Scope 1 (Fuel)
Scope 2 Location-based
Scope 2 Market-based
Scope 3 Air Travel
Year End
2019
0.8
3.0
0.3
2.6
Year End
2018
1.01
4.5
2.7
2.7
Total – Including
Location-based
Total – Including
Market-based
6.4
3.7
8.2
6.2
1 Scope 1 emissions have been adjusted in 2018 and
2019 to reflect a wider reporting boundary to ensure we
are capturing all the emissions that are directly under
our operational control. 2018 previously reported as
0.2 MTCO2e.
Carbon offsetting
Man Group has made an ongoing
commitment to offset its reported Scope
1, Scope 2 Market-based and Scope 3
travel emissions by funding an equivalent
carbon dioxide saving elsewhere. We aim
to offset our emissions through a range of
externally audited carbon reduction projects.
Water
Currently our water usage figure comes from
operations within our control. In 2019, total
water usage was: 27,221m3 (2018: 37,401m3).
The reduction in water usage in 2019 is due
to cooling tower upgrade works at Riverbank
House in London.
Waste
Man Group takes a zero waste to landfill
approach in jurisdictions where these
services are available. In 2019, 67% of
our operations based on headcount
were zero waste to landfill. Man Group
is working to improve our global
tracking of our waste streams to enable
comprehensive reporting across all offices.
55
Objectives and Targets
We have set new goals to 2022. We aim to set a science-based
target in line with the Paris Agreement on climate change, though
currently science-based financial sector targets are not available.
When the methodology is delivered we will adjust our targets
towards the Paris Agreement as required.
By the year end 2022
Global Operations
• Set an ambitious science based
emission target for all global
operations
Greenhouse Gas and Energy
Scope 1 Emissions
– Natural Gas & Fuel
• Reduce our scope 1 Natural Gas
and Fuel emissions by 30%
through energy efficiencies
saving a total of 341 MTCO2e
Scope 2 Emissions – Electricity
• Reduce global energy usage
10% year on year through
energy efficiencies saving
a total of 808 MTCO2e
• Reduce scope 2 market based
emissions by 50% by increasing
energy efficiency and 100%
renewable power supplies saving
a total of Scope 2 market-based
emissions of 232 MTCO2e
Water
• Reduce baseline usage 2% per
year saving a total of 1,600 m3
Pfäffikon – Switzerland
Our Pfäffikon office is powered by renewable
hydro-electric energy. The office underwent
a full refurbishment in 2019 which included
upgrading the lighting to smart LED lamps.
This has driven a saving of 8500kwh over
a quarter and continues to drive energy
efficiency savings.
Riverbank House – London
Riverbank House PV Cells
Riverbank House Green Roof
Riverbank House is rated “Excellent” via the Building Research Establishment Environmental
Assessment Method (BREEAM). The building has a green roof, rainwater harvesting and solar
power generation. In 2019 Riverbank House has had a key focus on reducing its natural gas
usage, which saw a 30% reduction in usage as compared with 2018. We continue to upgrade
plant and equipment to drive further efficiencies to reduce cost and climate impact. We are
targeting a reduction of at least 15% in energy usage over 2020.
Strategic report Man Group plc Annual Report 2019
56 Chairman’s governance overview
Shaping and
maintaining a strong
corporate culture
Dear Shareholder
I am pleased to present the corporate
governance report for the financial year
ending 31 December 2019; my first since
being appointed as Chairman. This section
will enable you to gain an understanding of
the governance responsibilities and focus of
the Board throughout the past year and its
ambitions for 2020. Man Group recognises
the importance of corporate governance
and the Board remains committed
to providing the highest standards of
governance throughout the organisation.
Board composition
Firstly, I would like to thank our previous
Chairman, Lord Livingston of Parkhead,
who stepped down at the end of 2019, for his
contribution to the Company over his tenure.
Similarly, Jonathan Sorrell announced his
departure from the Company in September
2019 and on behalf of myself and the
Board we would like to thank him for his
contribution and we wish him well in his future
endeavours. On receiving Ian’s resignation
the Board quickly activated its pre-arranged
succession plans and, as such, did not
require an external search consultancy.
The Board felt that my knowledge of
the Company and prior experience as
Chairman on other boards made me a
strong candidate for the role. As such, my
appointment as Chairman was unanimously
agreed by the Board in September 2019.
The Board takes succession planning
seriously and recognises its importance
to the Company’s success and the
effective functioning of the Board. We
continually evaluate the skills, experience,
diversity and tenure of the directors to
ensure these remain appropriate.
Matthew Lester approaches his nine year
tenure this year and as such stepped down
from the Board with effect from 26 February
2020. Andrew Horton will also step down
from the Board and his position as Audit
and Risk Committee Chair following the
2020 Annual General Meeting. I would like to
thank Matthew and Andrew for their service
to the Company. A search process was
undertaken to find a replacement Audit and
Risk Committee Chair and it was announced
that Lucinda Bell would be appointed as
a non-executive director with effect from
28 February 2020, and would succeed
Andrew as chair of the Audit and Risk
Committee when he steps down on 1 May.
Lucinda has significant financial expertise and
listed company experience gained through
her career at British Land Company PLC
where she held the position of Chief Financial
Officer for seven years. I am also pleased to
announce the appointments of Ceci Kurzman
and Anne Wade as non-executive directors.
Ceci’s appointment is with effect from
28 February 2020 and Anne’s appointment
is from 30 April 2020. Anne will also be a
member of the Remuneration Committee.
The Board considers these appointments
are complementary to its current skillset.
Corporate restructure
In 2018 the Board announced it was
proposing to implement a corporate re-
structure, the rationale being to provide
greater flexibility for the Group, support the
effective and efficient governance of the
business and to remain consistent with
market practice for other asset managers.
The restructure was thereafter approved by
shareholders in May 2019 and concluded
on 28 May 2019. This has resulted in the
Company being in a stronger competitive
position both within the UK and international
markets to provide value over the long term.
Further information on the reorganisation can
be found on our website at www.man.com.
Culture and diversity
The Board recognises its role in shaping and
maintaining a strong corporate culture which
aligns with the Company’s overall purpose
and values. The Board places emphasis
on ensuring an open and collaborative
environment with a focus on the development
of its people. This is integral to Man Group’s
success and supports our focus of attracting
and retaining talented staff. The Board spent
a significant amount of time at its strategy day
on the discussion of culture and its impact
Group wide. The discussion focused on the
current culture, Man’s core principles and
attracting and developing talent. From this
exercise, the Board agreed it would focus,
for 2020, on ensuring that employees felt
a sense of belonging; achieved through
employee communications, benefits and
wellbeing initiatives and ensuring that
employees felt valued for their contributions.
Further information on our people and
culture can be found on pages 44 to 47.
The Board recognises that diversity at Board
level and within Man Group as a whole
is an important topic, particularly within
the industry that Man Group operates.
As noted in last year’s Annual Report the
Nomination Committee had set a criteria
of at least 25% female representation on
the Board by the end of 2019. I am pleased
to say that as at the date of publication
of this report, we have 40% female
representation on the Board and we will
continue to be cognisant of gender diversity
when considering future appointments.
John Cryan
Chairman
57
Experience counts
Percentage of current Board members with
experience of:
International
Business
100%
Operations
90%
Finance &
Investment
90%
Risk management
80%
Board gender
Board age
Male
Female
60%
40%
35–44
45–54
55+
10%
20%
70%
Board tenure
Board composition
0–3 years
3–6 years
6+ years
30%
50%
20%
10%
Chairman
Senior independent
director
Executive directors
Independent
non-executive directors 60%
10%
20%
Governance report 58 Board of Directors
A balanced and
effective team
Executive Board member
Non-executive director
John Cryan
Chairman
Luke Ellis
Chief Executive Officer (CEO)
Appointed: January 2015. Chairman January 2020
Appointed: September 2016
Committees: Nomination (Chair), Remuneration
Committees: None
Background and career: John is Chairman of
XCyber Group Limited, a cyber intelligence company
based in the UK. John was CEO of Deutsche Bank
AG from July 2016 to April 2018, having previously
served as co-CEO from July 2015. Prior to
his appointment as CEO, John served on the
Supervisory Board of Deutsche Bank AG, chairing
its audit committee and as a member of its risk
committee. Prior to his time at Deutsche Bank AG,
he held a number of senior roles at UBS AG over
a career spanning more than 25 years with the
banking group, during which time he served as
Group CFO as well as Chairman and CEO of UBS
AG, EMEA. Following his time at UBS AG, John
was President of Temasek, based in Singapore.
Areas of expertise and contribution:
John has extensive knowledge of international
financial markets gained from experience
at leading global financial institutions and
brings significant knowledge of the regulatory
environment in which Man Group operates.
Mark Jones
Chief Financial Officer (CFO)
Appointed: January 2017
Committees: None
Background and career: Before joining the Board,
Mark served as Co-CEO of Man GLG from 2013 and
COO of Man GLG from 2010. Mark joined Man GLG
in 2005 from strategy consulting firm McKinsey,
where he worked across a range of industries.
Areas of expertise and contribution: Mark has
significant management, financial and operational
experience gained through his previous roles at
Man Group. This experience, together with his
extensive industry knowledge, has supported the
development of the Group’s strategy and offering
to clients. Since his appointment as CFO, Mark has
brought clear focus on cost through the delivery
of challenging cost saving initiatives, led the work
on our corporate restructure, and has successfully
overseen a number of changes to the structure of the
Group’s Risk function, as well as the implementation
of our new finance and HR system, Workday.
Background and career: Prior to his appointment
to the Board, Luke served as President of Man Group
from 2012, with responsibility for the management
of Man’s investment businesses. Before this, he was
Head and CIO of Man’s Multi-Manager Business and
Non-Executive Chairman of GLG’s Multi-Manager
activities. Luke previously served as Managing
Director of FRM from 1998 to 2008, prior to which he
was a Managing Director at J.P. Morgan in London.
Areas of expertise and contribution: Luke
has a strong and varied investment management
background and extensive knowledge of Man Group
from his role as President. Since his appointment
as CEO, Luke has led the Group in diversifying
its product range and increasing its international
presence. He has also continued to strengthen the
Group’s control focus through the creation of the
Chief Operations Officer role and the appointment
of the Chief Investment Officer for the Group.
Dame Katharine (Kate) Barker
Independent non-executive director
Appointed: April 2017
Committees: Remuneration
Background and career: Kate is a business
economist and was previously a member of the
Bank of England’s Monetary Policy Committee from
2001 to 2010. Prior to that, she was Chief Economic
Adviser to the Confederation of British Industry. Her
previous roles include Senior Adviser to Credit Suisse
from 2010 to 2016 and non-executive director of
the Yorkshire Building Society. Kate was awarded
a CBE in 2005 for services to social housing and
a DBE in 2014 for services to the British economy.
Kate is currently Senior Independent Director of
Taylor Wimpey plc, however will step down from
the board at the end of July 2020. During 2019
Kate joined Saunderson House as a member of the
Saunderson House Investment Committee. Kate
is also Chair of Trustees for the British Coal Staff
Superannuation Scheme, and from April 2020 will
become Chair elect of the USS Trustee Board.
Areas of expertise and contribution: Kate has
over 30 years’ experience as a senior business
economist with broad-ranging knowledge of
monetary and public policy, and the financial
services sector. Kate brings to Man Group’s
strategic thinking and economic insight coupled
with a strong knowledge of financial markets and
is a valuable adviser and contributor to the Board.
Man Group plc Annual Report 2019 Zoe Cruz
Independent non-executive director
Appointed: June 2018
Committees: Remuneration
Background and career: Zoe held various senior
roles during a 25-year career at Morgan Stanley,
including serving as Co-President of the firm between
2005 and 2007 and Global Head of Fixed Income,
Foreign Exchange and Commodities from 2001 until
2005. Following her time at Morgan Stanley, Zoe
founded Voras Capital Management in 2009 and ran
the firm as CEO until 2013. Zoe is currently a non-
executive director of Ripple Labs Inc. She was also
a non-executive director of Old Mutual plc from 2014
until its managed separation completed in 2018.
Areas of expertise and contribution: With
her senior-level experience within global financial
institutions, broad understanding of the macro
context for investment management, and
her strong US perspective, Zoe is a valuable
contributor to the development of Man Group’s
business strategy and risk management.
Lucinda Bell
Independent non-executive director
Appointed: 28 February 2020
Committees: Audit and Risk
Background and career: Lucinda served as CFO
of The British Land Company PLC from 2011-2018,
where she also led on sustainability. Prior to that,
she held a range of finance and tax roles at British
Land. Lucinda is also a non-executive director
and Chair of the Audit Committee at both Derwent
London plc and Rotork plc, and a non-executive
director of Crest Nicholson Holdings plc. She is
national Trustee and Treasurer of Citizens Advice,
where she chairs the audit and risk committee.
Areas of expertise and contribution: Lucinda has
extensive financial expertise as well as experience
in Environmental, Social and Governance matters.
She has significant listed company experience
acquired through her role as CFO at The British
Land Company PLC and is currently Chair of
two Audit Committees within the FTSE 250.
Richard Berliand
Senior Independent Director (SID)
Appointed: January 2016
Committees: Remuneration (Chair), Audit and Risk,
Nomination
Background and career: Richard held a
number of senior roles at J.P. Morgan over a
23-year career at the firm, including Global
Head of Prime Services, Global Head of Cash
Equities and Chairman of J.P. Morgan’s Market
Structure practice. Richard is currently Chairman
and non-executive director of TP ICAP plc.
Areas of expertise and contribution: Richard
has a wealth of experience in the financial services
sector gained through a number of senior executive
roles. He also brings extensive experience from a
diverse range of international non-executive positions
which gives him a deep understanding of areas
such as the current regulatory environment, risk
management and technology. Richard’s focus on
investor engagement through his role as Chairman of
the Remuneration Committee and SID has provided
valuable context to Board decisions, specifically
in relation to remuneration policy and practice.
59
Andrew Horton
Independent non-executive director
Appointed: August 2013
Committees: Audit and Risk (Chair), Nomination
Background and career: Andrew has served on
the Board of Beazley plc since 2003, first as Group
Finance Director and since 2008 as CEO. Prior to his
time at Beazley, Andrew held a number of financial
positions within ING, NatWest and Lloyds Bank.
Areas of expertise and contribution: Andrew
has over 25 years of broad financial services
experience with significant exposure to operating
at Board level. With his banking, financial markets,
insurance and broad international experience,
Andrew has significantly contributed to Man Group’s
strategic development, risk management, financial
reporting and increased international presence.
Dev Sanyal
Independent non-executive director
Appointed: December 2013
Committees: Audit and Risk
Background and career: Dev has held a number
of senior financial and line management positions
with BP in a global career spanning 30 years. Dev
is Chief Executive, Alternative Energy and Executive
Vice President, Europe & Asia Regions at BP plc.
Areas of expertise and contribution: Dev has
extensive knowledge of capital markets, asset and
risk management, trading and foreign exchange
gained from his role as BP Group Treasurer and
Chairman of BP Investment Management Ltd. With
broad international experience and wide ranging
operational expertise, he is able to contribute to
the development and execution of Man Group’s
business strategy and global relationships.
Cecelia (Ceci) Kurzman
Independent non-executive director
Appointed: 28 February 2020
Committees: None
Background and career: Ceci founded and is
currently the president of Nexus Management
Group. Prior to this she spent eight years at Sony
as Vice President of Global Marketing for Epic
Records and at Arista records where she led
marketing and artist development functions. Ceci
currently serves as a non-executive director on
the Board of Revlon where she is also a member
of the Audit and Remuneration Committees.
Areas of expertise and contribution: Ceci has
gained extensive experience within marketing,
brand management and technology, specifically
digital media and digital endorsement throughout
her career. She has significant experience
with company launches, funding growth stage
businesses and strong entrepreneurial skills.
Governance report 60 Corporate governance
Board structure and composition
Roles and responsibilities
Independence
70% of the Board (excluding the Chairman) comprises independent non-executive directors and the composition of all Board committees
complies with the Code. Additionally, the Chairman was considered independent on his appointment.
Role of the Board
The Board’s core role is to promote
the long-term success of the Company
for the benefit of its shareholders.
This requires it to:
• Determine and review business strategy
and Man Group’s appetite for risk
• Monitor management performance
in delivering against that strategy
• Ensure that risk management
measures and internal controls
are appropriate and effective
• Oversee and monitor the embedding
of and adherence to the Company’s
business values
• Ensure that the Company’s financial
structure, resources, talent and culture
will support long-term growth
In discharging this role, the Board
must also have regard to and engage
with the interests of a wide range of
stakeholders, including employees,
customers, suppliers and broader
communities, in order to build mutual
trust and support the long-term
sustainability of the business.
Role of the Board committees
The Board delegates its formal
governance responsibilities to three
Board committees comprised
exclusively of non-executive directors.
The main responsibilities of each
Board committee are set out
on the page opposite.
Senior Independent Director
• Maintains a broad overview of the work
of the Board and its committees
• Provides a sounding board for and advice
to the Chairman on any Board matters
including development and succession
• Acts as a focal point for communications
with the non-executive directors as required
• Leads the annual performance evaluation
of the Chairman
• Leads the search for the appointment
of a new Chairman
• Engages with shareholders as required
Non-executive directors
• Contribute and provide constructive challenge
to the development of business strategy
• Contribute to the identification of principal
business risks and the determination
of risk appetite
• Monitor and challenge management
performance in delivering business strategy
and objectives
• Monitor and challenge the effectiveness
of the internal control and risk management
framework
• Monitor the Company’s compliance with
the regulatory principles and requirements
impacting asset management and distribution
• Review and challenge, prior to publication,
the Company’s financial statements
and announcements
• Keep Board composition and succession
planning under review in light of changing
business needs and recommend any
changes considered
Chairman
• Leads the Board, sets its agenda and ensures it
discharges its role effectively
• Supports and constructively challenges the
CEO, promotes effective relationships between
executive and non-executive Board members,
and creates a culture of open debate
• Leads, with the support of the Nomination
Committee, effective Board succession
planning and the search for and appointment
of new directors, taking account of the need for
the development of Board skills, experience
and diversity
• Ensures that the Board maintains effective
engagement with shareholders and takes
account of the interests of all stakeholders
in its decision making
Chief Executive Officer
• Leads the development, for Board approval,
of business strategy and management’s
delivery against it
• Runs the business with appropriate delegated
authorities, risk management and internal
controls
• Communicates and embeds a shared purpose
and set of business values and builds
management talent
• Develops an effective relationship with the
Chairman and leverages the knowledge
of non-executive Board members
• Maintains an effective dialogue with
shareholders on the Company’s strategy
and performance
• Oversees the Group’s Sales and Marketing
capability globally and Man Global Private
Markets division
Chief Financial Officer
• Manages the allocation and maintenance
of the Group’s capital, funding and liquidity
in accordance with regulatory requirements
• Has responsibility for the preparation and
integrity of the Group’s financial information
and its reporting
• Leads the development of annual budgets
and Medium Term Plans for Board approval
• Has responsibility for the Group’s risk
management within the Board’s risk
appetite statements
• Maintains an effective dialogue with
shareholders and stakeholders on the
performance and financial structure
of the Company
• Has responsibility for and leads the
development of the Group’s corporate strategy,
including merger and acquisition activity
Man Group plc Annual Report 2019 61
Board Committees
Board operation and delegation
Audit and Risk Committee
• Reviews the integrity of the Company’s financial reports
and statements, and recommends their approval to the Board
• Reviews and reports to the Board on the effectiveness of
Man Group’s risk management and internal controls framework
• Recommends to the Board the appointment of the external
auditor and reviews their effectiveness and independence
• Approves the Internal Audit plan and reviews the effectiveness
of the Internal Audit function and management’s response
to their findings
Go to page
70
Remuneration Committee
• Determines and recommends to the Board the principles
and structure of the Directors’ Remuneration policy
• Approves the total annual compensation for individual executive
directors including salary, variable cash and deferred bonus,
and LTIP awards
• Approves the quantum of the Company’s annual variable
compensation pool and deferral policies
• Approves the total annual compensation for Executive
Committee members and Remuneration Code staff
• Reviews feedback from shareholders and oversees the
Company’s engagement on directors’ remuneration and reporting
Go to page
78
Nomination Committee
• Keeps the Board’s size, structure, composition and diversity
under review in response to business needs and opportunities
• Considers the skills, experience and knowledge required
for a particular Board appointment
• Conducts the search and selection process for new
directors, taking advice from independent search consultants
• Recommends to the Board preferred candidates for
Board appointment
• Reviews Board and senior management development
and succession planning to ensure continuity of resource
Go to page
76
Full committee terms of reference, which are reviewed and
approved by the Board on a regular basis, can be found on our
website. Details of the work of the committees during the year are
given in the separate committee reports in this annual report.
Matters reserved for the Board
To discharge its role, the Board has reserved for itself certain key
areas of decision including business strategy, risk appetite, material
acquisitions and making disposals, capital structure and funding,
financial reporting and dividend policy. A full list of the Board’s
reserved matters is available on our website at www.man.com/
corporate-governance.
Board activity during 2019
Details of the Board’s main activities and areas of focus during the
year are provided on pages 62 to 63. These align with the Board’s role
and reserved matters detailed above and demonstrate the part played
by the Board in supporting and progressing the Company’s strategic
priorities. An account of the Board’s engagement with key stakeholder
groups and consideration of their interests is given on pages 42 to 43
and 64 to 65.
Board delegation to the CEO
All business decisions and activities which are not reserved for the
Board and its committees are delegated to Luke Ellis as CEO. Luke
has appointed and runs the business through the Senior Executive
Governance Committee, whose members have the particular areas
of responsibility shown below.
Senior Executive Governance Committee
Member
Areas of responsibility
Robyn Grew
Group Chief Operating
Officer and General Counsel
Man Group’s infrastructure – Operations,
Trading Platform and Core Technology,
Compliance, Financial Crime, Legal, HR,
Corporate Real Estate, Business Operational
Risk and Resilience, Talent and Regional COOs
Mark Jones
Chief Financial Officer
and Executive Director
Capital, Financial reporting, Risk management
and relationships with Shareholders,
Regulators, Banks and Auditors, Corporate
Strategy, Mergers and Acquisitions
Sandy Rattray
Chief Investment Officer
Man AHL, Man Numeric, Man GLG, Man
Solutions, Man FRM and Trading and
Alpha Technology
L–R. Luke Ellis, Mark
Jones, Robyn Grew
and Sandy Rattray.
The Committee meets weekly to maintain its broad operational
oversight of the business, discuss top level strategic and risk issues and
develop proposals for Board review. These meetings are supplemented
by regular informal interaction and discussion to share and test views.
Shanta Puchtler was appointed to the Committee on 10 January 2020.
CEO’s operating authorities and procedures
In addition, to help manage and control the business on a day-to-day
basis, the CEO has implemented a framework of delegated authorities
and procedures which applies throughout the firm. This framework sets
out authority levels and controls in respect of material business change,
the development of Man Group’s product range, non-budgeted
expenditure, recruitment and compensation, legal agreements,
financial guarantees and use of the Company’s balance sheet.
Governance report
62 Corporate governance continued
How the Board
promotes the success
of the business
Key activities
Developing and
reviewing strategy
Reviewing risk appetite
and risk management
What we did
• Reviewed the progress
against last year’s areas
of focus: Sales, Technology,
Man GPM growth, Man
Numeric, Man FRM and
Man Solutions
• Received half yearly reviews
on ELS (equity long/short),
central trading, Man Numeric
and Man GLG
• Reviewed Man Group’s
operating model to ensure
it remained fit for purpose
• Deep dives on investment
strategies throughout the year
• Kept under review
contingency plans to allow
Man Group to react to a range
of Brexit scenarios
• Continued to review
management proposals for
a change to Man Group’s
corporate structure
Outcomes
• Agreed management
proposals for a change to Man
Group’s corporate structure
and successfully implemented
a new governance structure
• Agreed to monitor the
opportunities for growth within
the private markets sector and
agreed additional investment
to support the Man GPM
business as a strategic priority
What we did
• Reviewed the risk governance
and appetite framework
including business risk
tolerance
• Reviewed Man Group’s
principal risks and updates
to its risk dashboard
• Conducted a full year review
of the effectiveness of its risk
management and controls
• Reviewed future capital
and liquidity projections
and scenarios
• Reviewed the cyber risk
dashboard
• Reviewed the Modern Slavery
Transparency Statement
Outcomes
• After full discussion of
dashboard risks, approved the
Board’s principal risk and risk
management disclosures in
the Annual and Interim Report
see pages 34 to 39
• Refreshed the Company-wide
phishing and vishing training
and considered the use of
new products to enhance
monitoring and response
capabilities
• Approved the Modern Slavery
Transparency Statement
Monitoring and
challenging business
performance
What we did
• Discussed with the CEO
the impact of the current
macroeconomic and market
trends on Man Group’s
investment strategies,
potential investor appetite and
the retention of client assets
• Regularly reviewed internal
profit forecasts against
market consensus estimates
to identify and assess any
variance
• Reviewed assumptions
underlying 2020 budget
and 2020/22 Medium Term
Plan (MTP)
Outcomes
• Agreed the refinancing of Man
Group’s revolving credit facility
to include ESG-linked KPIs
• Challenged 2020 budget
assumptions on performance
and costs
• Approved 2020 budget
and MTP subject to ongoing
review in the course of the
year in light of changing
market conditions
Overseeing culture and
people engagement
What we did
• Discussed with the CEO the
2019 employee survey scores,
the analysis of feedback and
the management actions
planned in the year
• Discussed how we evaluate
culture, how it is embedded
across the organisation and
how it compliments Man
Group’s key values
• Sought further direct exposure
to members of the Executive
Committee and other senior
management through Board
presentations and in
subsequent follow
up discussions
• Discussed the succession
planning at both Board and
senior management level
• Reviewed regular updates on
management’s wide ranging
diversity initiatives to create
an inclusive environment
across the business
Outcomes
• Commended the overall
positive outcome of the 2019
employee survey. Requested
that management review
feedback and devise
appropriate action plans
• Agreed to appoint two
designated non-executive
directors to meet with
colleagues firm wide to
ascertain direct evidence
of Man Group’s culture,
feedback on Man Group’s
employee proposition
and general sentiment
• Agreed to instigate a search
process for a new non-
executive directors
• Sponsored and participated
in diversity events led by staff
Man Group plc Annual Report 2019 63
Key areas of focus
Innovation and
technology
Returns
to shareholders
Strong client
relationships
Proportion of Board time
spent on key activities
Technology
• Reviewed progress of the
central trading programme
and cost savings for clients
• Discussed Man Group’s
corporate technology strategy
and how Environmental,
Social and Governance (ESG)
factors could be incorporated
Innovation
• Creation of ESG Chief
Investment Officer to further
develop our ESG investment
expertise
• Discussed the development
of various new strategies
across credit, private markets
and multi-strategy to further
diversify our offering to clients
Dividends
• Recommended and approved
final and interim dividends
in line with the Company’s
published dividend policy
Client relationships
• Reviewed and discussed
with the sales team the
opportunities within the
Canadian pension market
Capital Return
• Kept under review and tested
throughout the year Man
Group’s forecast capital
and liquidity positions under
various scenarios
• Reviewed firm’s credit rating
position and Revolving Credit
Facility (RCF) refinancing
• Discussed impact of the
corporate restructure on firm’s
capital position and range of
current and future financing
options
• Reviewed market flow trends
in various sub-sectors that
Man Group operates in and
future areas of client demand
Responsible Investment (RI)
• Discussed with Man Group’s
RI team the increasing
importance of RI to
institutional and other
investors, the development
of Man Group’s RI strategy
and fund framework and the
raising of its RI profile within
the investment community
• Renewed Man Group’s
• Assessed merits of returning
funding of the Oxford Man
Institute to assist in developing
intellectual capital, talent and
longer term research projects
over time
further capital to shareholders
compared to potential value
of acquisitions
• Approved launch of a further
share buyback programme
of $100m
Board meeting attendance
The Chart below shows the Board attendance throughout the year:
Board Member
Ian Livingston1
Kate Barker
Richard Berliand
Zoe Cruz2
John Cryan
Luke Ellis
Andrew Horton
Mark Jones
Matthew Lester ³
Dev Sanyal
Jonathan Sorrell4
Strategy (including
innovation and tech) 47%
13%
Risk management
Performance
23%
Culture and people
and stakeholders
17%
Attendance
7/7
7/7
7/7
6/7
7/7
7/7
7/7
7/7
7/7
7/7
4/7
Ian Livingston resigned from the Board on 31 December 2019.
1
2 Zoe Cruz did not attend the September 2019 Board meeting due to a prior commitment.
3 Matthew Lester stepped down from the Board on 26 February 2020.
4 Jonathan Sorrell resigned in September 2019 and so did not attend the last three Board meetings of the year.
Governance report 64 Corporate governance continued
Stakeholder
engagement
Shareholders
The Board is committed to ongoing engagement with its
shareholders and it does this in the following ways:
Institutional investors
The Company has in place an Investor Relations programme
through which the Head of Investor Relations, CEO and CFO
maintain a continuous dialogue with investors on performance,
plans and strategic objectives. This is achieved through one to
one meetings throughout the year and participation in investor
roadshows and investor conferences. The 2019 investor calendar
is set out opposite. Key areas which the CEO and CFO have
discussed with investors throughout the year have included:
• Investment performance across our range of strategies
• Flows, interaction with clients, client concentration,
product innovation and margin trends
• Capital management including capital returns
and acquisition strategy
• Brexit and its potential impact on the Group’s operations
• Proposed corporate restructure
Richard Berliand, as Chairman of the Remuneration Committee,
provides regular reports on shareholder views on Man’s Directors’
Remuneration policy and award decisions from his engagement
with top shareholders and shareholder representative bodies.
Private investors
Our private investors are encouraged to access the Company’s
Interim and Annual Reports, half year and final results presentations
and quarterly trading statements on our website. Other useful
information such as historic dividend records and shareholder
communications are also available. Our website gives access to our
Registrar’s Shareview website (www.shareview.co.uk) through which
shareholders can manage their individual account online. Printed
copies of our Annual and Interim Reports and other shareholder
communications continue to be available on request for shareholders
who prefer this method of delivery. A shareholder mailbox is
also available to answer any queries (shareholder@man.com).
Shareholder meetings
The Board welcomes its shareholders to the Annual General
Meeting (AGM) each year. At the AGM the CEO provides an overview
of the progress of the business and its focus and outlook going
forward. This is followed by the opportunity for shareholders to ask
questions about the resolutions before the meeting and about the
business more generally. The CEO’s presentation is made available
on the website after the meeting. At the AGM held in 2019, the
resolution relating to the disapplication of pre-emption rights
authority in connection with an acquisition or specified capital
investment, received a vote against of more than 20%. In line with
the 2018 Corporate Governance Code the Board considered this
result and engaged in discussions with shareholders in order
to better understand their reasons. From this exercise it was
ascertained that shareholders may have preferred to have the
opportunity to vote on specific proposals for a transaction requiring
this level of pre-emptive issue. The Board will continue to engage
with its shareholders, through its investor relations team in the run
up to the Company’s 2020 AGM.
Calendar of investor events
Q1 2019 • 2018 year end results
• 2018 year end report published
• UK Investor Roadshow (London)
• US Investor Roadshow
• Morgan Stanley Annual European
Financials Conference
Q2 2019 • Q1 2019 Trading Statement update
• Shareholder engagement on 2018 Directors’
Remuneration Report, Audit policy and
AGM voting
• UBS Pan European Small and Mid-Cap
Conference
• Annual General Meeting
• Goldman Sachs European Financial
Services conference
Q3 2019 • 2019 interim results released
• 2019 Interim Report released
• UK Investor Roadshow (London)
• US Investor Roadshow
• Barclays Global Financial Services
Conference
• Citi Small and Mid Cap Conference
• Bank of America Merrill Lynch Annual
banking and Insurance Conference
Q4 2019
• Q3 2019 Trading Statement released
• UBS European Conference
Man Group plc Annual Report 2019
65
Employees
• Two non-executive directors were appointed to engage directly
with the global workforce. Further details on this process can
be found on page 67
Clients
• Continued to review trends in investor appetite and allocations
across asset classes, including trends towards credit and
private markets allocations during the year
• Sought feedback from business unit heads on staff sentiment
• Discussed underlying drivers of change in client behaviour
and the impacts of team and business change
during 2019 and sales priorities for 2020
• Maintained focus on investors’ increasing interest in Man Group’s
Responsible Investment approach and client behaviour in
this area
• Kept updated by the sales team on the development of
Man Group’s existing client base, the identification of top clients
we believe we can serve in the future and progress on strategies
to respond to their needs
• Requested and received regular deep dive reviews of large
institutional clients and the management and development
of their relationships with Man Group.
Further information can be found on pages 15 and 19.
Business partners/supply chain
• Regular interaction between Man Group’s executive directors
and key elements of its supply chain which largely comprise
business and professional service organisations
• Reviewed Man Group’s engagement with its broader supply
chain as part of the Board’s annual approval of Man Group’s
Modern Slavery and Transparency Statement
• Considered, as part of the review of Man Group’s corporate
restructure, any potential impact on business partner
relationships and continued to monitor this post completion.
• Explored in depth the outputs from the 2019 employee survey
and discussed the consistency of staff attitude and culture
across different parts of the Group
• Focused attention on ensuring staff awareness of the
Company’s whistleblowing procedures and their effectiveness
• Discussed with management the nature of Man Group’s culture
and the embedding of its business values and their impacts
• Received regular updates on progress of Man Group’s diversity
initiatives and participated in employee led Drive network events
• Engaged directly with management, at Executive Committee
level and below, within formal Board presentations and follow
up discussions.
Further information can be found on pages 44 to 47.
Whistleblowing and safeguarding
Man Group endorses an open and collaborative environment
and one where employees feel that they are able to raise their
concerns. The Company operates, through a third party provider,
a service whereby issues can be raised by employees
anonymously. Staff are also made aware of Man Group’s
whistleblowing procedures and the effectiveness of these
procedures are reviewed by the Audit and Risk Committee.
Communities
• Maintained an awareness of the broad communities of people
within which Man Group operates and the needs of the pension
funds and underlying individual beneficiaries which they serve
• Approved a charitable donation to Kings College
Mathematics School
• Received updates on the activities of and impacts of grants
made by Man Group’s UK and US Charitable Trusts which
is focused on improving standards of literacy and numeracy
in local communities and more broadly
• Discussed opportunities for internships at the Company.
Further information can be found on pages 50 to 51.
Governance report 66 Corporate governance continued
Board strength
and effectiveness
Board profile
Man Group’s Board is a highly skilled, committed and diverse group
of individuals who are focused on understanding its strengths, its
challenges and contributing to its success. The biographies set out on
pages 58 to 59 evidence that all members of the Board have extensive
experience within financial services as well as bringing critical skills
from their other or previous appointments at other companies. The pie
charts on page 57 provide an analysis of the Board’s diversity in terms
of skills base, length of tenure, age group and gender. The Board
acknowledges the Parker Report on ethnic diversity of UK Boards
and fully appreciates the benefits of an ethnically diverse Board and
is cognisant of this when considering new appointments.
The Board and its Committees hold meetings throughout the year
at regular intervals. During the year the Board met formally seven
times and this included a strategy day. Attendance of the Board
can be seen on page 63 and the attendance of the Committees
can be found in the separate Committee reports. The Board invites
the Chief Investment Officer and the Chief Operating Officer to attend
the Board meetings in order to give further detail and management
perspective on matters discussed at the Board, however they do
not contribute to any decision making.
Board meetings are conducted on the basis that all written
materials submitted are thoroughly reviewed in advance so as
to maximise time for discussion rather than presentations taking
place at the meetings. The role of the non-executives is to challenge
proposals and approaches where necessary. The non-executives
utilise their experience to suggest alternative approaches or ideas
that management have not considered. Board debate and decision
making are structured in such a way as to allow all views to be heard.
Board independence and time commitment
Our other non-executive directors are fully independent and our
Chairman was independent on his appointment to the role. Board
members are required to inform the Chairman of any updates or
changes they are considering to their external roles which may conflict
with their responsibilities at Man Group so that any potential conflicts
can be assessed by the Board. An ongoing schedule of directors’
external interests is maintained and formally reviewed by the Board
at the end of each year.
The Board is also conscious of the demands that being a director
of a FTSE 250 company entails and the necessary time commitment
required. Any new external director appointment will be assessed
by the Board for its impact on their ability to discharge their duties
as a director of Man Group plc adequately. Given the increased focus
of over-boarded directors by the 2018 UK Corporate Governance
Code all directors’ time commitments have been thoroughly reviewed
and the Board will monitor and revisit this at least annually and before
any additional external appointment is taken.
Board induction process
All non-executive directors receive a comprehensive and tailored
induction to the business and, if required, the asset management
industry. The programme is structured around one-to-one briefings
with the executive directors, Senior Executive Governance Committee
members, the heads of Group businesses and the Company
Secretary, covering their respective business areas. An outline
of the usual programme is given below with further detail available
on the website. The induction programme is kept under review and
is updated in response to feedback or changes within the business.
John Cryan was appointed as Chairman on 1 January 2020.
As John had already served as a non-executive director for five
years it was agreed that a formal induction process was not required.
Instead John will meet with key management throughout the Group.
Non-executive director induction programme
Business review
• Strategic direction and priorities
• Business strategy and market context
• Risk appetite, principal risks, risk governance framework
and ICAAP
• Overview of Man AHL, Man GLG, Man FRM,
Man Numeric and Man GPM
• Global sales and marketing
• Budget and medium term plan
• Operations and technology
Performance and market positioning
• Review of financial and market performance
• Recent analyst and media coverage
• Analysis of shareholder base and investor perceptions
• Shareholder engagement
Regulatory environment
• Overview of the Group’s key compliance and regulatory
policies Recent changes in the regulatory landscape
and impact of upcoming regulatory developments
• Hot topics and key priorities for regulators including
relevant thematic reviews
People, culture and values
• Discussion of business principles
• Key people and succession plans
• People and talent priorities including diversity and inclusion,
engagement, staff development and performance
• HR structure and outsourcing arrangements
Regulatory and Board governance framework
• Board structure, processes and dynamics
• Board interaction with the business
• Listed company obligations, reporting and corporate
governance framework
• Directors’ duties and responsibilities
Man Group plc Annual Report 2019 67
Employee engagement process
The Board sought to expand its approach to engagement with
the workforce as a whole. Our two non-executive directors who
were appointed by the Board to engage directly with the global
workforce, Kate Barker and Zoe Cruz, conducted a series of
discussions with staff from business units across Man Group.
The findings were then presented to the Board, and an in depth
discussion on how these could be addressed took place at the
November 2019 Board meeting.
A key theme highlighted during the process was enhanced
communication of Man Group’s strategy and growth plans to
employees. In response to this, the town hall presentations in
Boston, New York and London given by Luke Ellis (and other
Senior Executive Governance Committee members) following the
release of the firm’s year end and half year results, and quarterly
trading statements, were expanded to provide employees with
further detail (as appropriate) on the development of the firm.
Further themes highlighted included the diversity of Man Group’s
workforce and communication with Man Group’s regional offices
which the Board also considered and discussed.
The process proved highly insightful, and the Board agreed
that the results would be invaluable in enabling better informed
decisions, the effects of which would be closely monitored
through continued ongoing engagement during 2020.
Board education and training
The Board is kept updated on key areas of the business and
upcoming regulatory changes through the following methods:
• Briefing papers included within Board papers
• Presentations from senior management and other employees
on specific issues
• Educational sessions from external advisors where necessary
The main topics addressed during the year were:
Senior Managers and Certification Regime (SMCR)
• Impact of the SMCR requirements given from the Global Head
of Compliance
• Agreed post implementation reviews in order to monitor
progress and impacts
Corporate restructure
• Impact of the restructure post implementation, specifically
the new corporate governance framework
Brexit
• Further update on the most significant impacts of Brexit on
Man Group, including the need to maintain access to highly
skilled EU talent
• In response to ongoing political uncertainty, review of plans
to safeguard the continuation of Man Group’s investment
management services for European clients and its distribution
services in Europe
Hedge fund industry update
• 2019 hedge fund industry outlook and key investor trends
provided by Barclays
• Implications for Man Group’s strategies and client allocations
considered for 2019
Auditor briefings
• Update on new Corporate Governance and financial reporting
requirements to be incorporated into the 2019 Annual Report
• Actions agreed for the forthcoming annual report preparations
Non-executive training sessions
In addition to the above in-house sessions, opportunities continued
to be made available to non-executive directors to attend external
seminars and workshops on topical business and regulatory issues
offered by professional services firms.
Governance report 68 Corporate governance continued
2019 Board evaluation
The Board undertakes an external evaluation every three years in
accordance with the requirements of the 2018 Corporate Governance
Code, with internal evaluations being undertaken in the intervening
years. The last external evaluation was carried out in 2018 with the
next one due in 2021.
External evaluation
The external evaluation was completed last year and the below
actions were highlighted as areas of focus in 2019. The Board
considered the actions throughout the year and made the
following progress.
Board evaluation assessment
Areas of assessment
Agreed actions
Outcomes during 2019
Quality of Board papers
and presentations
Board dynamics – non-executive/
executive engagement
Consideration of people
and culture
Consider prioritisation of papers on the agenda and
provide further clarity as to which are for information and
which for decision. Management to adopt a clear structure
for all papers, setting out upfront their purpose and the
action required from the Board, and ensure that detailed
information is provided in an easy to understand manner.
Further development of the understanding of mutual roles,
needs and contributions between executives and non-
executives to strengthen their interaction and collective
effectiveness. Further clarity to be given in requests
made by non-executive directors for additional business
information.
Broader focus and more extensive Board conversations,
led by the CEO, on Man Group’s people and culture.
Improve people oversight through the development of
Board/employee engagement mechanisms in line with
Corporate Governance Code requirements. Drive forward
the talent and succession agenda.
Consideration of
stakeholder interests
Board education and training
Quality of company secretarial
and administrative support
Continue annual Board review of Man Group’s client
universe and its regular deep dive reviews of individual
clients. Introduce regular reporting on Man Group’s
engagement with and feedback from key service providers.
Continue Board reporting on the activities and focus
of Man Group’s role in the community and its employee
volunteering.
Continue to keep the Board updated on industry trends,
regulatory impacts and business developments through
engagement with external advisers and internal experts.
During the year a Board paper review was completed.
The Board has a good understanding of its role and
ensures that NEDs’ requests for clarity are made clearly
and well in advance.
During the Board strategy day 2019 Man Group’s culture
was a key focus.
In the year the Board undertook an analysis of Man Group’s
culture and principles. The Board continue to evolve Man
Group’s culture and this will remain an ongoing focus.
To deepen the Board’s appreciation of the views of the
workforce Kate Barker and Zoe Cruz were appointed
employee representative NEDs.
The Board consider stakeholder views as part of its decision-
making process. Further information can be found on pages
42-43 and 64-65.
Updates were provided throughout the year on topical issues
and will continue to be provided.
Maintain proactive and reliable level of service.
Continued to provide a proactive and reliable level of service.
Man Group plc Annual Report 2019 69
Internal evaluation
An internal evaluation was carried out in 2019 and took the form of a questionnaire which built on the actions identified in the external evaluation in
2018. The internal process included seeking director feedback on areas conducive to an efficient and effective Board.
The below is a summary of the results for 2019:
Board composition
Comment
Agreed 2020 actions
Man Group benefits from a wide range of experience
and expertise across the Board. We continue to seek to add
diverse skill sets and to our gender balance.
• Keep under review the overall skills on the Board
to ensure all key areas of expertise are covered.
• Continue to make progress on gender diversity
on the Board.
Management
succession/development
The Board supports senior management development and
seeks to promote internal successors to senior management
positions where appropriate.
Stakeholders
Culture/people
Stakeholders are an important factor in Board decision
making. The Board focuses on relationships with all key
stakeholders.
• Continued oversight of firm wide succession planning by
the Board.
• Continue to support and promote internal successors to
senior management roles.
• Continue with deep dives into our people, customer and
supplier stakeholder groups.
• Board to continue to receive regular presentations on key
customer relationships.
People and culture was a key topic of discussion
for the Board this year with employee engagement high
on the agenda.
• Board to receive papers on staff development
and recruitment.
• Continue to assess the annual employee engagement
survey.
• Continue the employee engagement process
by non-executive directors begun in 2019.
The Board, with the assistance of the Company Secretary,
will incorporate the above actions into the agenda for 2020.
Board Committee evaluations
The findings and recommended areas of focus arising from the
evaluation of the Audit and Risk, Remuneration and Nomination
Committees are discussed in the separate Committee reports
found on pages 70 to 98.
Corporate Governance Code
Compliance Statement
The Company has, throughout the year ended 31 December 2019,
complied with the 2018 UK Corporate Governance Code (the Code)
except in relation to the following:
Setting the Chairman’s remuneration
Provision 33 of the Code recommends that the Remuneration
Committee has responsibility for setting the remuneration of the
Chairman. The Board believes that, in order to provide transparency
and allow the views of all the directors (executive and non-executive)
to be taken into account, it is appropriate for all Board members to
provide input into the determination of the Chairman’s remuneration
and as such this is a matter reserved for the Board.
Review of individual director contributions
Annually, the Chairman discusses the evaluation feedback on
personal contributions to the Board during the year with each Board
colleague individually. These conversations identify areas where they
might bring additional benefit to the Board and explored opportunities
for further development in the role.
Richard Berliand, as Senior Independent Director, would normally
provide feedback to the Chairman from Board members; however,
as Ian Livingston resigned from the Board on 31 December 2019
and John Cryan became Chairman on 1 January 2020 it was
decided not to undertake this exercise.
Using an external search consultancy
for Board appointments
Provision 20 states that an external search consultancy should
generally be used when appointing a Chairman. However, for the
appointment of the Chairman the Board activated its prearranged
succession plans and as such did not require the use of an external
search consultancy.
Governance report 70
Audit and Risk Committee report
Andrew Horton
Chairman, Audit and
Risk Committee
Membership and meeting attendance
The members of the ARCom and their meeting
attendance during 2019 are set out below. Following
his appointment as Board Chairman, John Cryan
stepped down from the ARCom at the end of
the year.
The ARCom as a whole has competence relevant
to the sector in which the Group operates and I am
considered to have recent and relevant financial
experience for the purposes of the 2018 UK
Corporate Governance Code (the Code). Further
details of the ARCom members’ experience and
areas of expertise are provided on pages 58 to 59.
The Board Chairman, CEO, CFO, and Group Chief
Operating Officer and General Counsel are invited
to attend ARCom meetings along with the Head of
Internal Audit and representatives from Deloitte LLP
(Deloitte), the Group’s external auditor. Other
members of the senior executive management
team attend for those items that are relevant to them.
At the end of each meeting, the ARCom meet with
the Head of Internal Audit and representatives from
Deloitte in the absence of management.
Attendance
Committee member
Andrew Horton
Richard Berliand
John Cryan1
Matthew Lester
Dev Sanyal
Meetings
attended
6/6
6/6
6/6
6/6
6/6
1 Stepped down as an ARCom member on 31 December 2019
following appointment as Board Chairman
Proportion of ARCom time spent on key
responsibilities (%)
The Audit and Risk Committee
is integral to Man Group’s
governance framework through its
oversight of the Group’s financial
reporting, risk management
and internal controls, and
internal and external audit.
Dear shareholder
During the year the Audit and Risk Committee (the ARCom) continued
to support the Board in its assessment of the integrity of the Group’s
financial reporting, monitoring the effectiveness of the Group’s
systems of risk management and internal controls, and overseeing the
activities of the Group’s Internal Audit function and its external auditor.
The ARCom also dedicated significant time to considering regulatory
developments impacting the Group, the effectiveness of the channels
available to Man Group’s workforce to raise concerns and the Group’s
cyber security arrangements. In addition, the ARCom scrutinised the
new governance structure introduced under Man Group’s corporate
reorganisation and monitored its implementation, and further
developed its understanding of the risk and control environment
within Man GPM.
Andrew Horton
Chairman, Audit and Risk Committee
How the ARCom operates
Forward agenda
• Covers key events in the financial reporting
cycle, specific risk matters and standing items
set out in the terms of reference
• Reviewed and updated in response to changing
business risks and priorities
Agenda setting meeting
• Held in advance of each ARCom meeting to
identify key issues impacting the business that
may require consideration by the ARCom
• Attended by ARCom Chair, CFO, Group COO
and General Counsel, Head of Internal Audit
and representatives from Deloitte
At each meeting, the ARCom considers:
• Standing governance items
• Dashboards which highlight and monitor
changes in the key risks impacting the
business, compliance matters, the financial
controls framework, internal controls and cyber
security arrangements
• Reports and presentations on key financial
reporting, risk, compliance and audit matters
from management
Board reporting
• Board updated on the key areas of discussion
with recommendations made as appropriate
Financial reporting
Risk management
Internal audit
External audit
Committee meetings
Man Group plc Annual Report 2019 71
How the ARCom has discharged its roles
and responsibilities
Financial reporting
Key accounting judgements and estimates
As part of the process for monitoring the integrity of the financial
information contained in the interim and annual financial statements,
the ARCom reviewed the key accounting policies, judgements and
estimates adopted by management and confirmed that these were
appropriate. The significant areas of judgement and estimation
identified by the ARCom, in conjunction with management and
the external auditor, are set out in the table on page 72.
Viability and going concern
The ARCom reviewed the viability statement (as set out on page
35) and the processes supporting the viability assessment. After
significant discussion and having considered the Group’s prospects,
emerging and principal risks, forecast capital position and liquidity
resources and requirements, the ARCom concluded that the
three-year assessment period, in line with the Group’s business
planning horizon, continued to be appropriate and recommended
the draft viability statement to the Board for approval.
The ARCom also reviewed the going concern disclosure (as set out
on page 116) and concluded that the Group and the Company had
adequate resources to continue in operational existence for the
foreseeable future and confirmed to the Board that it was appropriate
for the Group’s financial statements to be prepared on a going
concern basis.
Fair, balanced and understandable assessment
At the request of the Board, the ARCom reviewed the interim and
annual financial statements in conjunction with the narrative sections of
the Interim and Annual Reports to ensure that there was consistency
in the information reported, that sufficient weight had been given to
both positive and negative aspects of business performance, that
there was an appropriate balance between statutory and adjusted
performance measures, and that key messages had been presented
coherently. The ARCom concluded that, taken as a whole, the
interim and annual reports were fair, balanced and understandable
and provided the information necessary for shareholders to assess
the Group’s position, performance, business model and strategy.
Roles and responsibilities
The ARCom is integral to Man Group’s governance framework
through its oversight of the Group’s financial reporting, risk
management and internal controls, and internal and external audit.
The ARCom’s roles and responsibilities are outlined below, together
with an explanation of how it has discharged its responsibilities during
the year. Full terms of reference for the ARCom, which are reviewed
on an annual basis and referred to the Board for approval, are
available on the Company’s website.
Roles and responsibilities of the ARCom
Financial Reporting
Risk Management,
ICAAP, Internal
Controls & Compliance
Internal Audit
• Monitor the integrity of the financial information
contained in the interim and annual financial
statements with particular focus on key
accounting policies, judgements and estimates
and the financial controls framework
• Review the viability and going concern
statements and recommend their approval
to the Board
• Review the directors’ solvency statements
required by Jersey law
• Advise the Board on whether the ARCom
believes the Interim and Annual Reports
to be fair, balanced and understandable
• Monitor and review the effectiveness of the
Group’s systems of risk management, capital
adequacy and internal controls (please see
pages 35 to 36 for further details)
• Ensure that a robust assessment of the
emerging and principal risks facing the Group
has been undertaken and advise the Board on
the management and mitigation of these risks
• Review the Internal Capital Adequacy
Assessment Process (ICAAP) for the European
sub-group and satisfy itself that the preparation
process steps were followed
• Review the effectiveness of the Group’s
regulatory reporting activities, Compliance
function and arrangements for Man Group’s
workforce to raise concerns in confidence
and – if they wish – anonymously, with any such
concerns and resulting follow-up actions being
reported to the Board
• Report to the Remuneration Committee
any findings in relation to risk matters which
may impact its decision on discretionary
remuneration payments
• Approve the annual Internal Audit Plan and
Charter and monitor Internal Audit activities
• Review the effectiveness of the Internal Audit
function
• Review all significant Internal Audit
recommendations and oversee progress
in addressing these
External Audit
• Recommend to the Board the appointment,
and determine the remuneration, of the external
auditor, including reviewing the external auditor’s
effectiveness and independence
• Review and approve the external audit plan
and the external auditor’s control procedures
• Review the findings of the external audit and the
external auditor’s management representation
letter and oversee management action to
address the findings where necessary
• Approve and monitor the policies relating to the
provision of non-audit services by the external
auditor and the hiring of personnel from the
external auditor
• Ensure that the tendering, selection and rotation
of the external audit services contract are
carried out in accordance with applicable law,
regulation and best practice
Governance report 72 Audit and Risk Committee report continued
Key accounting judgements and estimates
Matter considered
Action
Outcome
Impairment assessment of goodwill
and acquired intangibles
Goodwill and acquired intangibles for each of the
Group’s cash generating units (Man AHL, Man GLG,
Man FRM, Man Numeric and Man GPM) are tested
for impairment at least annually through the application
of a ‘value in use’ model. This requires estimates
concerning future cash flows, growth rates and
associated discount rates to be taken into account.
Please refer to Note 10 in the Group financial
statements for further details.
Fair value of contingent consideration
The valuation of the contingent consideration is
dependent on estimates concerning the projected
future growth rates and cash flows based upon
management’s view of future business prospects
and associated discount rates.
Please refer to Note 26 in the Group financial
statements for further details.
Consolidation of investment in funds
The Group holds seeding investments in a number
of funds which it manages. Judgement is required
to be exercised in terms of assessing whether these
investments are controlled by the Group and therefore
need to be consolidated into the Group’s financial
statements.
Please refer to Note 13 in the Group financial
statements for further details.
Deferred tax assets (DTA)
The Group has deferred tax assets in the US which
largely represent historical tax losses and future
deductions for amortisation of goodwill and other
intangible assets that will reduce the tax payable
in the US. The value of the US DTA recognised
requires judgement regarding the assessment
of probable future profits.
Please refer to Note 7 in the Group financial
statements for further details.
Alternative performance measures (APMs)
Man Group assesses the performance of the Group
using a variety of APMs, most significantly adjusted
profit before tax. The directors focus on adjusted
profit as this reflects the underlying trends in the
business and the revenue and costs that drive
the Group’s cash flow.
Please refer to pages 148-151 for further details.
The ARCom considered reports from management
outlining the methodology for the impairment
assessment and challenged the assumptions
underpinning the goodwill valuation model
including cash flow projections, discount rates,
the cost allocation methodology, and levels of
headroom availability.
The ARCom noted the low levels of headroom in
relation to the Man GPM cash generating unit,
discussing the underlying forecasts in detail and
the sensitivity of changes in various assumptions.
After debate and challenge, the ARCom concluded
that no impairment expense was required to be
recorded for the year ended 31 December 2019.
The ARCom considered management’s fair value
assessment of the contingent consideration creditors
of the Numeric, Aalto, Pine Grove, BAML, Sanlam and
Silvermine earn-outs. The call option relating to the
final Numeric earn-out was exercised in the year, with
$154 million paid in relation to this. The $37 million
credit to the income statement represented a
decrease in the fair value of the contingent
consideration creditors, largely driven by lower than
expected Numeric 2019 performance and forecast
refinements as we approached the final payment, and
lower than previously forecast growth for Aalto.
The ARCom reviewed management’s assessment
of the investments which the Group is deemed
to control in accordance with IFRS 10.
After a full discussion, the ARCom confirmed that
it was comfortable with the proposed accounting
treatment and that the decrease in the fair value
of the contingent consideration was appropriate.
A fair value adjustment of $37 million has been
recognised in the income statement.
The ARCom concluded that it was satisfied with
management’s assessment of the entities which
are deemed to be controlled by the Group and
the associated accounting treatment. Fifteen
investments have been consolidated on a line
by line basis with a grossing up impact on the
balance sheet of $224 million.
The ARCom discussed the methodology
underpinning the future forecast profits which
supported the valuation of the US DTA and
challenged management’s assessment.
The ARCom confirmed that it was satisfied that
recognition of the US DTA in full on the Group’s
balance sheet was reasonable. A movement
in the DTA of $27 million has been recognised
in the income statement.
The ARCom reviewed and discussed the
APMs contained in the interim and annual
reports and also considered a paper prepared
by management which compared adjusted profit
to operating cash flows for the last five years
in aggregate.
The ARCom noted that adjusted profit over the last
five years was broadly consistent with cash inflows
from operating activities and therefore concluded
that the APMs, including adjusted profit before
tax, were appropriate, provided a fair assessment
of the underlying profitability of the business
and were appropriately defined and reconciled
to statutory measures as disclosed on pages
148 to 151.
Man Group plc Annual Report 2019 Risk management, internal controls and compliance
Oversight of risk and control environment
– key business areas
The ARCom provided scrutiny of the changes proposed by
Man Group’s corporate reorganisation, and devoted significant time
to the identification of disruptive market forces and the consideration
of how such risks were managed and mitigated. The ARCom
also continued to monitor the progress of the infrastructure and
governance framework within the Man GPM business, receiving
an update in February from senior representatives from Man GPM.
Key areas of discussion are set out below.
Business disruption presentations
In response to the output of the 2018 ARCom evaluation, the
ARCom identified potential sources of disruption in the market
within which Man Group operates. In depth presentations were
then received by the ARCom during 2019, with a particular focus
on specific aspects of Cyber and IT risk, providing the ARCom with
a greater understanding of the internal controls in place to guard
against and mitigate the impact of any disruption stemming from
such risks.
Corporate reorganisation
The ARCom meeting in April was dedicated to scrutiny and
challenge of the new governance, risk, and control structure which
would be introduced under the Group’s corporate reorganisation.
Discussion focused on the implications of the new holding
structure and the treasury framework which would be introduced,
and the ARCom were able to consider whether the proposed
structure would result in any changes to the Group’s external
reporting requirements.
Following the approval of the corporate reorganisation by
shareholders in May, the ARCom received a further report on
the implementation of the governance structure at its December
meeting, allowing the ARCom to monitor the progress of the
embedding of the revised governance and risk control processes.
Man GPM
The ARCom continued to monitor the extent to which Man GPM’s
infrastructure and governance framework had been embedded,
changes to the investment process and resourcing plans to
support the growth of the business. The ARCom also discussed
and challenged future changes proposed by management in
the approach to integration of acquisitions.
Oversight of risk and control environment – key functional areas
The ARCom also considered presentations from each of the Group’s
key functional areas.
73
Risk
The ARCom received an update on the Group Risk function and
discussed its role in supporting the Group’s governance processes,
primarily through the maintenance of the Group’s Authorities Summary
(see page 61 for further details) and the operation of the Risk
Governance and Appetite Framework (the Framework). During the
year, the ARCom discussed and challenged a number of proposed
amendments to the Framework which were driven by the corporate
reorganisation. The ARCom endorsed the revised Framework and
recommended it to the Board for approval. The ARCom also received
an update on the role of the Investment Risk team, which enabled
the ARCom to develop its understanding of the controls in place
to mitigate investment underperformance risk through close
collaboration between Investment Risk and the investment teams.
Compliance
During the year, the Global Head of Compliance & Regulatory
presented the 2019 Compliance overview. Particular focus was given
to developments in financial regulation, including MiFID II and the
Senior Managers Certification Regime (SMCR) and their impact on
the business and the industry in general. Consideration was also given
to resourcing levels and the use of technology across the Compliance
function, global themes around regulatory risk, current priorities of
key regulators and Compliance initiatives. The ARCom continued to
monitor steps taken by the management team to improve awareness
of the channels available to Man Group’s workforce to raise concerns.
In addition, the Money Laundering and Reporting Officer (MLRO)
presented his 2018 annual report in the first half of 2019 and
confirmed that Man Group had established and maintained
an effective anti-money laundering/counter terrorist financing
programme with proportionate systems and controls.
Finance
The ARCom received a presentation from the Group Financial
Controller on the Finance function’s governance arrangements and
the key areas of focus during 2019. The ARCom discussed personnel
changes in the Finance team, resourcing levels and priorities for
2020. During the year, the Committee also received an update on
the implementation of Man Group’s new general ledger, consolidation
and HR system which came into effect on 1 January 2019. At the
December meeting, the Head of Tax was invited to present on the
Group’s tax position and highlight the key projects undertaken
by the tax team during 2019.
Technology
The Group’s Global Head of Operations updated the ARCom on the
key technology initiatives for 2019, together with the associated risks
and mitigants including the development of intelligent automation to
enhance certain processes, and the utilisation of outsourcing where
appropriate. Particular focus was given to the benefits that such
initiatives would bring and the resulting impact on resourcing levels
and technology.
Cyber security
Cyber security continued to be a key area of focus for the ARCom
during the year. The ARCom reviewed and discussed current
trends and themes in cyber security and received in-depth
updates throughout the year on specific areas of focus which
it identified, providing scrutiny of the controls in place to mitigate
the associated risks.
Governance report
74 Audit and Risk Committee report continued
Ongoing monitoring of the Group’s systems of risk
management and internal control
The ARCom is satisfied that, through its regular review of dashboards,
its in-depth assessment of key business areas and functions, its
consideration of changes to the Risk Governance and Appetite
Framework and its ongoing review of progress against the Internal
Audit Plan (as described below), it is monitoring the effectiveness
of the Group’s systems of risk management and internal control
on an ongoing basis. Further details can be found in the Risk
Management section on pages 35 to 36.
During the year, a number of operational and regulatory matters that
had occurred were reported to the ARCom. A paper summarising
these matters was considered by the ARCom at its December 2019
and February 2020 meetings. Whilst Man Group sought to improve
its processes in response to the matters identified, they were not
considered sufficiently material in number or nature either to require
separate disclosure in the financial statements or to indicate that
the control environment had not been operating effectively.
Internal Audit
2019 Internal Audit Plan
The Group’s Internal Audit function continues to be performed by
KPMG. During the year, the ARCom reviewed and approved the 2020
Internal Audit Plan which included details of the planned audit reviews
for 2020 and the team responsible for delivering the plan, led by
Stuart Wooldridge who took over the role during the year.
The ARCom received and discussed Internal Audit reports
presented by the Head of Internal Audit at each meeting and
monitored progress against the 2019 Plan. Whilst no significant
weaknesses were identified in any of the Internal Audit reports, a
number of improvements to certain processes and controls were
implemented in response to the recommendations put forward.
In response to a request from the ARCom, the Internal Audit function
provided a summary of key trends observed in its reports over the
previous five years, highlighting improvements to the management
awareness ratings over the period, and the reduction in the number
of overdue items, which was largely attributable to increased discipline
around the monitoring and closure of internal audit findings.
Effectiveness of Internal Audit function
During the year, an internal review of the Internal Audit function was
undertaken in order to assess its effectiveness. The review, which
involved interviews with ARCom members and key stakeholders
evaluated areas such as resourcing, delivery, reporting, and the
independence of internal audit. The output of the review indicated
that, overall, the Internal Audit function continued to be effective
and provided an independent perspective on the Group’s control
environment which was of the quality, experience and expertise
appropriate for the business. The ARCom noted the findings and
discussed the suggested areas for improvements which had been
identified in the review, together with the Head of Internal Audit’s
response to these points.
External Audit
2019 External Audit Plan
At the October meeting, the 2019 External Audit Plan was presented
by Deloitte. David Barnes has been the lead engagement partner
since 2017. The plan, which was discussed and approved by the
ARCom, set out the proposed materiality threshold, the scope of
the audit and the significant audit risks that had been identified.
Auditor independence and the provision of non-audit services
In order to safeguard the independence and objectivity of the
external auditor, the ARCom is responsible for the development,
implementation and monitoring of the Group’s policies on the provision
of non-audit services and oversight of the hiring of personnel from the
external auditor should this occur. The ARCom reviewed and
approved these policies during the year.
Summary of non-audit policy
In accordance with the non-audit services policy, any potential
services to be provided by the external auditor, which are not
excluded under the non-audit services policy but which have an
expected value of $75,000 or more, must be approved by the
ARCom in advance. The non-audit services fees in aggregate must
not exceed 70% of the statutory audit fee for the previous three
years, currently set at $1.4 million. Further details can be found
on the Company’s website.
The table below shows the remuneration paid to Deloitte in 2018
and 2019.
Fees payable to the external auditor for the
audit of the Company and the consolidated
financial statements
Other services:
The audit of the Company’s subsidiaries
pursuant to legislation
Audit-related assurance services
All other services
Total auditor’s remuneration
2019
$’000
2018
$’000
607
458
1,783
490
701
3,581
1,608
345
59
2,470
Non-audit fees in 2019 equate to around 50% of the average
statutory audit fees for the previous three years (2018: 15%),
excluding regulatory fees which are exempt from the fee cap, with
the majority of the non-audit fees in 2019 related to Deloitte acting
as Reporting Accountant in relation to the corporate reorganisation.
Given the scale of the project and the timeline for its completion,
it was agreed that due to Deloitte’s existing understanding of the
Group, it should be selected to conduct the work, the fees for
which totalled $0.6m. This was separately pre-approved by the
ARCom in accordance with the non-audit services policy.
Other increases were driven by changes to the audit scope
as a result of the corporate reorganisation and additional work
relating to the implementation of Man Group’s new general ledger,
consolidation and HR system. No prohibited services have been
provided by our external auditors.
Following a formal assessment of the external auditor’s independence
and objectivity in February 2020 the ARCom concluded that Deloitte
continued to be independent and objective.
Man Group plc Annual Report 2019 75
Effectiveness of external audit process
At the May 2019 meeting, the ARCom considered responses to a
questionnaire which had been completed by ARCom members and
various members of the management team in order to facilitate the
ARCom’s formal assessment of the effectiveness of the external audit
process. The questionnaire focused on several components of the
external audit process including the quality of the audit partner and
team, planning and execution of the audit, communication with the
ARCom and the external auditor’s independence and objectivity.
The responses indicated that, overall, Deloitte was performing in
line with expectations with the audit team demonstrating appropriate
challenge and a strong understanding of Man Group’s business. The
output of the review also highlighted that certain areas that had been
identified as requiring improvement in the previous year’s assessment,
particularly around the coordination of the work undertaken by the
internal and external auditors, had been addressed in the 2018 audit.
A number of areas, primarily around the continued monitoring of
transitional issues that may arise following the key audit partner’s
rotation off the Man Group audit and the streamlining of reports
to ARCom, were identified as requiring further consideration and
Deloitte’s plans to address these issues were set out in the 2019
audit plan. After extensive discussion, the ARCom concluded that
the external audit process in respect of the 2018 financial statements
had been effective.
Reappointment of Deloitte as external auditor
Deloitte was appointed as the Group’s external auditor in 2014,
following a tender process led by the ARCom in 2013. In accordance
with the Code and the Competition and Markets Authority’s Order
2014 (the Order), the Company will be required to put its external audit
out to tender again in 2023 at the latest. The ARCom will continue
to assess the external audit process annually and, on the basis that
it remains effective and the audit fee represents good value to
shareholders, it is expected that the next tender process will be
undertaken at that time with mandatory rotation of the external
auditors required by 2033 pursuant to the EU Audit Regulation.
The ARCom confirms that the Company has complied with the
provisions of the Order for the financial year under review.
Following the ARCom’s review of the effectiveness of the external audit
process and its assessment of the external auditor’s independence
and objectivity, it has recommended the reappointment of Deloitte
as the Group’s external auditor to the Board for recommendation
and approval by shareholders at the 2020 Annual General Meeting.
How the ARCom has assessed its effectiveness
Outlined in the table below are the three key areas that were identified
in the ARCom’s 2018 evaluation as requiring further consideration
and development during 2019, together with progress that has been
achieved in 2019.
2019 progress on 2018 actions
2018 evaluation
2019 progress
Further debate
around potential
sources of business
disruption in the
market
Streamlining of
certain ARCom
papers to avoid
duplication
Meetings were extended by 30 minutes
to allow the ARCom sufficient time for
free form risk discussions, resulting
in several in-depth updates being
provided to the ARCom in 2019 detailing
the controls in place to mitigate the
disruptive impact of the risks identified
during such discussions.
A number of changes were made to the
ARCom board paper reporting format
to ensure that certain papers were
appropriately focused, including the
inclusion of “highlights” or “summary”
papers rather than the more detailed full
reports (the full reports also being made
available as an additional resource for
ARCom members).
Continuing to keep
ARCom attendance
under review
Attendance at ARCom meetings
was kept under review and further
feedback was sought as part of the
ARCom effectiveness evaluation in
December 2019.
In December 2019, following the external review carried out in 2018,
the ARCom conducted a further evaluation of its effectiveness, which
was facilitated internally. Questionnaires covering topics such as
composition, meeting effectiveness and engagement with the Internal
Audit function and with Deloitte were circulated to all ARCom
members. The results confirmed that the ARCom was operating
effectively, and responses indicated that the ARCom meetings
continued to be well structured with agendas covering a wide range
of topics. Areas identified for focus in 2020 included the integration of
competitor benchmarking into reporting, and the conducting of risk
and control reviews of Man’s investment management businesses.
Andrew Horton
Chairman, Audit and Risk Committee
Governance report
76
Nomination Committee report
John Cryan
Chair
Attendance
Committee member
Ian Livingston (Chairman)1
John Cryan2
Richard Berliand
Andrew Horton
Meetings
attended
1/1
1/1
1/1
1/1
1
Ian Livingston stepped down as Chairman on 31 December 2019.
2 John Cryan was appointed a member of the Committee on 1 October
2019 and became Chairman of the Committee on 1 January 2020.
Luke Ellis attends meetings by invitation of the Committee.
The Committee continues its drive
to improve diversity resulting in
current representation of women
on the Board of 40%.
John Cryan
Chair, Nomination Committee
Committee activity during the year
During 2019, the Committee had, consistent with its role and
responsibilities, continued to review potential succession planning
options, including consideration of the key criteria for the role
of Chairman and the identification of any current directors who
may be suitable succession candidates should the need arise.
Ian Livingston informed the Board he would step down from his role
as Chairman of the Company, with effect from 31 December 2019.
On receiving Ian’s resignation the Board quickly activated its
prearranged succession plans and as such did not require an
external search consultancy or open advertising. The Board felt that
my knowledge of the Company and prior experience as Chairman
on other Boards made me a good candidate for the role. As such my
appointment as Chairman was unanimously agreed by the Committee
and the Board. Neither Ian Livingston nor I took part in Committee
or Board discussions on the appointment of the Chairman.
Jon Sorrell stepped down as President and executive director
on 11 September 2019.
As previously announced, Matthew Lester stepped down as a
non-executive director on 26 February 2020 and Andrew Horton
will step down as a non-executive director at the conclusion of the
AGM on 1 May 2020. Following an external search, Lucinda Bell and
Ceci Kurzman were appointed as non-executive directors with effect
from 28 February 2020 and Anne Wade was appointed as a non-
executive director with effect from 30 April 2020.
As in previous years the Committee maintained its focus on executive
management development and succession. With input from the CEO,
the current composition of the Board was reviewed, confirming the
committee’s desire to increase Board diversity. The Committee
reviewed the feedback from the 2019 evaluation and agreed its
priorities for 2020. More detail on all the Committee’s activities
during the year are provided below:
• Keep under regular review the Board’s composition in term of size,
structure, composition, skills, knowledge, experience and diversity
in response to changing business needs and opportunities
• Identify the particular skills, knowledge and experience required for
a specific Board appointment and conduct the search and selection
process
• Recommend the appointment of new candidates to the Board and
the renewal, where appropriate, of existing non-executive director
appointments
• Review plans for executive director and senior management
development and succession
The Committee’s full terms of reference, which are reviewed by the
Committee and submitted to the Board for approval on an annual
basis, are available on the Company’s website.
Man Group plc Annual Report 2019 77
New Non-Executive Appointment
During the latter part of the year, the Committee undertook a search
for new non-executive directors to bring additional skills and experience
to the Board. With the support of Heidrick & Struggles, an executive
search firm which has no other connection with the Company or any
individual director, the Committee interviewed potential candidates.
The Committee recommended to the Board the appointments of
Lucinda Bell, Ceci Kurzman and Anne Wade as additional non-
executive directors. Following the Committee’s recommendation,
the Board approved the appointments of Lucinda and Ceci as
non-executive directors with effect from 28 February 2020 and
Anne with effect from 30 April 2020. Lucinda will be a member of
the Audit and Risk Committee and will succeed Andrew Horton as
Chairman of the Audit and Risk Committee when he steps down
in May 2020 and Anne will be a member of the Remuneration
Committee. Biographies for Lucinda and Ceci are on page 59.
Review of Diversity
Board diversity
In 2019 the Committee recommended and the Board agreed that,
in line with the 2018 Hampton-Alexander review recommendations and
its drive to improve diversity, the diversity policy should be amended to
include a target of at least 25% for women representation on the Board
in the short term and a target of at least 33% in the medium term.
The policy, which has been approved by the Board, is set out below.
At present women representation on the Board is 40%.
Diversity and inclusion (D&I) in the business
The Committee reviewed and welcomed the considerable progress
made by the management team in promoting and celebrating diversity
in all its forms within the business and creating a consciously inclusive
working environment. A full account of the activities and achievements
of Man Group’s D&I global networks and the firm’s engagement with
external organisations on shared objectives is given in People and
Culture on pages 44 and 47. This also provides detail on the progress
of gender balance among senior management and their direct reports
and within Man as a whole and the Company’s support for the
Women in Finance Charter.
Renewal of existing NED appointments
The Committee reviewed the profile of Board tenure of Man Group’s
non-executive directors in the light of its future needs. As part of this
it considered the renewal of Kate Barker whose current three year
term was due to expire in the first half of 20201. It agreed taking
account of the current cycle of Board development and succession
and the feedback on her contribution in the 2019 Board evaluation,
to recommend the renewal of her appointment for approval by the
Board for a further three years.
1 The Board member took no part in the consideration of the renewal of her own appointment.
Committee evaluation and priorities for 2020
This year’s Committee evaluation was conducted as part of the main
Board evaluation. The responses were consolidated in an unattributed
summary report and submitted to the Board. Further details on the
process can be found on page 69.
The priorities for the Committee in 2020 are:
• Additional non-executive skills – Conduct a search for non-
executive directors with exposure to asset management or related
businesses with a focus on technology or people issues.
• Diversity – continue to focus on diversity, including but not limited
to gender diversity, as part of the above search by seeking diverse
shortlists.
• Management and Board succession – continue to strengthen the
focus on succession planning.
Board diversity policy
Overview
The Board embraces and seeks to promote diversity in its
broadest sense, both in terms of its own composition and within
Man Group’s senior management and employee base as a whole.
It sees diversity as the combination and interaction of people
with different knowledge, skills, experience, backgrounds and
outlooks and believes that this creates greater value and leads
to better decision making and performance at all levels of the
organisation. The Board is aware of the recommendations for
the adoption of voluntary targets for building gender and ethnic
diversity into FTSE company boards and senior management
and is conscious of the long standing gender diversity challenge
within the financial services sector. It has, therefore, adopted
a target of at least 25% for women representation on the
Board over the next 12 months and a target of at least 33%
in the medium term. Set out below are three main areas on
which we are focusing in pursuing our policy objectives.
Board appointments
When seeking to make a new appointment, the Board will focus
first on identifying an individual with the capability, expertise and
experience which are required to discharge the specific role and
will select the best candidate on that basis. Within this remit, it
recognises and will pursue the added value to be derived from
diversity, including diversity of gender, social and ethnic
backgrounds and cognitive and personal strengths. To support
this objective, we adopt a formal approach to Board search which
includes insisting on strong representation of under-represented
groups on search firms’ long and short lists and remaining
conscious of any potential for bias in the interview and selection
process. We will also consider and explore alternative routes to
the supply of appropriate candidates.
Oversight of recruitment, development and inclusion
The Board continues to encourage and oversee the output from
a wide range of recruitment and people development policies
and initiatives led by the executive management which aim to grow
the diversity of Man Group’s talent pool, provide development
opportunities for all and embed an inclusive culture. While we
cannot lead such initiatives directly, our role is to monitor and
challenge the impact they are having on the firm. As part of this
oversight we review the level of gender diversity introduced through
our summer internship and graduate programmes and women’s
progression over time through mentoring, retention and Returner
initiatives. We also keep updated on Man Group’s relationships
with partners who can help source talent from more diverse
backgrounds and under-represented groups and Man Group’s
sponsorship of events which encourage more diverse talent
into financial careers.
In addition, a key role of the Nomination Committee is to monitor
and discuss with the CEO the career development and succession
plans for senior management across the firm, including the
progress of any under-represented groups. This enables us
to promote the development of a strong and diverse pipeline
of talent for future executive leadership and Board positions.
Review and reporting
The Board is committed to the development of diversity on the
Board and among Man Group’s employees. It will seek feedback
on Board balance and any missing skills and experience in its
annual Board evaluation and will keep the review and challenge
of Man Group’s people development, inclusion and diversity
programmes firmly on the Board agenda. An account of the
Board’s activities and progress against its objectives in these
areas will be given in the Annual Report each year.
Governance report Contents
Chairman’s annual statement
Remuneration at a glance
Directors’ Remuneration Policy summary table
79–84
85–87
85
Actual 2019 remuneration and illustrative pay for performance scenarios 86
Executive director pay in the context of Man Group’s shareholders
Executive director pay in the context of Man Group’s employees
Remuneration outcomes in 2019
Single total figure of remuneration for executive directors
Annual bonus in respect of 2019 performance
Percentage change in CEO remuneration
Relative importance of spend on pay
Review of past performance
CEO pay ratio
Retirement benefits
Single total figure of remuneration for non-executive directors
Payments for loss of office and payments to past directors
Directors’ interests
87
87
88–94
88
88-89
89
90
90
91
91
91
92
92
Directors’ interests in shares and options under Man Group
long-term incentive plans
92–94
Shareholder voting and engagement
Implementation of directors’ Remuneration Policy for 2020
Base salary
Annual bonus for 2020
Long-Term Incentive Plan for 2020
Non-executive directors’ Remuneration Policy for 2020
Remuneration Committee
Membership and attendance
Independent advisers
Committee activities during 2019 and the early part of 2020
2019 Committee evaluation
Benchmarking and peer groups
94
95
95
95
95
95
96–98
96
96
97
97
98
Man Group plc Annual Report 2019
78
78
Directors’ Remuneration report
Richard Berliand
Remuneration
Committee
Chairman
The Remuneration Policy
continues to operate broadly
as intended.
Role of the Remuneration Committee
• Determine the Company’s remuneration
philosophy and the principles and structure
of its Remuneration Policy
• Propose the specific remuneration policy for the
executive directors, for approval by shareholders,
and make remuneration decisions within that
approved policy
• Approve the total annual compensation for
the executive directors, Executive Committee
members and Remuneration Code staff
• Recommend to the Board the remuneration
of the Chairman
• Review and consider shareholder feedback
and agree the approach to ongoing shareholder
engagement
Attendance
Committee member
Richard Berliand (Chairman)
Lord Livingston of Parkhead
Zoe Cruz1
Dame Katharine (Kate) Barker
Meetings
attended
6/6
6/6
5/6
6/6
1 Zoe Cruz was unable to attend the September meeting due to prior
commitments but reviewed the papers ahead of the meeting and
discussed her views with the Committee Chairman.
How the Committee
spent its time in 2019 (%)
Executive directors’
remuneration
Employee remuneration
Senior management
compensation
Shareholder engagement
and DRR
Governance and Other
Financial regulation
Man Group plc Annual Report 2019 1. Chairman’s annual statement
79
Ensuring the metrics used to
determine the variable incentive
outcomes are clearly linked
to Man’s strategic priorities
and setting stretching targets
to deliver them continues
to be a critical part of the
Committee’s work.
Richard Berliand
Chairman
Dear Shareholder
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report (the DRR) for the year to 31 December 2019.
For ease of reference, this report contains the following sections:
• a detailed index to help you find the sections you need (page 78);
• this annual statement (pages 79–84);
• the remuneration ‘at a glance’ section, summarising how the
Remuneration Policy has been implemented in 2019 (pages 85–87);
and
• the annual report on remuneration (pages 88–98).
1.1 Introduction
In last year’s letter, we laid out the process by which we had started
to comply with the new UK Corporate Governance Code (2018) (the
Code), which became effective on 1 January 2019. As this is the first
full year of the Code’s application, this letter includes further detail
of how we have complied with its provisions.
Last year’s letter also set out data about our approach to establishing
and measuring stretching performance targets in the incentive
arrangements; this was particularly well received. Therefore, again,
we have provided a similar level of detail.
1.2 Remuneration Policy
In its second year of operation, the Remuneration Policy continues
to operate broadly as intended and we do not propose to make any
changes to it ahead of its normal three-year renewal, due in May 2021.
Although we do not currently anticipate that significant changes will be
required, it is our intention again to consult widely with shareholders,
their representative bodies and the proxy agencies to understand any
areas of concern or focus.
In the meantime, in compliance with the Code we have set out below
how the Remuneration Committee addresses the following factors:
Risk
Inappropriate risk-taking is avoided and good alignment with
shareholders is achieved through a number of mechanisms
including significant bonus deferral into shares and funds, a three-
year performance period for the Long-Term Incentive Plan (the
LTIP) with a subsequent two-year post-vesting holding period and
shareholding requirements, including for two years after cessation
of employment. Details of the operation of malus and clawback
are included in the table on page 85. Before any decisions about
incentive outcomes are made, the Audit and Risk Committee reports
to the Remuneration Committee on any specific matters indicating
excessive risk-taking or lack of regard for controls and procedures.
Predictability
The charts on page 86 illustrate the potential remuneration outcomes
under a range of scenarios (including in the event of a 50% increase
in the share price). In addition, the Remuneration Committee has
included illustrative numbers for the ‘single figure’ outcome as if a fair
value for the LTIP had been included.
Proportionality
The link between strategic priorities and incentive metrics is set out
in detail in the chart on page 80. The Remuneration Committee
considers wider employee remuneration, holistic business
performance and shareholder experience in determining the
appropriate level of executive director remuneration.
Alignment to culture
The key principles that underpin our approach to remuneration
(and which apply at all levels of the organisation) are:
• remuneration is structured to support corporate strategy
and sound risk management;
• employees’ interests are aligned with shareholders and
the bonus pool is drawn from profit;
• incentives are designed to encourage behaviour focused
on longer-term strategic and sustainable performance; and
• our total remuneration is competitive in the talent markets from
which we hire.
Simplicity
Incentive schemes are straightforward in their structure and operation
with explicit links between strategic priorities, key performance
indicators and incentive metrics.
Clarity
The Remuneration Policy is clearly laid out in summary form in the
DRR and the full version is available on the Company website. Details
of the operation of the Remuneration Policy have been explained to
the wider workforce, as explained in more detail in section 1.5 below.
Governance report 80
Directors’ Remuneration report continued
1. Chairman’s annual statement continued
1.3 The link between pay
and performance at Man Group
The performance metrics selected for use in the short and long-term
incentive arrangements in the Remuneration Policy have been chosen
to reflect Man Group’s strategic priorities; they are aligned with Man
Group’s financial KPIs which illustrate and measure the relationship
between the investment experience of Man Group’s clients, our
financial performance and the creation of shareholder value over time.
That alignment ensures that the link between strategy, performance
and reward is clear, as shown in the table below.
Bonus
weighting
The link between strategic priorities and incentive metrics
Strategic
priority
Innovative
investment
strategies
Strong client
relationships Net Inflows
Performance
measure
Relative
Investment
Performance
LTIP
weighting
25%
30%
–
15%
18%
Aggregate
weighting1
Efficient and
effective
operations
Cumulative
Net Inflows
Core
Management
Fee PBT $m
Core Total PBT,
$m
20%
20%
Returns to
shareholders Relative TSR
3-year
cumulative core
management
fee EPS
3-year
cumulative core
total EPS
Strategic and
Personal
Objectives
Total
–
–
–
10%
–
–
25%
17%
20%
38%
20%
30%
–
12%
100%
1 Aggregate weighting shows the overall weighting when consolidated across both the bonus
and LTIP opportunities; maximum bonus opportunity is 250% salary; maximum LTIP
opportunity is 350% salary.
1.4 Shareholder engagement in 2019
At the time the 2018 DRR was published, I again offered to meet with
each of our top 30 shareholders. Although no face-to-face meetings
were requested, we were pleased to receive constructive feedback
on the report from a number of our shareholders and we have tried
to address that in this report. Meetings with several of the leading
proxy voting agencies, however, were again undertaken in the second
half of 2019 to discuss their voting guidelines and any particular areas
of focus for the forthcoming AGM season. These sessions are a very
helpful opportunity to understand the individual perspectives of
the agencies and I would like to thank those who participated.
As indicated above, it is our intention to seek out shareholder
and other stakeholder views as we prepare to renew our policy
in May 2021.
1.5 The link between the pay
of executive directors and the workforce
In response to the new Code, for the first time this year, the
Remuneration Committee engaged directly with employees by
providing a simple document explaining how the remuneration of the
executive directors is determined and how that links with the manner
in which employees are remunerated. A dedicated email address was
also established to provide employees anywhere in the Company with
a quick and easy way to raise any questions with the Remuneration
Committee. This was in addition to the wider employee engagement
being undertaken, on behalf of the Board, by the two designated non-
executive directors, both of whom are members of this Committee
(covered in more detail on page 67 of the governance report).
Building on last year’s ‘deep dive’ into compensation approaches
across the Man Group, the Remuneration Committee also continued
to develop its detailed understanding of the approach to all-employee
remuneration, including:
• reviewing the ratio of CEO pay to the UK employee population;
• approving the total bonus pool to be allocated to employees;
• undertaking a detailed review of bonus proposals and evaluations
for the Executive Committee and individuals covered by the
Remuneration Code;
• reviewing annual performance ratings by gender; and
• reviewing the specific compensation arrangements for leading
revenue / profit-generators.
We would also like to take this opportunity to confirm that the pension
provision available to the executive directors is in line with the rest
of the UK employee population. Higher employer contributions are
available to employees who meet both the service requirements and
elect to make a higher employee contribution, which is matched on a
2:1 basis for employees who have been scheme members for at least
two years, up to a maximum employer contribution of 14% of salary.
Any contributions exceeding the annual or lifetime allowance are paid
as cash on a cost neutral basis.
1.6 Review of performance in 2019
The past year reflects the diversification of Man Group’s business
today. We have seen a strong rebound in total profitability from 2018
driven by good absolute performance from a range of our quantitative
alternative strategies. That performance has also led to Net Inflows
into those strategies, with continued growth in Alternative Risk Premia
in particular. A number of our larger strategies that have a valuation
component have underperformed this year, consistent with similar
strategies across the wider market. This has led to negative Relative
Investment Performance across Man Group. That Relative Investment
Performance combined with a backdrop of outflows across the
long-only equity industry has resulted in net outflows for Man Group
in 2019 following record inflows in recent years. Those outflows and
the various non-operating factors affecting 2019, including the loss
of associate income from Nephila and foreign exchange headwinds,
result in a reduction in Core Management Fee PBT. However, overall
profitability, as reflected in Core Total PBT, has performed strongly,
driven by a strong rebound in performance fees resulting in a record
performance overall.
Man Group plc Annual Report 2019 81
1.7 Remuneration outcomes for 2019
Bonus
The delivery of excellent core total profits in 2019 means that this has been a record year for core corporate performance. However, the bonus for
the executive directors is lower than prior year, despite an increase in Core Total PBT of more than 60%. We feel that the remuneration model has
broadly worked, but are concerned that the excellent bottom-line performance is not fully reflected in the executive directors’ pay.
Short-term annual cash bonus (%)
Luke Ellis
Actual
Opportunity
Mark Jones
Actual
Opportunity
0%
50%
100%
0%
50%
100%
Net
Inflows
Core Management
Fee PBT
Core Total
PBT
Strategic
and Personal
The approach to target setting was described in detail in the 2018
DRR and the Remuneration Committee again established the bonus
targets by reference to internal and external forecasts, including
consensus estimates available at the time and long-run historical
performance of both Man Group and our peers. The following
sections explain actual performance against the targets set for 2019.
Net Inflows
As a reminder, the industry sector has been experiencing low or
negative growth in recent years; during 2017 and 2018 Man Group
delivered double-digit growth in Net Inflows. For 2019, the targets for
Net Inflows were set at the same percentage growth levels as in the
2017 and 2018 bonuses, requiring 1% growth at threshold, 3.5%
at target and 6% growth for the maximum bonus to be achieved.
In a challenging external environment, net flows were slightly negative
in 2019, resulting in no payout for this element of the bonus, out
of a possible maximum of 30%.
Net Inflows, growth (%)
16%
10%
context of the external environment in order to incentivise
management appropriately. We therefore set a target range with a
threshold of $159 million, on-target performance broadly in line with
consensus at the time, of $172 million, and a maximum of $188 million.
As anticipated, 2019 has been a more difficult year and, in that
context, the Core Management Fee PBT outcome of $170 million,
between threshold and target, results in a bonus payout of 9%,
out of a possible maximum of 20% for this component.
Core Management Fee PBT ($m)
203
178
170
188 Maximum
172 Target
159 Threshold
132
103
99
6%
2%
0%
-1%
2014
2015
2016
2017
2018
2019
6% Maximum
3.5% Target
1% Threshold
Core Management Fee PBT
As Man Group entered 2019, it was clear that there were challenging
headwinds which had already been reflected in Man Group’s
medium-term plan and consensus forecasts, largely as a result
of market declines at the end of 2018, resulting in a lower starting
point for 2019. The Remuneration Committee felt it was important
to establish targets that still represented strong performance in the
2014
2015
2016
2017
2018
2019
Core Total PBT
The third financial metric for the bonus, Core Total PBT, starts with
Core Management Fee PBT and then adds Adjusted Performance
Fee PBT, which is the more volatile component of Man Group’s
profits but represents a valuable earnings stream for our shareholders
over time.
The Remuneration Committee again referenced historical trend data
for Adjusted Performance Fee PBT and also considered the impact
of the high water marks (i.e. the level of investment performance that
had to be achieved before any performance fees would be earned)
that the business was facing coming into 2019. Consequently, target
performance fee PBT was set at $120 million with threshold at $75
million and maximum at $200 million. This delivered a Core Total PBT
range for the bonus from $234 million at threshold, meaning no bonus
Governance report 82
Directors’ Remuneration report continued
1. Chairman’s annual statement continued
would be paid for this component unless performance in line with
2018 was delivered. The target was set at $292 million (representing
growth of more than 20% on prior year) and at maximum of $388
million, an increase of more than 60% in Core Total PBT was required.
As indicated above, strong absolute performance has resulted in
Core Total PBT of $384 million which delivers a payout just below
the maximum of 20% on this component of the bonus, which the
Remuneration Committee considered appropriate for this high level
of performance.
Core Total PBT ($m)
359
359
384
388 Maximum
285
159
237
292 Target
234 Threshold
2014
2015
2016
2017
2018
2019
Core Management Fee PBT
Core Performance Fees
The Committee reviewed the formulaic outcome of the quantitative
components of the bonus. Although they felt that the lower outcome
for the directors did not fully reflect the very positive corporate
performance, the Committee elected not to exercise any upward
discretion, recognising that this kind of volatility is a feature of the sector.
Strategic and Personal Objectives
The Strategic and Personal Objectives of each executive director,
which account for 30% of their overall bonus outcome, were selected
to ensure delivery of sustained performance over time. These
non-financial deliverables ensure that there is ongoing focus and
discretionary effort applied to activities, the benefit of which will only
fully be seen over the medium to longer term, including objectives
around strategy, risk, clients, culture and people. The objectives link
to our strategic priorities and payout against them requires clear
performance impact.
Both directors delivered extremely well on their non-financial
objectives, details of which are set out in table R2 (page 89).
The successful delivery of the corporate restructure, approved by
shareholders in May 2019, represented a significant joint achievement
delivered with minimal impact on ‘business as usual’. In his third full
year in the role, Luke Ellis continues to lead the innovation of new
product developments and those introduced in the last couple of
years are delivering significant Net Inflows. Employee engagement
scores remain strong and progress has been achieved on gender
diversity, which is particularly challenging in this sector. Mark Jones
also played a leading role in the success of the corporate restructure
as well as ensuring the seamless delivery, on time and in budget,
of a major IT project in Finance and HR which has already improved
operational efficiency. Other highlights for Mark include the successful
re-financing and the new ESG-linked revolving credit facility which
commits the Company to further improvements in gender diversity,
increasing volunteering efforts to contribute to the communities in
which we operate and maintaining the highest United Nations PRI
rating for its approach to responsible investment.
The Committee considered that awards for the strategic and personal
objectives of 27.5% and 28.5% for the CEO and CFO, respectively,
appropriately reflected their performances during the year.
Salary
In the 2018 DRR, we set out our intention to keep Mark Jones’
salary under review and, following another year in which he has
again performed strongly, are proposing a modest increase of 2%
to $625,000 (from $612,500). Having been brought in on an initial
salary which was well below his predecessor, Mark’s salary has been
progressively increased to reflect both his experience in the role and
his excellent performance, although it remains substantially below
his predecessor.
Overall remuneration for the executive directors
In considering whether the overall remuneration of the executive
directors for 2019 was appropriate, the Committee considered
a number of factors, including:
• Benchmarking data for similar roles in other UK and US listed
financial services companies. As covered in detail in section
5.5 Man Group is one of the few listed companies anywhere
in the world that operates in the hedge fund industry, so careful
consideration also needs to be given to those unlisted companies
with whom Man Group competes for talent, including at the most
senior level.
• The experience for Man Group’s shareholders in a year in which ten
year peak core profitability was delivered.
• The experience of Man Group’s employees: average employee
bonuses increased by 10% in the year, as a result of ten year
peak core profitability, whereas the executive directors’ bonuses
were lower than in 2019.
Other 2019 remuneration decisions
As announced in September 2019, John Cryan was appointed
as the new Chairman of Man Group plc from 1 January 2020.
This was the first time, since my appointment as Remuneration
Committee Chairman, that there had been an opportunity to review
the Chairman’s fee at the time of a new appointment. I understand
that the fee had been set at the level of £450,000 per annum back in
2007, in order to allow for some differentiation with the fee of the then
Deputy Chairman, a former CEO of the business. Upon appointment
of John Cryan, the Remuneration Committee reviewed benchmarking
of similar roles in broadly equivalent sized companies in the financial
services sector and, taking into account the demands of the role, has
set the fee at £350,000. In a spirit of transparency, we also want to
make shareholders aware that John Cryan’s contractual arrangements
with his former employer, Deutsche Bank AG, mean that he will
effectively be unpaid for his role as Chairman of Man Group plc,
as he will be required to sacrifice his post-tax receipts arising from
his Man Group role to Deutsche Bank AG.
During the year, the Board also reviewed non-executive director fees
and decided to increase the base fee and fees for chairing the Audit
and Risk and Remuneration Committees, as well as introducing an
additional fee for the Employee Engagement NEDs, to reflect the
increasing demands of all these roles.
During the year, Man Group’s former President, Jonathan Sorrell, left
the Company, stepping down from the Board on 11 September and,
following a period of handover, leaving the business on 31 December
2019. Details of his remuneration, for the period until he ceased to be
a director, are included in the report (page 88). Having chosen to leave
Man Group, Jonathan was not eligible for any variable compensation
in respect of 2019; further, all conditional share awards previously
granted to him under the Deferred Executive Incentive Plan (the DEIP)
and Deferred Share Plan (the DSP), together with his unvested awards
under the LTIP, lapsed in full when he left the Company. Jonathan
Sorrell is subject to a continuing obligation to retain a shareholding
in Man Group plc, for a period of two-years from departure, as set
out in the Directors’ Remuneration Policy.
Man Group plc Annual Report 2019 Man Group plc Long-Term Incentive Plan (the LTIP)
As a reminder, the first award was made under the LTIP in March
2019, replacing the DEIP, the former long-term plan in which awards
were made at the end of the performance period. Consequently,
no long-term remuneration has been reported in the single figure table
(page 88), as required by the DRR regulations. However, a table has
been included in the ‘Remuneration at a glance’ section (page 86)
to illustrate this impact in more detail, by assuming a ‘fair value’ for
the LTIP.
The table below sets out the metrics and targets for the LTIP award
to be granted in March 2020 with a three-year performance period
(from 1 January 2020 to 31 December 2022); any vested shares will
be required to be held for a further two-year period. There will be
straight-line vesting between threshold and target, and target and
maximum performance.
Metric ranges for LTIP (from 1 January 2020 – 31 December 2022)
Metric
Weighting
Threshold
Maximum
Target
Relative
Investment
Performance
25%
Relative TSR
vs FTSE 2501
25%
20%
3-year
Cumulative Core
Management
Fee EPS2, cents
3-year
Cumulative Core
Total EPS, cents
20%
Cumulative
Relative Net
Inflows3
10%
Total
100%
3%
6%
0%
Based on the aggregate of the asset-
weighted relative investment performance
across Man Group’s funds for each year
over the three-year performance period.
Mid-point
Median
between
Median and
Upper Quartile
Upper
Quartile
TSR versus FTSE 250 based on the
three-month average share price (taking
account of share price movement and
reinvested dividends over the performance
period).
30¢
Measures Cumulative Core Management Fee
EPS performance over the three-year period.
36¢
33¢
42¢
56¢
75¢
This measure includes the impact of
performance fee delivery over the long
term and is based on cumulative EPS
performance over the three-year period.
3%
The percentage growth target represents
cumulative Net Inflows over the three-year
performance period as a percentage
of starting FUM, compared to peers.
10.5%
18%
1 Relative TSR vs FTSE 250 represents the total return to Man Group’s shareholders relative
to the FTSE 250 Index, using data sourced from an independent provider. Total Shareholder
Return (TSR) takes into account the movement in the Man Group plc share price and any
dividends paid to shareholders.
2 3-year Cumulative Core Management Fee EPS calculated as the post-tax core management
fee profits over the three-year measurement period divided by the weighted average diluted
number of shares for the three-year measurement period. Core management fee profits
are derived from Core Management Fee PBT less a deduction for associated taxes.
3 Cumulative Relative Net Inflows compares asset-weighted growth in Net Inflows of Man
Group’s businesses to the relevant industry index.
Relative Investment Performance
Relative Investment Performance measures our performance relative
to our peers. The establishment of the threshold at 0% means that
Man Group must, as a minimum, outperform peers for management
to receive any payout on this measure. The maximum of 6% implies
in excess of $6 billion of cumulative outperformance relative to peers,
which the Remuneration Committee considered a demanding target
and one which would represent an excellent outcome for clients
and shareholders.
83
Relative TSR vs FTSE 250
In line with widespread practice for a Total Shareholder Return (TSR)
measure, threshold performance requires TSR growth in line with the
median constituent of the FTSE 250 Index. The maximum outcome
will only be achieved if Man Group’s TSR is in the upper quartile over
the three-year performance period, which would again represent good
alignment with the experience of Man Group’s shareholders.
3-year Cumulative Core Management Fee EPS
The targets for Cumulative Core Management Fee EPS have been
established in absolute terms at 30 cents at threshold, 33 cents at
target and 36 cents at maximum. The targets reflect the more
challenging environment for management fee earnings in 2019 with
2019 core management fee EPS of 9.6 cents, some 13% below 2018.
In this context, the targets require core management EPS to be on
average 4%, 15% and 25% higher than 2019 at threshold, target and
maximum respectively over the three years. The Committee
considered this to be appropriately stretching.
The targets have been set based on reported figures, which include
the impact of foreign exchange (FX) movements. Given that such
movements are outside the control of management, the Remuneration
Committee will carefully review the outcome of this measure and
adjust it, if appropriate, in the event that management has benefited
from an exceptional gain or been disadvantaged by an exceptional
FX headwind. Man Group plc has a track record of careful capital
management and a policy of returning excess capital to shareholders
via dividends and/or share buybacks. In establishing the three-year
target for Cumulative Core Management Fee EPS, the Remuneration
Committee has assumed a continuation of that policy.
3-year Cumulative Core Total EPS
Core Total EPS starts with Core Management Fee EPS and
additionally includes performance fee profits; the target, therefore,
represents the Core Management Fee EPS target, from above,
together with performance fee EPS. The performance fee EPS targets
have been set in line with the LTIP award made in 2019. The slight
reduction, versus prior year, in the Cumulative Core Total EPS targets
simply reflects the change in the Cumulative Core Management
Fee EPS, explained above. In order to satisfy itself that the targets
remained stretching, the Committee again reviewed the Cumulative
Core Total EPS delivered in the three-year periods ending in each
of the last five years, as shown in the table below.
3-year Cumulative Core Total EPS (¢)
75 Maximum
52.8
56 Target
41.3
42.1
39.8
37.5
42 Threshold
2015
2016
2017
2018
2019
3-year Cumulative Core Management Fee EPS
3-year Cumulative Performance Fee EPS
Governance report 84
Directors’ Remuneration report continued
1. Chairman’s annual statement continued
Performance fee income is the more volatile part of Man Group’s
profits but represents a valuable earnings stream over time. At the
levels of performance required to achieve the threshold, this will
represent sustained delivery of performance fees over a three-year
period and be a positive outcome for our shareholders which will be
significantly improved if target or maximum performance is delivered.
Cumulative Relative Net Inflows
In order to ensure that management is only rewarded for
performance which they can directly impact through their actions,
the Committee has decided to change the Net Inflows targets for
the 2020 LTIP, and for the bonus in 2020, so that performance
is measured relative to inflows into the industry. The executive
directors will be required to beat the wider sector by 3% in order
to receive any payout for this metric; at target, growth in Net
Inflows of 10.5% more than peers will be required and, for a
maximum payout, outperformance of at least 18% will be required,
which would represent an excellent result for shareholders.
Overall, the Committee considered that the ranges set for the LTIP
award to be granted in March 2020 were demanding and would
align management experience with that of shareholders. As a
reminder, the level of vesting at threshold is 0%, meaning that the
directors will only start to receive any awards under the LTIP when
threshold performance has been exceeded, representing a much
tougher hurdle than in the majority of listed businesses.
1.8 Conclusion
I hope that you find the information in this letter, and the sections
of the DRR that follow, to be clear and useful and I would welcome
any feedback you may have.
We look forward to welcoming you at our AGM and receiving
your support for our 2019 DRR at that meeting.
Richard Berliand
Chairman of the Remuneration Committee
Man Group plc Annual Report 2019 2. Remuneration at a glance
2.1 Directors’ Remuneration Policy summary table
Key elements
2019
2020 2021
2022 2023 2024
2025
Remuneration Policy
Implementation in 2019/20
85
Fixed pay
Cash
bonus
Deferred
bonus
Long-term
incentive
Share
ownership
requirements
Malus and
clawback
Pension
allowance
Benefits
Maximum
opportunity
Operation
Maximum
opportunity
Operation
Salary
– Overall policy maximum of
$1.1m will apply to all executive
directors, meaning no increase
for the CEO over the life of the
policy
– Policy maximum 14% salary1
– Actual 14% salary
– Includes family private medical
insurance, life assurance and
permanent health insurance
Salaries effective from 01/01/19:
– CEO $1.1m
– CFO $612.5k
Salaries effective from 01/01/20:
– CEO $1.1m
– CFO $625k
– 250% of salary
KPIs (%)
– Awarded as a combination
of cash (50%) and deferral (50%)
into shares vesting in equal
tranches in each of the following
three years
– Opportunity to defer up to
half the deferred amount
into funds, once the share
ownership requirements are met
– Malus and clawback apply
Net Inflows
Core Management
Fee PBT ($m)
Core Total PBT ($m)
Strategic and
Personal Objectives
– 350% of salary
KPIs (%)
– Man Group Long-Term Incentive
Plan (LTIP)
– Forward-looking three-year
performance conditions with
share grant at year 0, vesting
year 3 with subsequent two-year
holding period
– Malus and clawback apply
Relative Investment
Performance
Relative TSR vs FTSE250
3-year cumulative core
management fee EPS
3-year cumulative core
total EPS
Cumulative Net Inflows
30
20
20
30
25
25
20
20
10
Share
ownership
requirements
– CEO 300% of salary
– Other executive directors 200%
of salary
– 100% of the requirement to
be retained for one year after
leaving and at least 50%
for the second year
Actual shareholding
as at 31/12/19:
– CEO 925%
– CFO 412%
Malus and
clawback
The Committee may apply malus and/or clawback to variable pay
in certain specified circumstances, including:
– Misconduct
– Material misstatement of financial results affecting the assessment
of a performance condition, or where there has been an error
or inaccuracy relating to the determination of variable pay
In addition, it can apply malus if a director:
– fails to meet the required standards of fitness and propriety;
– participates in or was responsible or accountable for a material
failure of risk management;
– has caused or contributed to a material extent to censure
by any regulatory authority; or
– has caused or contributed to a significant detrimental impact
on the Company’s reputation.
The full detail of the executive directors’ Remuneration Policy, approved
in May 2018, can be viewed at www.man.com
1 The directors’ maximum pension contribution is aligned to the maximum available to all UK employees, currently 14%
of salary.
Governance report 86
Directors’ Remuneration report continued
2. Remuneration at a glance continued
2.2 Actual 2019 remuneration and illustrative pay for performance scenarios
The chart below shows the actual remuneration of the executive directors in 2019 compared to their potential earnings in different performance
scenarios (‘minimum’, ‘mid-point’, ‘maximum’ and ‘maximum with 50% share price appreciation’). As set out in detail in the 2018 DRR, the impact
of switching from the former DEIP to the LTIP is that no long-term variable pay will be included in the single figure table until the first award vests
at the end of 2021. Consequently, in the interests of clarity and transparency, the 2018 and 2019 ‘illustrative’ data in the table below shows the
potential single figure outcome using an expected value of 50% for the LTIP. Achievement at this level would require target performance to be
delivered on all five measures. The actual outcomes for the March 2019 and March 2020 awards will be reported in the DRRs for 2021 and
2022, respectively.
Illustrative pay for performance scenarios compared to actual remuneration ($’000)
49%
$7,874
39%
20%
$9,799
Luke Ellis
CEO
Minimum
Mid-point
Maximum
Maximum with 50%
share price appreciation
2018 actual
2018 illustrative
2019 actual
2019 illustrative
Mark Jones
CFO
Minimum
Mid-point
Maximum
Maximum with 50%
share price appreciation
2018 actual
2018 illustrative
2019 actual
2019 illustrative
100%
$1,274
28%
16%
13%
30%
42%
$4,574
35%
28%
$2,856
$2,804
$4,781
$4,729
100%
$729
28%
30%
42%
$2,604
16%
13%
35%
28%
$1,601
$1,583
$2,673
$2,677
49%
$4,479
39%
20%
$5,572
Salary, pension and benefits
Annual bonus
LTIP
50% share price
appreciation on LTIP
Assumptions used:
• The minimum scenario reflects base salary, pension (of 14% of salary) and benefits as disclosed in the single
figure of total remuneration (i.e. fixed remuneration), which are the only elements of the executive directors’
remuneration packages not linked to performance during the year under review.
• The ‘mid-point’ scenario reflects fixed remuneration as above, plus a target payout of 50% of the maximum
annual bonus and 50% vesting for the LTIP.
• The ‘maximum’ scenario reflects fixed remuneration as above, plus full payout of both the annual bonus
and LTIP.
• The minimum, mid-point and maximum illustrations are based on initial award value and do not, therefore,
reflect potential share price appreciation or any dividend equivalent received over the vesting/deferral periods.
• The ‘maximum with 50% share price appreciation’ shows the impact of a 50% increase in the value of
the LTIP share award from grant; it does not reflect any potential dividends received over the vesting period.
• Annual bonus includes both the cash bonus and the amount of the bonus deferred.
• The illustrative scenarios include the LTIP at 50% of its face value.
Man Group plc Annual Report 2019
2.3 Executive director pay in the context of Man Group’s shareholders
The chart below shows the TSR generated since Luke Ellis’s appointment as CEO in September 2016, compared to both the FTSE 250 and the
FTSE 350 Financial Services Index.
Total shareholder return (TSR) (Sep 16 – Dec 19)
87
250
200
150
100
50
0
Sep
2016
Dec
2016
Apr
2017
Aug
2017
Dec
2017
Apr
2018
Aug
2018
Dec
2018
Apr
2019
Aug
2019
Dec
2019
Man Group TSR
FTSE 250 TSR
FTSE 350 Financial Services TSR
Source: Datastream
The chart below shows the single figure of remuneration for the CEO mapped against the percentage increase in Total Core PBT delivery, since
the appointment of Luke Ellis as CEO. Although ten year peak core profitability was delivered in 2019 which was not fully reflected in the directors’
bonus outcomes, the Committee elected not to exercise any upward discretion.
Core Total PBT and CEO remuneration
10,000
8,000
6,000
4,000
2,000
0
0
0
0
’
$
n
o
i
t
a
r
e
n
u
m
e
r
O
E
C
500
400
300
200
100
0
C
o
r
e
T
o
t
a
l
P
B
T
$
m
2016
2017
2018
2019
CEO remuneration ($) – Actual
CEO remuneration ($) – Illustrative
Core Total PBT ($m)
2.4 Executive director pay in the context of Man Group’s employees
In determining the appropriate remuneration for the executive directors, the Committee carefully considered conditions for employees across the
Group. A high calibre, motivated workforce, appropriately rewarded for their contributions, is a critical component of our success and the table
below illustrates remuneration paid to the executive directors in the context of the wider workforce.
CEO – single total remuneration figure (SFT) ($’000)
Ratio of SFT to median UK employees1
Compensation – all employees ($m)2
Compensation ratio3
Number of bonus-eligible employees
Mean annual bonus award per bonus-eligible employee ($’000)
Median annual bonus award per bonus-eligible employee ($’000)
CEO SFT as % of total compensation of all employees
Aggregate total SFT of all executive directors as % of total compensation of all employees
Year ended
31 December
2019
Year ended
31 December
2019
illustrative4
Year ended
31 December
2018
Year ended
31 December
2018
illustrative4
2,804
17:1
460
43%
1,312
203
35
0.6%
1.0%
4,729
29:1
460
43%
1,312
203
35
1.0%
1.6%
2,856
18:1
425
48%
1,273
185
30
0.7%
1.5%
4,781
31:1
425
48%
1,273
185
30
1.1%
2.5%
1 See table R6 on page 91 for the full disclosure of the CEO ratio. In this table, the 2018 ratio has been re-stated to exclude UK employees who joined during 2018, to align with the approach used
for the calculation of full-time equivalent remuneration in the 2019 ratio.
2 Compensation for all employees represents total fixed pay (salary, pension and benefits) and variable pay in respect of 2019.
3 Compensation ratio represents total compensation costs for all employees (fixed base salaries, benefits, variable bonus compensation and associated social security costs) as a proportion of net
revenue (gross management and other fees, performance fees, income or gains on investments and other financial instruments, and share of post-tax profits of associates, less distribution costs).
4 The columns headed ‘Year ended 31 December 2018 – illustrative’ and ‘Year ended 31 December 2019 – illustrative’ are included to aid understanding of the impact of the switch to the LTIP award,
which means that no long-term variable pay is included in the directors’ single figure disclosure (table R1, page 88). For illustrative purposes, an expected value of 50% of the face value of the LTIP
award made in March 2019 and the award to be made in March 2020 has been assumed.
Governance report
88
Directors’ Remuneration report continued
3. Remuneration outcomes in 2019
3.1 Single total figure of remuneration for executive directors
The table below sets out a single figure for the total remuneration received by each executive director for the year ended 31 December 2019
and the prior year.
Single total figure of remuneration for executive directors (audited) – Table R1
All figures in USD
Salary
Taxable benefits2
Pension benefits3
Other4
Total fixed remuneration
Short-term variable5
Value of vested award
Amount due to share appreciation
Total long-term variable6
Total variable remuneration
Total
Luke Ellis
Executive directors
Mark Jones
Jonathan Sorrell
2019
1,100,000
3,223
134,929
16,893
1,255,045
1,548,615
–
–
–
1,548,615
2,803,660
2018
1,100,000
3,691
134,250
14,888
1,252,829
1,603,250
–
–
–
1,603,250
2,856,079
2019
612,500
3,191
76,727
12,934
705,352
877,609
–
–
–
877,609
1,582,961
2018
600,000
3,292
74,891
10,865
689,048
912,000
–
–
–
912,000
1,601,048
20191
523,810
30,3381
64,252
793
619,193
–
–
–
–
–
619,193
2018
750,000
3,691
91,534
1,445
846,670
1,121,250
–
–
–
1,121,250
1,967,920
1 Jonathan Sorrell resigned from the Board on 11 September 2019 and left Man Group on 31 December 2019 after a period of handover. His remuneration for 2019 has been pro-rated accordingly
and he received no performance-related remuneration for 2019. His taxable benefits are higher in 2019 because they include a payment for accrued but unused annual leave.
2 Taxable benefits include private medical insurance and gym membership subsidy.
3 Pension benefits are paid into the Man Group Self-Invested Personal Pension with any contributions exceeding the annual or lifetime allowance paid as cash on a cost neutral basis to the Company.
4
5 See table R2 for details of the short-term variable compensation award.
6 The first award under the new Man Group plc LTIP was made in March 2019 for the three-year performance period ending on 31 December 2021. To the extent the performance conditions have been
‘Other’ includes non-taxable benefits (e.g. life insurance, Group income protection and fund fee rebate).
achieved, any vested shares will be reported in this table in the report for 2021. Vested shares are subject to a further two-year holding period.
3.2 Annual bonus in respect of 2019 performance
The annual bonus is based on the Committee’s assessment of executive directors’ performance against objectives agreed by the Board at the
beginning of the year, split 70% based on quantitative metrics and 30% on qualitative performance. The threshold, target and maximum ranges
are considered to represent appropriately stretching levels of performance, as explained in detail in the Chairman’s statement, and are set by
reference to internal budgets and strategic plans, industry backdrop and external expectations. The targets for Core Management Fee PBT and
Core Total PBT (including Adjusted Performance Fee PBT) have been adjusted to exclude ‘non-core management fees’ relating to discontinued
business, in order to ensure the executive directors are incentivised only using stretching targets for metrics over which they have direct control.
Table R2 shows the results of the Committee’s assessment of the performance delivered in 2019.
Annual bonus in respect of 2019 (audited) – Table R2
Financial metric
Increase in Net Inflows
Core Management Fee PBT
Core Total PBT
Total financial metrics
Non-financial metrics
Percentage of maximum annual bonus awarded
Quantum of award – total1
Quantum of award – paid in cash
Quantum of award – deferred
Weighting
30%
20%
20%
70%
30%
2018 actual
9.9%
$203m
$237m
Threshold
(25% of max)
1.0%
$159m
$234m
Target (50%
of max)
3.5%
$172m
$292m
Maximum
(100% of
max)
6.0%
$188m
$388m
Outcome
-1.2%
$170m
$384m
% achieved
0.0%
46.0%
98.0%
CEO
27.5%
56.3%
$1,548,615
$774,308
$774,307
Bonus
outcome, after
weighting (% of
maximum)
0.0%
9.2%
19.6%
28.8%
CFO
28.5%
57.3%
$877,609
$438,805
$438,804
1 50% of the bonus is paid in cash with the remaining 50% deferred into Man Group plc shares; when a director achieves their shareholding requirement, up to half the deferral may be into Man Group
plc funds and the balance into shares. No further performance conditions apply to the deferral which vests in three equal tranches on the first, second and third anniversary of grant subject, in normal
circumstances, to continued employment.
Man Group plc Annual Report 2019
Key
Criteria fully met or exceeded
Criteria partially met
Criteria not met
89
Assessment of performance against qualitative objectives
Executive directors Objective
CEO
Prepare Group strategic plan,
key business objectives and
required resources
Continue leading approach to
compliance and risk
management
Develop new investment
content and focus on research
and technology to support
long-term profitable growth
Company culture, diversity and
development of people
Build reputation of Man Group
with key external stakeholders
CFO
Accurate, appropriate, clear,
proactive and timely reporting
Company culture, diversity and
development of people
Manage Group capital
Continue leading approach to
compliance and risk
management
Build reputation of Man Group
with key external stakeholders
Outcome
Ten year peak core profitability in the year despite industry backdrop of negative flows and
weaker relative performance. Ongoing delivery on longer-term drivers of strategy including
innovation, such as the seeding of quantitative credit strategies and the development
of a new Man Group multi-strategy hedge fund.
The corporate restructure represented a major programme successfully implemented with
strong shareholder support. No events occurred outside the Company’s risk appetite and
the balance sheet seeding programme continued to support growth, with seeding gains
of $20 million, whilst remaining well below risk thresholds.
Positive performance and initial fund raising from credit strategies across Man Group.
Continued strong performance of recent vintage of new products (e.g. AHL Target Risk
inflows of more than $1.6 billion).
Employee engagement remains at high levels, with an overall rating of 7.7/10 from higher
annual participation in the Employee Survey. Public targets for female representation in
senior management, and year-on-year improvement in 2019. In 2016, 16% of senior
managers at Man Group were women and this had increased to 20% at the end of 2019.
Continuing to build Man Group’s profile; more than 180 client meetings attended in
person. Senior Man Group people chair committees of the Alternative Investment
Management Association, on both diversity and inclusion and tax matters, and the
Investment Association General Regulations Committee, to ensure Man Group is
represented and contributing to industry-wide thinking and developments.
The successful, timely and within budget implementation of a new Finance and HR system
has had a substantial impact on the efficiency of operations, delivering improved analytics,
processes, automation and breadth of access across Man Group. This was a very
significant IT implementation led by the CFO, together with the corporate restructuring,
in which the CFO also played a leading role, both were seamlessly delivered without
impacting ‘business as usual’ activities and together represent a substantial achievement.
The new ESG revolving credit facility includes a number of public commitments for the
Company across gender diversity, volunteering and UN PRI assessment. Active sponsor
of the Company’s ‘Family Network’; the ‘return to work’ programme has resulted in five
‘returners’ joining the Company, two of whom have been recruited into permanent roles in
Finance. Sponsorship of the King’s Maths School to help talented students from diverse
backgrounds in London succeed in numerical disciplines.
Corporate restructure successfully completed with very strong shareholder support.
Positive P&L from seed book despite more difficult alpha environment, no material
drawdowns (seeding gains $20 million). Successfully accessed more attractive financing
sources for Man Group from Total Return Swaps and repo financing saving approximately
$5 million p.a. on a run rate basis.
No material operational events. Enhanced risk reporting across Man Group, e.g. Python
based reporting, with enhanced ability to drill down, replacing static reports. Smooth
implementation and initial operations of new corporate structure.
Positive feedback from shareholders and 99%+ of shareholders approved the corporate
restructure.
3.3 Percentage change in CEO remuneration
The table below sets out the percentage change in remuneration for the CEO and staff.
Percentage change in CEO remuneration – Table R3
Salary
Taxable benefits2
Short-term variable
CEO
All staff
All figures in $’000s
2019
1,100
3
1,549
2018
1,100
4
1,603
% change
0
-13
-3
% change1
63
143
104
1 Figures are calculated on a per capita basis.
2 Taxable benefits include private medical insurance and gym membership subsidy.
3 Represents the average increase in salary and taxable benefits in underlying currency in which each member of staff is paid.
4 For staff, short-term variable remuneration includes both variable cash compensation and deferred awards relating to the current year.
Governance report 90
Directors’ Remuneration report continued
3. Remuneration outcomes in 2019 continued
3.4 Relative importance of spend on pay
The table below shows the year-on-year change in total employee expenditure compared to the change in shareholder distributions.
Relative importance of spend on pay – Table R4
Total employee expenditure1
Shareholder distributions2
2019
$m
477
244
2018
$m
436
400
% change
9
-39
1 Remuneration paid to or receivable by all employees (i.e. accounting cost). Refer to Note 4 to the financial statements for further details. Total employee expenditure excludes restructuring costs.
2 Distributions to shareholders (dividends paid of $189 million and repurchase of shares of $211 million in 2018, dividends paid of $152 million and repurchase of shares of $92 million in 2019).
3.5 Review of past performance
The performance graph below compares the Company’s total shareholder return performance against the FTSE 250 Index and the FTSE 350
Financial Services Index. The FTSE 250 has been chosen as the primary comparator to align with the peer group used in the LTIP in which 25%
of the outcome is determined by the Company’s relative TSR performance compared to the FTSE 250 Index. In previous years, Man Group had
chosen the FTSE 350 Financial Services Index as the comparator group so it has also been shown below, for reference.
Total shareholder return (TSR) (Mar 10 – Dec 19)
350
300
250
200
150
100
50
0
Mar
2010
Mar
2011
Dec
2011
Dec
2012
Dec
2013
Dec
2014
Dec
2015
Dec
2016
Dec
2017
Dec
2018
Dec
2019
Man Group TSR
FTSE 250 TSR
FTSE 350 Financial Services TSR
Source: Datastream
Historical CEO remuneration – Table R5
Accounting period ended
CEO single figure
($’000s)
Short-term variable
award (as a percentage of
maximum opportunity)4
Long-term variable award
(as a percentage of
maximum opportunity)4
31 Mar
2010
n/a
n/a
6,299
n/a
n/a
n/a
n/a
n/a
n/a
31 Mar
20111
n/a
n/a
8,173
n/a
n/a
n/a
n/a
n/a
n/a
31 Dec
20112
n/a
n/a
6,437
n/a
n/a
n/a
n/a
n/a
n/a
31 Dec
2012
n/a
n/a
1,048
n/a
n/a
n/a
n/a
n/a
n/a
L Ellis3
E Roman3
P Clarke3
L Ellis3
E Roman3
P Clarke3
L Ellis3
E Roman3
P Clarke3
31 Dec
2013
n/a
3,397
978
n/a
31 Dec
31 Dec
2014
2015
n/a
n/a
5,068
5,367
n/a
n/a
n/a
n/a
70% 100% 83.3%
n/a
n/a
n/a
n/a
40% 40.7%
n/a
0%
n/a
17%
0%
n/a
31 Dec
2016
1,347
910
n/a
31 Dec
2017
6,215
n/a
n/a
31 Dec
2018
2,856
n/a
n/a
31 Dec
2019
2,804
n/a
n/a
40.2% 78.8% 58.3% 56.3%
n/a
n/a
n/a5
n/a
n/a
n/a
n/a
28.6% 46.2%
n/a
n/a
n/a
n/a
n/a5
n/a
n/a
n/a
n/a
n/a
n/a
1 Salary and benefits are for 12 months and bonus for nine months.
2 Salary and benefits are for nine months and bonus for 12 months.
3 Peter Clarke stepped down as CEO with effect from 28 February 2013 and was on garden leave until his retirement on 10 December 2013. Emmanuel Roman became CEO on 28 February 2013
and stepped down on 31 August 2016. Luke Ellis was appointed CEO on 1 September 2016. Remuneration for 2016, therefore, reflects four months’ service only.
4 For the accounting periods ended up to and including 31 December 2012, as there was no cap on the overall maximum bonus awards, the percentage of maximum opportunity is not shown.
5 Awards under the LTIP were made in March 2019 and will be made in March 2020, vesting in March 2022 and March 2023 respectively, with a subsequent two-year holding period.
Man Group plc Annual Report 2019
91
3.6 CEO pay ratio
The table below compares the 2019 single total figure of remuneration for the CEO with that of the Group’s UK employees who are paid at the
25th percentile (lower quartile), 50th percentile (median) and 75th percentile (upper quartile).
Table R6
Year
2019
Method
A
25th percentile
pay ratio
26:1
50th percentile
pay ratio
17:1
75th percentile
pay ratio
10:1
In reviewing the ratio, the Committee considered the context within which it had been calculated. In 2019, the CEO’s bonus is slightly lower than
prior year and his remuneration does not include any LTIP vesting, as explained elsewhere in the report. However, mean annual bonus awards
per employee have increased by 10% as a result of the delivery of ten year peak core profitability in 2019 (see section 2.4). The Committee also
recognised that the ratio in isolation does not provide much insight and that trend data over time, as well as an understanding of how Man
Group’s ratio compares to that in similar businesses may provide more useful context in future.
The ratio has been calculated using option A methodology, which uses actual employee data. The Committee considered this to be the most
accurate approach. Total full-time equivalent remuneration for people employed for the full 12-month period ending on 31 December 2019 has
been calculated in line with the methodology for the ‘single figure of remuneration’ for the CEO (table R1, page 88). This data was then ranked
to identify the individuals at the 25th, 50th and 75th percentiles and the salary and total pay and benefits for the three identified quartile point
employees is shown in the table below.
All figures in USD
Salary
Total pay and benefits
25th percentile
78,036
106,015
50th percentile
100,104
161,720
75th percentile
127,928
289,952
3.7 Retirement benefits
Luke Ellis and Mark Jones are not eligible for any defined benefits under the Man Group plc Pension Plan.
3.8 Single total figure of remuneration for non-executive directors
The table below sets out a single figure for the total remuneration received by each non-executive director for the year ended 31 December 2019
and the prior year.
Single total figure of remuneration for non-executive directors (audited) – Table R7
All figures in GBP
Lord Livingston of Parkhead
Dame Katharine Barker
Richard Berliand
John Cryan
Zoe Cruz1
Andrew Horton2
Matthew Lester2
Dev Sanyal
Fees
Taxable benefits3
Total
2019
450,000
84,167
125,000
70,000
84,167
100,000
85,000
85,000
2018
450,000
80,000
120,000
70,000
46,667
92,500
92,500
85,000
2019
1,228
108
307
12,025
11,328
108
108
1,319
2018
1,631
–
–
1,310
5,467
–
–
1,392
2019
451,228
84,275
125,307
82,025
95,495
100,108
85,108
86,319
2018
451,631
80,000
120,000
71,310
52,134
92,500
92,500
86,392
1 Zoe Cruz was appointed to the Board on 1 June 2018. Her remuneration for 2018 has been pro-rated accordingly.
2 Andrew Horton took over as Chair of the Audit and Risk Committee from Matthew Lester on 1 July 2018. Their remuneration for 2018 has been pro-rated accordingly.
3 Taxable benefits comprise travel and staff entertainment expenses and the tax paid in relation to such benefits.
Governance report 92
Directors’ Remuneration report continued
3. Remuneration outcomes in 2019 continued
3.9 Payments for loss of office and payments to past directors (audited)
There were no payments for loss of office made to executive directors during the year. Jonathan Sorrell resigned from the Board on
11 September 2019 and left Man Group on 31 December 2019, following a period of handover. For the period between stepping down from the
Board and leaving Man Group, Jonathan Sorrell was paid a total fixed remuneration of $267,378, comprising of a salary of $226,190; $13,100 for
taxable benefits; $27,745 for pension benefits; and $343 for other non-taxable benefits (see notes 1 to 4 at table R1 for details of the above
benefits). Jonathan Sorrell received no performance-related remuneration for 2019 and has forfeited any unvested share awards.
3.10 Directors’ interests
Directors’ interests in shares of Man Group plc (audited) – Table R8
Executive directors
Luke Ellis
Mark Jones
Former executive director
Jonathan Sorrell3
Non-executive directors
Lord Livingston of Parkhead4
Dame Katharine Barker
Richard Berliand
John Cryan4
Zoe Cruz5
Andrew Horton
Matthew Lester
Dev Sanyal
Number of
ordinary
shares1,2
31 December
2019
Number of
ordinary
shares1
31 December
2018
3,637,643
351,977
3,073,703
252,408
1,020,606
775,952
62,789
45,057
50,000
–
–
100,000
22,692
81,821
62,789
42,948
50,000
–
–
100,000
22,692
77,993
1 All of the above interests are beneficial.
2 There has been no change in the directors’ interests in the ordinary shares of Man Group plc from 31 December 2019 up to 27 February 2020, being the latest practicable date prior
to the publication of this report.
3 Jonathan Sorrell stepped down from his role as President and as an executive director of the Company on 11 September 2019. He is subject to post-employment shareholding requirements
as set out in the directors’ Remuneration Policy summary table on page 85.
4 Lord Livingston of Parkhead stepped down from his role as Chairman of the Company on 31 December 2019. John Cryan has been appointed Chairman of the Company with effect from
1 January 2020.
5 Zoe Cruz was appointed to the Board on 1 June 2018.
Executive directors’ shareholdings measured against their respective shareholding requirement as at 31 December 2019
(audited) – Table R9
Executive directors
Luke Ellis
Mark Jones
Former executive director
Jonathan Sorrell5
Shares owned
outright
3,637,643
351,977
Shares no
longer subject
to performance
conditions1
1,219,842
852,589
Total
shareholding2
4,857,485
1,204,566
Value of
shareholding3
(USD)
10,172,982
2,522,711
Annual salary
(USD)
1,100,000
612,500
Shareholding
requirement as
a % of salary4
300%
200%
Current
shareholding as
a % of salary
925%
412%
Requirement
met?
Yes
Yes
1,020,606
–
1,020,606
2,137,445
750,000
200%
285%
Yes
1
In future, LTIP shares retained during the two-year post-vesting retention period will also count towards achievement of the requirement. Unvested shares no longer subject to performance conditions
are shown on a net of tax basis. Details of unvested awards can be found in tables R11, R12 and R14.
2 Shares that count towards achievement of the policy are limited to: shares owned outright and deferred shares, granted under the Deferred Executive Incentive Plan (DEIP), Deferred Share Plan (DSP)
and Partner Deferred Share Plan (PDSP), which are no longer subject to performance conditions.
3 Shareholdings valued at 31 December 2019 share price of £1.58 and a GBP/USD exchange rate of £1 = $1.3255.
4 The directors’ Remuneration Policy, approved in May 2018, increased the shareholding requirement to 300% and 200% of salary for the CEO, and other executive directors, from 200% and 100%
of salary respectively.
5 Jonathan Sorrell stepped down from his role as President and as an executive director of the Company on 11 September 2019. He is subject to post-employment shareholding requirements as set
out in the directors’ Remuneration Policy summary table on page 85.
3.11 Directors’ interests in shares and options under Man Group long-term incentive plans
Scheme interests to be awarded under the Man Group plc Long-Term Incentive Plan (LTIP)1 – Table R10
Executive director
Luke Ellis
Mark Jones
Award value2
Award (% of
salary)
(USD)
350% 3,850,000
2,187,500
350%
Vesting date
Mar-23
Mar-23
End of retention
period date
Mar-25
Mar-25
1 Awards under the LTIP will be made in March 2020 for the three-year performance period commencing on 1 January 2020 and ending on 31 December 2022; the proportion
of the award which vests will be determined based on the measures, weightings and target ranges set out in table R19.
2 The monetary value of these awards will be converted into a number of shares using the USD/GBP exchange rate and the market value on the immediately preceding dealing day to
grant. The awards will be granted as conditional awards of shares and will vest, to the extent the performance conditions have been achieved, three years later and will then be subject
to a further two-year retention period, under the LTIP rules. These awards attract dividend accruals from grant date to the end of the two-year retention period for vested shares.
Man Group plc Annual Report 2019
93
Conditional share awards under the Long-Term Incentive Plan (LTIP) – subject to performance conditions and retention period
(audited) – Table R11
Executive director
Luke Ellis
Mark Jones
Former executive director
Jonathan Sorrell5
Date of grant
Face value of
award1
Mar-19 $3,850,000
$2,143,750
Mar-19
Granted during
the year2,3
2,185,434
1,216,889
Dividends
accruing4
107,904
60,083
Lapsed during
the year
–
–
31 December
2019
2,293,338
1,276,972
Vesting date6
Mar-22
Mar-22
End of retention
period7
Mar-24
Mar-24
Mar-19 $2,625,000
1,490,069
73,571
1,563,640
–
–
–
1 The face value of the awards represent 350% of salary.
2 The first awards under the LTIP were granted in March 2019 for the three-year performance period commencing on 1 January 2019 and ending on 31 December 2021. The performance measures
for these awards are: Relative Investment Performance (25%), Relative TSR versus FTSE 250 (25%), 3-year Cumulative Core Management Fee EPS (20%), 3-year Cumulative Core Total EPS (20%)
and Cumulative Net Inflows (10%). The targets were disclosed in detail in the 2018 DRR.
3 The monetary value of these awards was converted into a number of shares using the USD/GBP exchange rates of $1 = £0.7638 and a share price of £1.3455, being the market value on the
immediately preceding dealing day to grant. The awards have been granted as conditional awards of shares and will vest, to the extent the performance conditions have been achieved, three
years later and will then be subject to a further two-year retention period, under the LTIP rules. These awards attract dividend accruals from grant date to the end of the two-year retention period
for vested shares.
4 On 17 May 2019 dividend accruals of 57,859, 32,217 and 39,449 shares were added to Luke Ellis, Mark Jones and Jonathan Sorrell’s awards respectively based on a sterling dividend of 4.06 pence.
On 4 September 2019, dividend accruals of 50,045, 27,866 and 34,122 shares were added to Luke Ellis, Mark Jones and Jonathan Sorrell’s awards respectively based on a sterling dividend of
3.87 pence.
5 Jonathan Sorrell stepped down from his role as President and as an executive director of the Company on 11 September 2019. Under the rules of the LTIP, awards granted in March 2019 lapsed
on 11 September 2019, being the date his intention to step down from the Board was announced.
6 0% of the award will vest at threshold with straight-line vesting between threshold and target and target and maximum performance. 100% of the award will vest for maximum performance.
7 Shares subject to a vested award are delivered to participants at the end of the two-year retention period.
Conditional share awards under the Deferred Executive Incentive Plan (DEIP) – subject only to service conditions (audited)
– Table R12
Executive director
Luke Ellis
Mark Jones
Former executive director
Jonathan Sorrell3
Date of grant1
Mar-174
Mar-185
Mar-185
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
1 January
2019
298,590
1,041,056
500,015
93,626
245,608
642,786
694,117
569,230
Dividends
accruing2
14,742
51,399
24,684
Vested during
the period
–
–
–
Lapsed during
the period
–
–
–
31 December
2019
313,332
1,092,455
524,699
–
6,063
21,156
34,269
28,104
93,626
122,804
214,262
–
–
–
128,867
449,680
728,386
597,334
–
–
–
–
–
Date vested
–
–
–
Mar-19
Mar-19
Mar-19
–
–
1 No further awards are to be granted under the DEIP following the adoption of the LTIP.
2 On 17 May 2019 dividend accruals of 35,466, 13,236 and 48,039 shares were added to Luke Ellis, Mark Jones and Jonathan Sorrell’s awards respectively based on a sterling dividend of 4.06 pence.
On 4 September 2019, dividend accruals of 30,675, 11,448 and 41,553 shares were added to Luke Ellis, Mark Jones and Jonathan Sorrell’s awards respectively based on a sterling dividend of
3.87 pence.
3 Jonathan Sorrell stepped down from his role as President and as an executive director of the Company on 11 September 2019. Under the rules of the DEIP, the unvested portion of awards granted
since March 2015 lapsed.
4 Award vests in three equal instalments in March 2020, March 2021 and March 2022.
5 Award vests in three equal instalments in March 2021, March 2022 and March 2023.
Options granted under the Man Group Deferred Share Plans – not subject to service conditions (audited) – Table R13
Executive director
Luke Ellis1
Mark Jones2
Date of grant
Deferred Share Plan (KEOP)
Nov-10
Mar-11
Partner Deferred Share Plan (POP)
Mar-11
1 January
2019
Exercised
during period
31 December
2019
Option exercise
price
Latest exercise
date
744,327
407,463
356,110
–
–
–
744,327
407,463
319.88p
267.08p
Nov-20
Mar-21
356,110
308.55p
Mar-21
1 Luke Ellis was granted KEOP options under the Deferred Share Plan prior to his appointment as a director. All options are vested.
2 Mark Jones was granted a POP option under the Partner Deferred Share Plan prior to this appointment as a director. All options are vested.
Governance report
94
Directors’ Remuneration report continued
3. Remuneration outcomes in 2019 continued
Options granted under the Man Group Deferred Share Plans – subject only to service conditions (audited) – Table R14
Executive director
Luke Ellis
Mark Jones
Date of grant
Deferred Share Plan (DSP)
Mar-151, 2
Mar-161
Mar-17 1, 3
Mar-19 4
Partner Deferred Share Plan
(PDSP)
Mar-155,6
Mar-165
Deferred share Plan (DSP)
Mar-17 5,7
Mar-17 3, 5
Mar-19 4
1 January
2019
Granted during
the year
Dividends
accruing8
421,051
172,587
410,178
–
421,051
51,843
305,341
95,452
–
–
–
–
227,519
–
–
–
–
258,846
20,788
–
10,125
11,229
20,788
–
15,075
2,355
12,777
Exercised/
vested during
the period
–
172,587
205,088
–
–
51,843
–
47,726
–
Lapsed during
the year
31 December
2019
Exercised/
vested date
–
–
–
–
–
–
–
–
–
441,839
–
215,215
238,748
441,839
–
320,416
50,081
271,623
–
Mar-19
Mar-19
–
–
Mar-19
–
Mar-19
–
Former executive director
Jonathan Sorrell9 Deferred Share Plan (DSP)
Mar-19
–
159,117
7,854
–
166,971
–
–
1 Luke Ellis was granted nil-cost options under the Deferred Share Plan prior to his appointment as a director.
2 Award vests in a single instalment in March 2020 and will be exercisable until March 2025.
3 Remaining award vests in March 2020 and will be exercisable until March 2027.
4 Award vests in three equal instalments in March 2020, March 2021 and March 2022. All are exercisable until March 2029.
5 Mark Jones was granted nil-cost options under the Deferred Share Plan as well as conditional awards under the Partner Deferred Share Plan prior to his appointment as a director.
6 Award vests in a single instalment in March 2020. Shares are delivered upon vesting.
7 Award vests in a single instalment in March 2022 and will be exercisable until March 2027.
8 On 17 May 2019 dividend accruals of 22,597, 27,345 and 4,212 shares were added to Luke Ellis, Mark Jones and Jonathan Sorrell’s awards respectively based on a sterling dividend of 4.06 pence.
On 4 September 2019, dividend accruals of 19,545, 23,650 and 3,642 shares were added to Luke Ellis, Mark Jones and Jonathan Sorrell’s awards respectively based on a sterling dividend of
3.87 pence.
9 Jonathan Sorrell stepped down from his role as President and as an executive director of the Company on 11 September 2019. Under the rules of the DSP, awards granted in March 2019 lapsed
on 11 September 2019, being the date his intention to step down from the Board was announced.
Options granted under the Man Group Sharesave Scheme (audited) – Table R15
Executive director
Date of grant
Luke Ellis
1 January
2019
Granted during
year
Exercised
during period
Lapsed during
year
31 December
2019
Option price
Earliest exercise
date
Latest exercise
date
Number of options
Sep-14
Sep-17
Sep-19
16,833
11,363
–
–
–
11,811
16,833
–
–
Mark Jones
Sep-17
Former executive director
Jonathan Sorrell
13,636
–
–
–
–
–
–
–
11,363
11,811
90.0p1
132.0p
127.0p
Oct-19
Oct-22
Oct-24
Mar-20
Mar-23
Mar-25
13,636
132.0p
Oct-20
Mar-21
Sep-14
Sep-17
Sep-19
16,833
11,363
–
–
–
11,811
16,833
–
–
–
11,363
11,811
–
–
–
90.0p1
132.0p
127.0p
Oct-19
Oct-22
Oct-24
Mar-20
Mar-23
Mar-25
1 Luke Ellis and Jonathan Sorrell exercised their options on 19 November 2019. The average market price per share on 19 November 2019 was 144.65 pence.
3.12 Shareholder voting and engagement
At the AGM held on 10 May 2019, votes cast by proxy and at the meetings in respect of directors’ remuneration were as follows:
Table R16
Resolution
Approve the annual report on remuneration
Approve the directors’ Remuneration Policy (May 2018)1
Votes for
1,021,697,914
1,132,967,350
% for
Votes against
93.6 69,956,885
97.2 32,266,653
% against
Total votes cast
6.4 1,091,654,799
Votes withheld
(abstentions)
434,650
2.8 1,165,234,003
565,403
1 Votes cast by proxy and at the AGM held on 11 May 2018.
Man Group plc Annual Report 2019 95
4. Implementation of directors’ Remuneration Policy for 2020
4.1 Base salary
Salaries are reviewed annually taking into account market benchmarks for executives of comparable status, responsibility and skill.
Base salary of executive directors – Table R17
Base salary at
1 January 2019
1 January 2020
Luke Ellis
$1,100,000
$1,100,000
Mark Jones
$612,500
$625,000
4.2 Annual bonus for 2020
The following table shows the performance metrics and weightings for the annual bonus in 2020. The Remuneration Committee considers that
the disclosure of detailed performance targets in advance for 2020 would be commercially sensitive and they are not, therefore, disclosed here.
It is the intention of the Committee to disclose them in the DRR for the year ended 31 December 2020.
Table R18
Metrics
Relative Net Inflows
Core Management Fee PBT, $m
Core Total PBT, $m
Strategic and Personal
Total
Weighting %
30%
20%
20%
30%
100%
4.3 Long-Term Incentive Plan for 2020
The threshold to maximum ranges for the Man Group plc LTIP are set out in the table below. Awards vest at 0% at threshold, 50% at target
and 100% at maximum, with straight-line vesting between these points.
Table R19
Metrics
Relative Investment Performance
Relative TSR vs FTSE 250
3-year Cumulative Core Management Fee EPS, cents
3-year Cumulative Core Total EPS, cents
Cumulative Relative Net Inflows
Total
Threshold
0%
Median
30¢
42¢
3%
Target
3%
Mid-point
between
Median and
Upper
Quartile
33¢
56¢
10.5%
Maximum
6%
Upper
Quartile
Weighting %
25%
25%
36¢
75¢
18%
20%
20%
10%
100%
4.4 Non-executive directors’ Remuneration Policy for 2020
The Chairman’s fee has been reduced to £350,000 per annum, following a review of benchmarking of similar roles and explained in detail
in my letter. The Board has also slightly increased the Board fee and fees for chairing the Audit and Risk and Remuneration Committees,
as well as introducing an additional fee for the Employee Engagement NEDs, to reflect the increasing demands of all these roles.
Non-executive directors’ fees for 2020 – Table R20
Position (All figures in GBP)
Chairman of the Board
Board fee1
Senior Independent Director
Audit and Risk Committee chair
Other Audit and Risk Committee members
Employee Engagement NEDs
Remuneration Committee chair
Other Remuneration Committee members
Includes Nomination Committee membership where appropriate.
1
2 Fee paid from 27 February 2019.
2020
350,000
75,000
15,000
35,000
15,000
7,500
30,000
10,000
2019
450,000
70,000
15,000
30,000
15,000
5,0002
25,000
10,000
% change
-22%
7%
–
17%
–
50%
20%
–
Governance report
96
Directors’ Remuneration report continued
5. Remuneration Committee
5.1 Membership and attendance
The Committee met six times during 2019 with attendance by members as indicated below. All members held office throughout the year. In
addition, certain urgent proposals relating to the retention of awards by good leavers were circulated and agreed by email in between meetings.
Table R21
Committee member
Richard Berliand (Chairman)
Dame Katharine Barker
Lord Livingston of Parkhead (retired 31 December 2019)
Zoe Cruz
Meetings
attended
6/6
6/6
6/6
5/61
Notes
1 Zoe Cruz was unable to attend the September meeting due to prior commitments but reviewed the papers ahead of the meeting and discussed her views with the Committee Chairman.
Committee meetings are regularly attended by the CEO and, where appropriate, by the CFO at the invitation of the Chairman. The Committee
is supported by the Senior Reward Executive, who routinely attends, as does the Global Head of HR. Other members of the Legal, Compliance
and Executive Incentive Plans teams attend meetings when required to provide information and advice on remuneration, regulatory and executive
incentive plan matters. The Company Secretary acts as Secretary to the Committee.
At the end of each meeting there is an opportunity for private discussion between Committee members without the presence of executive
directors and management. No Committee member or attendee is present when matters relating to his or her own remuneration are discussed.
Roles and responsibilities
The Committee’s principal responsibilities are to:
• Determine the Company’s remuneration philosophy and the principles and structure of its remuneration policy, ensuring that these are aligned
with the Company’s purpose, business strategy, objectives, risk appetite and values, comply with all regulatory requirements and promote
long-term shareholder and other stakeholder interests.
• To recommend to the Board the specific remuneration policy for the executive directors, for approval by shareholders, and make remuneration
decisions within that approved policy.
• Approve the total annual compensation for individual executive directors based on their achievement against objectives set by the Committee
and Board at the start of the year for the short term annual bonus and at the start of the relevant performance period for the LTIP.
• Recommend to the Board the remuneration of the Chairman.
• Approve the total annual compensation for Executive Committee members, the Company Secretary and Remuneration Code staff.
• Review and consider shareholder feedback and agree the approach to ongoing shareholder engagement.
Full terms of reference for the Committee, which are reviewed on an annual basis and submitted to the Board for approval, are available
on the Company’s website. www.man.com/corporate-governance
5.2 Independent advisers
Following a formal tender process in July 2017, the Committee appointed PricewaterhouseCoopers (PwC) to provide it with advice on a range
of remuneration matters including the benchmarking of directors’ compensation in the asset management sector, trends in market practice
and regulatory disclosures. PwC also provide professional services in the ordinary course of business including tax and related advisory work
to parts of the Group. There are processes in place to ensure the advice received by the Committee is independent of any support provided
to management. The Committee is satisfied on this basis that PwC are able to serve as an objective and independent remuneration adviser.
The total fees paid to PwC in 2019 were £60,000 (ex. VAT) on the basis of agreed fixed fees. The Committee also received legal advice from
Herbert Smith Freehills LLP on compliance with legislation and regulations relating to remuneration matters.
Man Group plc Annual Report 2019 97
5.3 Committee activities during 2019 and the early part of 2020
The summary below sets out the main issues considered and decisions made by the Committee in the period following the publication
of the 2018 Directors’ Remuneration report up to the current date.
Chairman’s fee
• Reviewed the fee level for the appointment of the new Chairman in the context of benchmarking of similar roles in broadly equivalent-sized
companies in the Financial Services sector and of the demands of the role.
Executive director compensation
• Established the threshold, target and maximum ranges to be achieved for the financial metrics and approved the objectives to be delivered
under the non-financial component of the annual bonus.
• Assessed the 2019 performance of the CEO and CFO against the financial and non-financial metrics of the annual bonus, considered whether
any discretionary intervention was required to adjust the formulaic outcome, and approved the total cash sum payable and the amount to be
deferred.
• Reviewed the level of achievement of each executive director in respect of their shareholding requirement and consequently determined
whether the option to defer up to 50% of the bonus deferral amount into funds could be offered.
• Approved a salary increase for the CFO for 2020.
• To provide the business context for all the above reward decisions, reviewed the available benchmarking for the CEO and CFO roles within
UK and US listed asset managers (please see section 5.5 for information on peer groups).
• Reviewed and approved the terms of exit of Jonathan Sorrell, including that all his unvested awards would lapse and that he remained subject
to his post-employment shareholding obligations.
Shareholder engagement and reporting
• Reviewed shareholder voting and feedback on the 2019 AGM resolution for the DRR, noting the substantial level of support.
• Continued to undertake shareholder engagement, including meetings in the second half of 2019 with some of the proxy voting bodies.
• Reviewed the 2019 DRR taking account of best practice recommendations and institutional shareholder guidelines.
Compensation below Board level
• Reviewed, challenged and approved the 2019 bonus pool proposed by management in relation to the Company’s performance for the year.
• Approved bonus deferral policies for different groups of staff.
• Approved total compensation proposals for Executive Committee members, taking account of the CEO’s appraisal of their individual
performance for 2019 and their adherence to the Company’s business values.
• Approved the total compensation for BIPRU, AIFMD and UCITS V Remuneration Code staff.
• Retained oversight of the total compensation for staff earning over $1 million, taking account of the CEO’s appraisal of their performance
for 2019 and reports from the Risk and Compliance functions on any related risk issues arising during the year.
• Supported by management, and building on the detailed review of the approach to compensation below Board level carried out in 2018,
reviewed the specific compensation arrangements for leading revenue/profit-generators.
• Reviewed the ratio of CEO pay to the lower quartile, median and upper quartile remuneration paid to UK employees (see page 91).
Financial regulation and governance
• Reviewed ongoing regulatory developments on remuneration and their implications for the Company’s business.
• Reviewed the Company’s FCA Remuneration Policy Statement and the Company’s BIPRU, AIFMD, UCITS V and MiFID II Remuneration Policy.
• Approved the list of BIPRU, AIFMD and UCITS V Remuneration Code staff for 2019.
5.4 2019 Committee evaluation
Following a mid-year review, by the Chairman, of the 2019 priority actions identified in the Committee’s 2018 evaluation, the Chairman undertook
at the year end a full-year evaluation of the operation and effectiveness of the Committee during 2019. The topics covered included progress
on the priorities for 2019 and the conduct and outcomes of specific areas of Committee activity and focus during the year, including the support
and advice available to the Committee.
In the evaluation feedback, the Committee again acknowledged the quality of the advice provided by its advisers and the thorough and
professional papers delivered to the Committee to support its decision-making. The following specific areas of focus were agreed for 2020:
• Deliver the 2019 DRR.
• Continue the Committee’s engagement with shareholders as appropriate and, in particular, undertake a thorough consultation in advance
of proposing a new Directors’ Remuneration Policy for approval at the 2021 AGM.
• Continue to deepen the Committee’s understanding of compensation below the Board, including by reference to gender diversity metrics,
and ensure this is considered in discussions about the level and appropriateness of executive director compensation.
• Review the effectiveness of the process adopted in 2019 for explaining to the workforce how executive remuneration aligns with wider
Company pay policy and consider whether any changes are required.
• Keep the remuneration advice and industry knowledge available to the Committee under review as a matter of ongoing good governance.
Governance report 98
Directors’ Remuneration report continued
5. Remuneration Committee continued
5.5 Benchmarking and peer groups
Benchmarking is one of a number of factors considered by the Committee in its deliberations on remuneration as it is important that the
Committee understands the level of remuneration paid by Man Group’s competitors for similar positions and which they may be offering
in the marketplace.
Man Group variously uses three separate peer groups as detailed in the tables below. These are:
1. a group of asset managers and related businesses listed on the London Stock Exchange;
2. a group of similar businesses listed on the New York Stock Exchange or Nasdaq; and
3. businesses within the privately owned hedge fund industry.
All three of these sources are relevant.
UK LISTED PEER GROUP
US LISTED PEER GROUP
PRIVATE MANAGER PEER GROUP
• 3i
• Standard Life Aberdeen
• Ashmore
• Close Brothers
• TP ICAP
• Intermediate Capital Group
• Investec Asset Management
• Jupiter
• M & G
• Schroders
• Affiliated Managers
• Apollo Investment
• Ares
• Artisan Partners
• BlackRock
• Blackstone
• Carlyle
• Eaton Vance
• Federated Investors
• Janus Henderson
• KKR
• Legg Mason
• Oaktree Capital
• Waddell & Reed
• AKO
• AQR
• Arrowgrass
• Brevan Howard
• Bridgewater
• Capula
• Citadel
• Lansdowne Partners
• Marshall Wace
• Millennium
• Two Sigma
• Winton
Many of Man Group’s senior staff are geographically mobile, particularly between London and New York, and an explicit consideration of
remuneration levels in both of these geographies is relevant. Man Group is one of the few listed companies anywhere in the world that operates
in the hedge fund industry. The majority of businesses in this industry are privately owned and systematic remuneration data is not publicly
available. Nevertheless, Man Group competes for talent against these businesses and staff move between Man Group and these private
companies.
Man Group operates globally – witnessed in the geographic footprint of its operations, the spread of its client base and in the breadth of assets it
manages. It also creates and distributes a wide range of products: hedge funds, long-only funds and quantitative funds. None of the companies
referred to above have these same characteristics and, although some of them are larger than Man Group, the Committee believes that, while
they are broadly comparable, Man Group tends to be more diverse geographically and have a wider range of fund strategies. However, these
groups share some of Man Group’s characteristics and, in some cases, information regarding the remuneration of directors is publicly available.
The privately owned hedge fund market is made up of a large number of participants, some of them small and single product and others very
large. As noted earlier, little information is available publicly on the compensation quantum and structures in these businesses. The senior
management of those few hedge fund companies which are publicly listed are generally the founders of the original private company who
retained very significant shareholdings at the time of listing. Man Group endeavours to make up this gap in publicly available data by reviewing
available information on privately owned peers, some of whom are listed in the table above. Man Group has also obtained direct information
about remuneration in those privately held companies that Man Group has acquired.
Interpreting peer group data and benchmarking involves a number of complexities and the Committee looks at this data to provide important
market context for its decisions.
Unless otherwise stated, all information in the Directors’ Remuneration report is unaudited.
For and on behalf of the Board
Richard Berliand
Chairman of the Remuneration Committee
28 February 2020
Man Group plc Annual Report 2019
Directors’ report
99
Directors’ indemnities and insurance cover
The Company has maintained third-party indemnity provisions for the
benefit of Man Group plc, its subsidiary directors, and the trustees of
its defined benefit pension scheme during the year and these remain
in force at the date of this report. New indemnities are granted by the
relevant company to new directors on their appointment and covers,
to the extent permitted by law, any third-party liabilities which they
may incur as a result of their service on a Board within the Group.
The Company arranges directors’ and officers’ liability insurance to
cover certain liabilities and defence costs which an indemnity does not
meet. Neither the indemnity nor the insurance provides any protection
in the event of a director being found to have acted fraudulently or
dishonestly in respect of the Company or its subsidiaries.
Shares
Share capital
Details of movements in issued share capital, together with the
rights and obligations attaching to the Company’s shares, are set
out in Note 21 to the financial statements. This Note also provides
information on the Company’s unexpired authority to purchase its
own shares and details of the shares purchased by the Company
during the year.
Substantial interests
As at 31 December 2019, the Company had been notified of the
following voting interests in the ordinary share capital of the Company
in accordance with DTR 5 of the FCA’s Disclosure Guidance and
Transparency Rules. Percentages are shown as notified, calculated
with reference to the Company’s latest total voting rights announcement
prior to the date of the movement triggering the notification.
It should be noted that these holdings are likely to have changed since
the Company was notified. However, notification of any change is not
required until the next notifiable threshold is crossed.
Shareholder
Tameside MBC re Greater
Manchester Pension Fund
Silchester International
Investors LLP
Number of
shares notified
to the Company
Percentage of
issued share
capital
Date of
notification
49,386,416
3.20% 3 June 2019
131,297,253
8.52% 29 May 2019
No changes to the above were disclosed to the Company in
accordance with DTR 5 during the period 1 January to 27 February
2020 inclusive, being the latest practicable date prior to the publication
of this report.
The Directors present their report,
together with the audited consolidated
financial statements, for the year ended
31 December 2019
Man Group plc is incorporated as a public limited company and
is registered in Jersey with the registered number 127570. The
Company’s registered office is 22 Grenville Street, St Helier, Jersey,
JE4 8PX.
Although the Company is subject to Jersey law, the following report
also includes disclosures required under the Companies Act 2006
in order to ensure that UK legislative disclosures with which our
stakeholders have become familiar are also included for continuity.
Directors
Details of the current directors, together with their biographies, can be
found on pages 58 to 59. The following director changes occurred
during the year:
Jonathan Sorrell
Lord Livingston of Parkhead
Stepped down 11 September 2019
Stepped down 31 December 2019
Following the completion of Man Group’s corporate reorganisation
on 28 May 2019, and in accordance with the scheme of arrangement,
all of the non-executive directors were appointed as directors of the
Jersey registered Man Group plc (the current executive directors
having already been appointed on its incorporation in October 2018).
Details of the directors’ interests in the Company’s shares are given
on page 92 of the Annual Report.
Subsidiaries, joint ventures and associated
undertakings
The Company’s subsidiaries are listed on pages 144 to 146 (Note 29)
to the Group’s financial statements.
Powers of directors
The Board is responsible for the management of the business of the
Company and may exercise all the powers of the Company subject
to the provisions of relevant statutes and the Company’s Articles
of Association (the Articles). A copy of the Articles is available on
the Company’s website and by request from the registered office
of the Company. The Articles may be amended by a special
resolution of the shareholders.
Appointment, retirement and replacement of
directors
The appointment, retirement and replacement of directors are
governed by the Articles, the 2018 UK Corporate Governance Code
and the Companies (Jersey) Law 1991. Under the Articles, the Board
has the power to appoint further directors during the year, but any
director so appointed must stand for reappointment at the next Annual
General Meeting (AGM). In accordance with the Articles, one-third
of the Board must retire by rotation at each AGM and may stand for
reappointment. In practice, and in accordance with the UK Corporate
Governance Code, all Board members retire and offer themselves
for reappointment at each AGM.
The Articles give each director the power to appoint any person
to be his/her alternate, such appointment being subject to Board
approval where the proposed alternate is not an existing director
of the Company.
Governance report
100
Directors’ report continued
Restriction on voting rights
Employee Benefit Trusts (EBTs) and share awards
Where shares are held in EBTs for the satisfaction of awards made
under the Company’s share schemes, under the trust deeds the
trustees have discretion to vote or abstain from voting. Further details
regarding deferred compensation arrangements can be found in note
20 of the financial statements.
Treasury shares
Ordinary shares held by the Company in treasury do not carry
voting rights.
Share transfer restrictions
As disclosed in the 2018 Annual Report:
• On 1 January 2017, 5,650,862 ordinary shares in the Company,
which were issued as partial upfront consideration for the
acquisition of Aalto Invest Holding AG (Aalto), became subject to
share lock-up agreements. Under the terms of such agreements,
and with limited exceptions, the shares could not be disposed
of until 1 January 2019 (second anniversary of the acquisition).
• On 28 August 2018, 3,140,953 ordinary shares in the Company,
which were issued in part settlement of an earn out payment made
in connection with the acquisition of Aalto, became subject to share
lock-up agreements. Subject to a number of limited exceptions,
the shares could not be disposed of until 1 January 2020 (third
anniversary of the acquisition).
The Board may decline to register a transfer of any share which
is not a fully paid share. In addition, registration of a transfer of
an uncertificated share may be refused in the circumstances set
out in The Companies (Uncertificated Securities) (Jersey) Order
1999 and where the number of joint holders exceeds four.
Change of control
The Company’s employee share and fund product incentive
schemes contain provisions whereby, upon a change of control of
the Company, outstanding options and awards will vest and become
exercisable, subject to any prorating that may be applicable.
Independent auditor
The Company’s auditor, Deloitte, has indicated its willingness to
continue in office and a resolution to reappoint Deloitte as auditor of
the Company will be proposed at the 2020 Annual General Meeting.
Political donations
The Group’s policy is not to make any donations or contributions
to political parties or organisations and no such payments were
made during the year.
Annual General Meeting (AGM)
The AGM of Man Group plc will be held at Riverbank House,
2 Swan Lane, London, EC4R 3AD on Friday 1 May 2020 at 10.00am.
Further disclosures
The Directors’ report comprises pages 99 to 100 and the other
sections and pages of the Annual Report and Accounts cross
referenced below which are incorporated by reference. As permitted
by legislation, certain disclosures normally included in the Directors’
report have instead been integrated into the Strategic report (page 1 to
55) and Corporate Governance Report (page 56 to 69).
Business relationships, stakeholders and their effect
on decisions
Corporate governance statement
Directors’ responsibility statement including
disclosure of information to the auditor
Dividend
Dividend waiver
Employment policies, including disability and equal
opportunities and employee involvement
Financial risk management and financial
instruments
Future developments in the business
Greenhouse gas emissions, energy consumption
and energy efficiency
Internal control and risk management statements
Research and development activities
Going concern disclosure
Pages
10–15, 64-65
56–69
101
33, 123, 152-153
123, 133
44–47, 52, 65, 67
126, 141-142
14-23
54–55
35-36, 70-75
18-23
116
In the event that the change of control of the Company relates to
an internal reorganisation, the Board may determine, with the consent
of the new controlling company, that in the case of share awards the
outstanding options and awards will not vest and will be automatically
surrendered in consideration for the grant of new equivalent awards
or options in the new controlling company and that fund product
awards will not vest but will continue to subsist.
For and on behalf of the Board
Alice Rivers
Interim Company Secretary
28 February 2020
Man Group plc Annual Report 2019
Directors’ responsibility statement
101
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulations.
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 European Union. 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, whose names and functions are on pages
58–59 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
performance, business model and strategy
• 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
Governance report Man Group plc Annual Report 2019
102
Financial statements contents
Financial statements contents
Audited information
Audited information
Independent auditor’s report
Independent auditor’s report
Group income statement
Group income statement
Group statement of comprehensive income
Group statement of comprehensive income
Group balance sheet
Group balance sheet
Group cash flow statement
Group cash flow statement
Group statement of changes in equity
Group statement of changes in equity
Notes to the Group financial statements
Notes to the Group financial statements
Basis of preparation
Basis of preparation
Significant accounting policies schedule
Significant accounting policies schedule
Revenue
Revenue
Distribution costs and asset servicing
Distribution costs and asset servicing
Compensation
Compensation
Other costs
Other costs
Finance expense and finance income
Finance expense and finance income
Tax
Tax
Earnings per ordinary share
Earnings per ordinary share
Dividends
Dividends
Goodwill and acquired intangibles
Goodwill and acquired intangibles
Other intangibles
Other intangibles
Cash, liquidity and borrowings
Cash, liquidity and borrowings
Investments in fund products and other investments
Investments in fund products and other investments
Fee and other receivables
Fee and other receivables
Trade and other payables
Trade and other payables
Provisions
Provisions
Investments in associates
Investments in associates
Leasehold improvements and equipment
Leasehold improvements and equipment
Leases
Leases
Deferred compensation arrangements
Deferred compensation arrangements
Capital management
Capital management
Pension
Pension
Segmental analysis
Segmental analysis
Geographical disclosure
Geographical disclosure
Foreign currencies
Foreign currencies
Fair value of financial assets/liabilities
Fair value of financial assets/liabilities
Related party transactions
Related party transactions
Other matters
Other matters
Group investments
Group investments
Unaudited information
Unaudited information
Five year record
Five year record
Alternative performance measures
Alternative Performance Measures
Note
Note
103
111
111
112
113
114
116
116
117
118
119
119
120
120
121
122
123
123
125
126
127
130
130
131
131
131
132
133
135
136
139
140
140
141
143
143
144
103
111
111
112
113
114
116
116
117
118
119
119
120
120
121
122
123
123
125
126
127
130
130
131
131
131
132
133
135
136
139
140
140
141
143
143
144
147
148
147
148
1
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
1
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
Independent auditor’s report to the members of Man Group plc
103
Financial statements
Report on the audit of the financial statements
1. Opinion
3. Summary of our audit approach
In our opinion the financial statements of Man Group plc (the ‘parent
company’) and its subsidiaries (the ‘Group’):
• give a true and fair view of the state of the Group’s affairs as at
31 December 2019 and of the Group’s profit for the year then ended;
• have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union; and
• have been properly prepared in accordance with Companies (Jersey)
Law, 1991.
We have audited the financial statements which comprise:
• the Group income statement;
• the Group statement of comprehensive income;
• the Group balance sheet;
• the Group cash flow statement;
• the Group statement of changes in equity; and
• the related notes 1 to 29.
The financial reporting framework that has been applied in their
preparation is applicable law and IFRSs as adopted by the European
Union.
2. Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the auditor’s responsibilities for
the audit of the financial statements section of our report.
We are independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial statements in
the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical
Standard as applied to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with these
requirements. We confirm that the non-audit services prohibited by the
FRC’s Ethical Standard were not provided to the Group.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
While the parent company is not a public interest entity subject to
European Regulation 537/2014, the directors have decided that the
parent company should follow the same requirements as if that
Regulation applied to the parent company.
Key audit
matters
The key audit matters that we identified in the current
year were:
• Valuation of contingent consideration and goodwill
for GPM; and
• Accuracy of performance fees
Within this report, key audit matters are identified as
follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
Scoping
Significant
changes in our
approach
The materiality that we used for the Group financial
statements was $16.0m which was determined on
the basis of 5% of the two-year average of the
adjusted profit before tax.
We performed a full scope audit of 22 (2018:23)
subsidiaries and audits of specified account balances
within a further 10 (2018:10) subsidiaries across eight
(2018: eight) geographic locations.
Together, this accounts for 99% (2018:99%) of the
Group’s revenue and 97% (2018:99%) of the Group’s
profit before tax.
The valuation of Numeric contingent consideration is
no longer considered a key audit matter in the current
year and the valuation of goodwill recognised for
GPM is a refinement to the prior period key audit
matter. Refer below in the “Key Audit Matters”
section for the rationale.
There are no other significant changes in our
approach apart from these key audit matters.
Man Group plc Annual Report 2019
104
Independent auditor’s report to the members of Man Group plc continued
4. Conclusions relating to going concern, principal risks and viability statement
4.1 Going concern
We have reviewed the directors’ statement in Note 1 to the financial statements about whether they
considered it appropriate to adopt the going concern basis of accounting in preparing them and their
identification of any material uncertainties to the Group’s ability to continue to do so over a period of at least
twelve months from the date of approval of the financial statements.
We considered as part of our risk assessment the nature of the Group, its business model and related risks
including where relevant the impact of Brexit, the requirements of the applicable financial reporting framework
and the system of internal control. We evaluated the directors’ assessment of the Group’s ability to continue
as a going concern, including challenging the underlying data and key assumptions used to make the
assessment, and evaluated the directors’ plans for future actions in relation to their going concern
assessment.
We are required to state whether we have anything material to add or draw attention to in relation to that
statement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with our
knowledge obtained in the audit.
4.2 Principal risks and viability statement
Based solely on reading the directors’ statements and considering whether they were consistent with the
knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of the
directors’ assessment of the Group’s ability to continue as a going concern, we are required to state whether
we have anything material to add or draw attention to in relation to:
• the disclosures on pages 37-39 that describe the principal risks, procedures to identify emerging risks, and
an explanation of how these are being managed or mitigated;
• the directors' confirmation on page 36 that they have carried out a robust assessment of the principal and
emerging risks facing the Group, including those that would threaten its business model, future
performance, solvency or liquidity; or
• the directors’ explanation on page 35 as to how they have assessed the prospects of the Group, over what
period they have done so and why they consider that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the Group will be able to continue in operation and meet
its liabilities as they fall due over the period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
We are also required to report whether the directors’ statement relating to the prospects of the Group
required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.
Going concern is the basis of
preparation of the financial
statements that assumes an
entity will remain in operation
for a period of at least
12 months from the date of
approval of the financial
statements.
We confirm that we have nothing
material to report, add or draw
attention to in respect of these
matters.
Viability means the ability of
the Group to continue over the
time horizon considered
appropriate by the directors.
We confirm that we have nothing
material to report, add or draw
attention to in respect of these
matters.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of
the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
In the prior year, we identified one key audit matter that we have not included in the current year relating to the valuation of Numeric contingent
consideration payable. The consideration crystallised during the year and was largely paid during the period.
Additionally, we refined the risk relating to contingent consideration to include the impairment assessment of GPM goodwill given the low headroom
for this cash-generating unit (CGU).
Financial statements
105
Valuation of GPM goodwill and Aalto (GPM) contingent consideration
Key audit matter
description
Following the acquisition of Aalto in 2017, the Group recognised goodwill of $55m for the CGU of Global Private
Markets, (GPM), and a corresponding contingent creditor relating to the deferred consideration. In the current year, the
goodwill attributable to the CGU remains at $55m (2018: $55m) and the fair value of the contingent creditor is $22m
(2018: $37m).
The estimation uncertainty in forecasting growth requires judgemental interpretations such as the projection of client
flows or discount rates or margin estimates used to calculate the carrying value of the CGU. The valuation of goodwill is
very sensitive to changes in this estimate.
The value of the contingent creditor and goodwill is dependent on the estimated future run rate revenues as determined
by management. Changes in the valuation of the contingent consideration and goodwill are recognised in the Group
income statement. There is a fraud risk given the risk of management bias in estimating key assumptions. Given the
level of judgement involved in deriving necessary assumptions and the sensitivities of these assumptions, the change to
valuation of GPM goodwill and Aalto (GPM) contingent consideration is deemed to be a key audit matter.
The accounting policy for the valuation of goodwill is detailed in Note 10 to the financial statements. The accounting
policy for the valuation of contingent consideration is detailed in Note 26 to the financial statements.
How the scope of our
audit responded to the
key audit matter
Our procedures included:
Assessing related controls: We obtained an understanding of the relevant controls in the contingent consideration and
goodwill valuation processes and tested the relevant controls over the valuation models.
Working with specialists: We involved our internal valuation specialists in challenging management’s assumptions used
to calculate the fair value. Our specialists assisted challenging the forecast Funds Under Management (“FUM”) flows and
performance against recent industry flows and performance, challenging the discount rate and perpetual growth
multiple applied through discussions with management based on the results of our reviews.
Substantive testing:
Valuation of Aalto (GPM) contingent consideration payable
We compared the key terms of the acquisition agreements to the valuation models. We performed a retrospective
review of the accuracy of previous forecasts where applicable. We held a series of discussions with key management of
GPM and the Group who are outside of the finance function, as well as certain Board members of the Group, and
assessed our understanding from these discussions with the modelling for consistency. We performed a comparison of
key assumptions to those applied by peers. We performed an independent sensitivity analysis to determine the impact
of reasonably foreseeable changes to the key assumptions used in the fair value models, to determine whether such
changes would result in material revaluation.
Impairment assessment of GPM goodwill
We compared the modelled Group value-in-use and the Group’s market capitalisation, assessing management’s
reconciliation between the two valuations. We examined the goodwill for the GPM CGU and assessed management’s
deal pipeline and corroborated forecasts to evidence support for deal progress where available and used market data to
challenge management’s estimates. We performed an independent sensitivity analysis to determine the impact of
reasonable foreseeable changes to assumptions used in the value in use calculations for the GPM CGU to determine
whether such changes would trigger material impairments.
Key observations
As disclosed in Note 10, the Group’s valuation of GPM indicates that no impairment charge is deemed necessary at
31 December 2019. If future results are lower than those forecast it is reasonably foreseeable that an impairment would
arise. Based on historical growth rates and other available evidence, we consider the Group’s projection of client
forecasted cash flows to be within an acceptable range although at the optimistic end of that range. Man’s sensitivity
analysis around the key assumptions is shown in Note 10.
Man Group plc Annual Report 2019
106
Independent auditor’s report to the members of Man Group plc continued
Accuracy of performance fees
Key audit matter
description
Performance fees are manually calculated as they are performed less frequently and are more complicated than
management fee calculations, increasing the relative risk of misstatement.
The performance fees require the accurate implementation of methodologies as set out in the investment
management agreements which are bespoke for each client or fund. The value of performance fees recorded in the
year is $325m (2018: $126m).
The performance fee calculation requires judgemental interpretations such as the treatment of client flows around the
crystallisation dates or in-period flows within the calculations, and the use of estimated valuations which can change
after the period-end. There is a presumed fraud risk associated to revenue. Given the complexity of the calculations
and level of judgement involved in determining if the revenue has crystallised, accuracy of performance fees is
deemed to be a key audit matter.
The accounting policy for performance fees is detailed in Note 2.
Our procedures included:
Assessing related controls: We obtained an understanding of the relevant controls in the performance fees process
and tested the relevant controls over the accuracy of performance fees.
Tests of detail: We independently agreed a sample of calculations to governing documents and source
documentation, verifying the calculation methodology and the accuracy of the inputs used in the calculation (for
example, fee rates, crystallisation dates, fund product profit and relevant benchmarks), challenging any judgements
when interpreting governing documents. For estimates subsequently finalised and invoiced after the year end, we
assessed the amounts invoiced against the accrued estimate at the year end in mid-February.
How the scope of our
audit responded to the
key audit matter
Key observations
Based on our work, performance fees are appropriately recorded.
6. Our application of materiality
6.1 Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in
evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Materiality
$16.0m (2018: $15.8m)
Basis for determining
materiality
Rationale for the
benchmark applied
5% of the two-year average adjusted profit before tax (“PBT”) (2018: 5% of the two-year average adjusted PBT)
Adjusted PBT in a key alternative performance measure that is reconciled to statutory profit before tax on page 149 of
this annual report. Adjusted PBT is a relevant benchmark as it is a key figure used by analysts in assessing the
performance of the business. It is closely correlated with the Group’s cash earnings. We have determined that a
profit-based benchmark is most appropriate for listed investment management companies and this is consistent with
benchmarks used by Man’s peers.
Performance fees are variable and can fluctuate significantly year on year. For the year ended 31 December 2019,
performance fees of $325m have been recorded in comparison to $126m in 2018. As a result, we have taken an
average of the current year and prior year adjusted profit before tax in order to create a more stable basis.
Financial statements
107
The Group audit team has developed a programme of planned visits
that has been designed so that the Senior Statutory Auditor or a senior
member of the Group audit team visits each of the locations where the
Group audit scope is focused on a rotational basis. During the current
year visits were made to New York and Switzerland. Regular
communications were also maintained with the remaining geographical
locations. Books and records for subsidiaries located within Ireland, the
Cayman Islands, Australia and the Channel Islands are maintained
within the UK and are audited by the Group audit team.
7.2 Our consideration of the control environment
Where relevant, we followed a combined approach of performing
substantive and controls testing. We took a controls reliance approach
over management and performance fees and the related balance sheet
receivables and accruals in all areas of the business except Aalto given
these controls are not as embedded in the normal course of business.
We also tested relevant controls over distribution costs, fixed
compensation, asset servicing, investment in fund product plans,
goodwill and contingent consideration and pension balances.
In the current period, the Group has changed financial reporting
systems. We have performed general IT controls testing over the
Group’s financial reporting processes and the key IT systems for
management fees, performance fees, distribution costs and
compensation. In addition, we performed tests over manual relevant
controls which complement these where needed.
7.3 Working with other auditors
The Group audit was directed and components were supervised by the
UK audit team. Referrals for audit work were only issued to the US
component team. For ongoing monitoring of the component auditor
bi-weekly calls were held during the audit to discuss progress and
provide relevant Group updates relevant to the Group audit.
All remaining audit work was performed by the UK audit team.
6.2 Performance materiality
We set performance materiality at a level lower than materiality to
reduce the probability that, in aggregate, uncorrected and undetected
misstatements exceed the materiality for the financial statements as a
whole. Group performance materiality was set at 70% of Group
materiality for the 2019 audit (2018: 70%).
When considering performance materiality we have taken into account
our strong understanding of the entity and its environment. We have
considered the reliability of the entity's internal controls over financial
reporting and were able to rely upon controls for a number of business
processes,
We also considered our past experience of the audit, which has
indicated a low number of corrected and uncorrected misstatements
identified in prior periods.
6.3 Error reporting threshold
We agreed with the Audit & Risk Committee that we would report to the
Committee all audit differences in excess of $798k (2018: $790k), as
well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds. We also report to the Audit & Risk
Committee on disclosure matters that we identified when assessing the
overall presentation of the financial statements.
7. An overview of the scope of our audit
7.1 Identification and scoping of components
We perform our global scoping assessment on an individual entity by
entity basis to determine the ‘significant components’ or specified
balances which should be subject to testing. In doing so, we perform
both a quantitative and qualitative assessment of all entities within the
consolidated Group. Our quantitative assessment is primarily based on
each entity’s PBT and revenue, however a further assessment is
performed to determine whether sufficient coverage has been obtained.
Our qualitative assessment is based on our understanding of the entities
obtained from prior years’ and current year’s events and any significant
risks or management interest associated with each entity. Specific to
our considerations is management’s strategy for the Group and we
continue to re-assess where we focus our efforts as the business
continues to evolve.
Based on that assessment, which is broadly consistent with the prior
year, we focused our Group audit scope primarily on the audit work at
eight geographical locations. This included the full audit of 22 (2018: 23)
subsidiaries across the UK, the US, Switzerland, Jersey, Japan, Ireland,
the Cayman Islands and Channel Islands. A further 10 (2018: 10)
subsidiaries across the UK, the US, Hong Kong, Jersey and Australia
were subject to an audit of specified account balances where the extent
of our testing was based on our assessment of the risks of material
misstatement and of the materiality of the Group’s operations at those
locations. All other subsidiaries were subject to analytical review
procedures.
These eight (2018: eight) geographical locations represent the principal
business units and account for 99% (2018: 99%) of the Group’s total
assets, 99% (2018: 99%) of the Group’s revenue and 97% (2018: 99%)
of the Group’s profit before tax on an absolute basis. They were also
selected to provide an appropriate basis for undertaking audit work to
address the risks of material misstatement identified above. Our audit
work at the 32 (2018: 33) subsidiaries was executed at levels of
materiality applicable to each individual entity which were lower than
Group materiality and ranged from $0.1m to $10.4m (2018: $0.2m to
$10.2m).
Man Group plc Annual Report 2019
108
Independent auditor’s report to the members of Man Group plc continued
In this context, matters that we are specifically required to report to you
as uncorrected material misstatements of the other information include
where we conclude that:
• Fair, balanced and understandable – the statement given by the
directors that they consider the annual report and financial
statements taken as a whole is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Group’s position and performance, business model and strategy,
is materially inconsistent with our knowledge obtained in the audit; or
• Audit & Risk Committee reporting – the section describing the
work of the Audit & Risk Committee does not appropriately address
matters communicated by us to the Audit & Risk Committee; or
• Directors’ statement of compliance with the UK Corporate
Governance Code – the parts of the directors’ statement required
under the Listing Rules relating to the company’s compliance with
the UK Corporate Governance Code containing provisions specified
for review by the auditor in accordance with Listing Rule 9.8.10R (2)
do not properly disclose a departure from a relevant provision of the
UK Corporate Governance Code.
We have nothing to report in respect of these matters.
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the
directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view, and for such
internal controls as the directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group’s ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
10. Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
Details of the extent to which the audit was considered capable of
detecting irregularities, including fraud and non-compliance with laws
and regulations are set out below.
A further description of our responsibilities for the audit of the financial
statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor’s report.
8. Other information
The directors are responsible for the other information. The other
information comprises the information included in the annual report,
other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other
information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears
to be materially misstated.
If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of
the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information,
we are required to report that fact.
Financial statements
109
11.2 Audit response to risks identified
As a result of performing the above, we identified valuation of Aalto
(GPM) contingent consideration and GPM goodwill as key audit matters
related to the potential risk of fraud.
The key audit matters section of our report explains the matters in more
detail and also describes the specific procedures we performed in
response to those key audit matters. In addition to the above, our
procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to
supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect on
the financial statements;
• enquiring of management, the Audit & Risk Committee and in-house
and external legal counsel concerning actual and potential litigation
and claims;
• performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud;
• reading minutes of meetings of those charged with governance,
reviewing internal audit reports and reviewing correspondence with
HMRC and FCA;
• in addressing the risk of fraud in possible contingent liabilities, we
held meetings with external legal counsel; and
• in addressing the risk of fraud through management override of
controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making
accounting estimates are indicative of a potential bias; and evaluating
the business rationale of any significant transactions that are unusual
or outside the normal course of business.
We also communicated relevant identified laws and regulations and
potential fraud risks to all engagement team members including internal
specialists and significant component audit teams, and remained alert
to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by our
engagement letter
In our opinion the part of the directors’ remuneration report to be
audited has been properly prepared in accordance with the provisions
of UK Companies Act 2006 as if that Act had applied to the parent
company.
11. Extent to which the audit was considered
capable of detecting irregularities, including
fraud
We identify and assess the risks of material misstatement of the financial
statements, whether due to fraud or error, and then design and perform
audit procedures responsive to those risks, including obtaining audit
evidence that is sufficient and appropriate to provide a basis for our
opinion.
11.1 Identifying and assessing potential risks related to
irregularities
In identifying and assessing risks of material misstatement in respect of
irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
• the nature of the industry and sector, control environment and
business performance including the design of the Group’s
remuneration policies, key drivers for directors’ remuneration, bonus
levels and performance targets;
• results of our enquiries of management, internal audit and the Audit &
Risk Committee about their own identification and assessment of the
risks of irregularities;
• any matters we identified having obtained and reviewed the Group’s
documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and
whether they were aware of any instances of non-compliance;
– detecting and responding to the risks of fraud and whether they
have knowledge of any actual, suspected or alleged fraud;
– the internal controls established to mitigate risks of fraud or non-
compliance with laws and regulations
• the matters discussed among the audit engagement team including
significant component audit teams and involving relevant internal
specialists, including tax, valuations, pensions, IT, and industry
specialists regarding how and where fraud might occur in the
financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and
incentives that may exist within the organisation for fraud and identified
the greatest potential for fraud in the following areas: valuation of Aalto
(GPM) contingent consideration and GPM goodwill, accuracy of
performance fees and the possible recognition of contingent liabilities.
In common with all audits under ISAs (UK), we are also required to
perform specific procedures to respond to the risk of management
override.
We also obtained an understanding of the legal and regulatory
framework that the Group operates in, focusing on provisions of those
laws and regulations that had a direct effect on the determination of
material amounts and disclosures in the financial statements. The key
laws and regulations we considered in this context include Jersey Law
1991, Listing Rules and Disclosure Guidance and Transparency Rules,
pensions legislation, tax legislation and matters regulated by the
Financial Conduct Authority. Compliance with regulatory capital
requirements is fundamental to the Group’s ability to continue as a
going concern.
In addition, we considered provisions of other laws and regulations that
do not have a direct effect on the financial statements but compliance
with which may be fundamental to the Group’s ability to operate or to
avoid a material penalty. These included the Group’s solvency
requirements.
Man Group plc Annual Report 2019
110
Independent auditor’s report to the members of Man Group plc continued
13. Matters on which we are required to report by
exception
13.1 Adequacy of explanations received and accounting records
Under Jersey Law 1991 we are required to report to you if, in our
opinion:
• we have not received all the information and explanations we require
for our audit; or
• proper accounting records have not been kept by the parent
company, or proper returns adequate for our audit have not been
received from branches not visited by us; or
• the financial statements are not in agreement with the accounting
records and returns.
We have nothing to report in respect of these matters.
14. Other matters
14.1 Auditor tenure
Following the recommendation of the Audit & Risk Committee, we were
appointed by the Audit and Risk Committee on 19 March 2014 to audit
the financial statements for the year ending 31 December 2014 and
subsequent financial periods. The period of total uninterrupted
engagement including previous renewals and reappointments of the
firm is six years, covering the years ending 31 December 2014 to 31
December 2019.
14.2 Consistency of the audit report with the additional report to
the Audit & Risk Committee
Our audit opinion is consistent with the additional report to the
Audit & Risk Committee we are required to provide in accordance
with ISAs (UK).
15. Use of our report
This report is made solely to the Group’s members, as a body, in
accordance with Article 113A of the Companies (Jersey) Law 1991. Our
audit work has been undertaken so that we might state to the parent
company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the parent company and the parent company’s members as
a body, for our audit work, for this report, or for the opinions we have
formed.
David Barnes (ACA)
For and on behalf of Deloitte LLP
Recognised Auditor
Jersey
28 February 2020
Group income statement
111
Financial statements
$m
Revenue:
Gross management and other fees
Performance fees
Income or gains/(losses) on investments and other financial instruments
Third-party share of (gains)/losses relating to interests in consolidated funds
Revaluation of contingent consideration
Gain on sale of investment in Nephila
Distribution costs
Asset servicing costs
Amortisation of acquired intangible assets
Impairment of acquired intangible assets
Compensation
Other costs
Sub-lease rental income
Share of post-tax profit of associates
Finance expense
Finance income
Profit before tax
Tax expense
Statutory profit attributable to owners of the Parent Company
Earnings per share:
Basic (cents)
Diluted (cents)
Group statement of comprehensive income
$m
Statutory profit attributable to owners of the Parent Company
Other comprehensive income/(expense):
Remeasurements of post-employment benefit obligations
Current tax credited on pension scheme
Deferred tax debited on pension scheme
Items that will not be reclassified to profit or loss
Cash flow hedges:
Valuation losses taken to equity
Transfer to Group income statement
Deferred tax (debited)/credited on cash flow hedge movements
Net investment hedge
Foreign currency translation
Items that may be reclassified to profit or loss
Other comprehensive income/(expense) (net of tax)
Total comprehensive income attributable to owners of the Parent Company
Year ended
31 December
2019
Year ended
31 December
2018
Note
2
2
13.1
13.2
26
17
3
3
10
10
4
5
19
17
6
6
7
8
788
325
1,113
35
(18)
37
1
(38)
(55)
(78)
(5)
(476)
(189)
14
–
(42)
8
307
(22)
285
18.9
18.4
834
126
960
(10)
7
31
113
(51)
(51)
(83)
–
(437)
(175)
–
7
(40)
7
278
(5)
273
17.3
17.0
Year ended
31 December
2019
Year ended
31 December
2018
285
273
(10)
3
(2)
(9)
–
12
(2)
–
1
11
2
287
15
4
(6)
13
(16)
(5)
4
4
(11)
(24)
(11)
262
Man Group plc Annual Report 2019
112
Group balance sheet
$m
Assets
Cash and cash equivalents
Fee and other receivables
Investments in fund products and other investments
Pension asset
Right-of-use lease assets
Leasehold improvements and equipment
Goodwill and acquired intangibles
Other intangibles
Deferred tax assets
Non-current assets held for sale
Total assets
Liabilities
Trade and other payables
Provisions
Current tax liabilities
Third-party interest in consolidated funds
Lease liability
Borrowings
Deferred tax liabilities
Total liabilities
Net assets
Equity
Capital and reserves attributable to owners of the Parent Company
At
31 December
2019
At
31 December
20181
Note
12
14
13
22
19
18
10
11
7
13
15
16
7
13
19
12
7
281
426
776
16
209
40
854
31
120
2,753
–
2,753
559
8
14
213
307
–
28
1,129
1,624
370
307
770
24
–
46
938
26
93
2,574
39
2,613
701
26
10
100
–
150
33
1,020
1,593
1,624
1,593
Note:
1 The Group has applied IFRS 16 for the first time from 1 January 2019, using the cumulative catch-up approach (see further details in Note 1). Comparative information is not restated and the
effect of transition is recognised in retained earnings at that date.
The financial statements were approved by the Board of Directors and authorised for issue on 28 February 2020 and signed on its behalf by:
Luke Ellis
Chief Executive Officer
Mark Jones
Chief Financial Officer
Group cash flow statement
113
Financial statements
$m
Cash flows from operating activities
Statutory profit
Adjustments for non-cash items:
Income tax expense
Net finance expense
Share of post-tax profit of associates
Gain on sale of investment in Nephila
Revaluation of contingent consideration
Depreciation of leasehold improvements and equipment
Depreciation of right-of-use lease assets
Amortisation of acquired intangible assets
Impairment of acquired intangible assets
Amortisation of other intangibles
Share-based payment charge
Fund product based payment charge
Unrealised foreign exchange movements on lease liabilities and associated deferred tax
Other non-cash movements
Return of Reservoir Trust pension plan assets on wind-up
Changes in working capital:
(Increase)/decrease in receivables
Decrease/(increase) in other financial assets1
Increase/(decrease) in payables
Cash generated from operations
Interest paid
Unwind of lease liability discount2
Unwind of discount in relation to acquisitions3
Income tax paid
Cash flows from operating activities
Cash flows from investing activities
Purchase of leasehold improvements and equipment
Purchase of other intangible assets
Payment of contingent consideration in relation to acquisitions3
Acquisition of business and other acquired intangibles
Interest received
Proceeds from sale of Nephila
Dividends received from Nephila
Cash flows from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Proceeds from sale of Treasury and Employee Trust shares in respect of Sharesave
Purchase of own shares by the Employee Trust and Partnerships
Repayments of principal lease liability2
Payment of contingent consideration in excess of projected fair value recognised at acquisition3
Share repurchase programme (including costs)
Repayment of Tier 2 notes
Payment of capitalised upfront costs on revolving credit facility
Dividends paid to Company shareholders
Cash flows from financing activities
Net decrease in cash
Cash at the beginning of the year
Effect of foreign exchange movements
Cash at year end4
Year ended
31 December
2019
Year ended
31 December
2018
Note
285
273
7
6
17
17
26
18
19
10
10
11
4
4
22
17
12
9
12
22
34
–
(1)
(37)
15
20
78
5
12
28
50
10
12
–
533
(122)
170
5
586
(11)
(14)
(80)
(43)
438
(9)
(14)
(78)
–
8
1
–
(92)
–
2
(11)
(20)
(11)
(92)
(150)
(1)
(152)
(435)
(89)
370
–
281
5
33
(7)
(113)
(31)
14
–
83
–
10
25
41
–
5
19
357
354
(203)
(140)
368
(11)
–
–
(35)
322
(16)
(15)
(22)
(3)
5
140
8
97
6
–
(32)
–
–
(211)
–
–
(189)
(426)
(7)
379
(2)
370
Notes:
1 Includes $35 million of restricted net cash inflows (2018: $3 million) relating to consolidated fund entities (Note 13.2).
2 As required by IFRS 16 from 1 January 2019 (Note 1 and Note 19).
3 Relates to the final Numeric contingent consideration payment in September 2019 (Note 26) as required by IAS 7, whereby the total consideration paid is greater than the projected fair value of
contingent consideration recognised on acquisition, the unwind of discount over the life of the earn-out should be recognised within operating activities and any residual payment in excess of this
recognised within financing activities.
Includes $61 million (2018: $26 million) of restricted cash relating to consolidated fund entities (Note 13.2).
4
Man Group plc Annual Report 2019
114
Group statement of changes in equity
$m
Share capital and capital reserves
Revaluation reserves and retained earnings
Capital and reserves attributable to owners of the Parent Company
Share capital and capital reserves
Year ended
31 December
2019
Year ended
31 December
2018
(1,635)
3,259
1,624
1,226
367
1,593
$m
At 1 January 2019
Purchase and cancellation of own shares
Scheme of arrangement (Note 1):
– Cancellation of shares in former holding company
–
Capital reduction (Note 1)
At 31 December 2019
Issue of shares in new holding company
Revaluation reserves and retained earnings
$m
At 1 January 2019
Adjustment for adoption of IFRS 16 (Note 1)
At 1 January 2019
Statutory profit
Other comprehensive income/(expense):
Revaluation of defined benefit pension scheme
Current tax credited on pension scheme
Deferred tax debited on pension scheme
Transfer cash flow hedge to Group income statement1
Deferred tax debited on cash flow hedge movements
Currency translation difference
Share-based payment charge
Scheme of arrangement – capital reduction (Note 1)
Deferred tax credited on share-based payments
Purchase of own shares by the Employee Trust
Disposal of own shares by the Employee Trust
Share repurchases
Transfer to Treasury shares
Transfer from Treasury shares
Cancellation of Treasury shares
Disposal of Treasury shares in respect of Sharesave
Dividends
At 31 December 2019
Note:
1 Details of the Group’s hedging arrangements are provided in Note 12.
Share
capital
Share
premium
account
Capital
redemption
reserve
Merger
reserve
Reorganisation
reserve
55
(2)
(53)
53
–
53
32
–
(32)
2,861
(2,861)
–
8
2
(10)
–
–
–
499
–
(499)
–
–
–
632
–
(632)
(1,688)
–
(1,688)
Profit
and loss
account
Own shares
held by
Employee Trust
Treasury
shares
Cumulative
translation
adjustment
Cash flow
hedge
reserve1
499
(24)
475
285
(10)
3
(2)
–
–
–
28
2,861
1
–
(15)
(100)
92
(4)
(140)
–
(152)
3,322
(62)
–
(62)
–
–
–
–
–
–
–
–
–
–
(11)
15
–
–
(8)
–
–
–
(66)
(114)
–
(114)
–
–
–
–
–
–
–
–
–
–
–
–
–
(92)
12
140
2
–
(52)
54
–
54
–
–
–
–
–
–
1
–
–
–
–
–
–
–
–
–
–
–
55
(10)
–
(10)
–
–
–
–
12
(2)
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
1,226
–
(1,226)
1,226
(2,861)
(1,635)
Total
367
(24)
343
285
(10)
3
(2)
12
(2)
1
28
2,861
1
(11)
–
(100)
–
–
–
2
(152)
3,259
The proposed final dividend would reduce shareholders’ equity by $76 million (2018: $83 million) subsequent to the balance sheet date (Note 9).
Further details of the Group’s share capital and reserves are included in Note 21.
Financial statements
Group statement of changes in equity continued
115
Share capital and capital reserves
$m
At 1 January 2018
Purchase and cancellation of own shares
Issue of ordinary shares: Partnership Plans and Sharesave
At 31 December 2018
Revaluation reserves and retained earnings
$m
At 1 January 2018
Statutory profit
Other comprehensive expense:
Revaluation of defined benefit pension scheme
Current tax credited on pension scheme
Deferred tax debited on pension scheme
Fair value losses on cash flow hedges1
Transfer cash flow hedge to Group income statement
Deferred tax credited on cash flow hedge
movements
Currency translation difference
Share-based payments charge
Deferred tax debited on share-based payments
Purchase of own shares by the Employee Trust
Disposal of own shares by the Employee Trust
Share repurchases
Transfer to Treasury shares
Settlement of Aalto year one contingent consideration2
Dividends
At 31 December 2018
Share
capital
56
(1)
–
55
Share
premium
account
Capital
redemption
reserve
Merger
reserve
Reorganisation
reserve
26
–
6
32
7
1
–
8
499
–
–
499
632
–
–
632
Total
1,220
–
6
1,226
Profit
and loss
account
478
273
Own shares
held by
Employee
Trust
(50)
–
15
4
(6)
–
–
–
–
19
(1)
–
(14)
(201)
121
–
(189)
499
–
–
–
–
–
–
–
–
–
(26)
14
–
–
–
–
(62)
Treasury
shares
Cumulative
translation
adjustment
Cash flow
hedge
reserve
Available-
for-sale
reserve
–
–
–
–
–
–
–
–
–
–
–
–
–
(121)
7
–
(114)
61
–
–
–
–
–
–
–
(7)
–
–
–
–
–
–
–
–
54
7
–
–
–
–
(16)
(5)
4
–
–
–
–
–
–
–
–
–
(10)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
496
273
15
4
(6)
(16)
(5)
4
(7)
19
(1)
(26)
–
(201)
–
7
(189)
367
Notes:
1 Details of the Group’s hedging arrangements are provided in Note 12.
2 A portion of the Aalto year one contingent consideration payment was settled in Treasury Shares (Note 26).
Man Group plc Annual Report 2019
116
Notes to the Group financial statements
1. Basis of preparation
Accounting policies
The audited consolidated financial information has been prepared in accordance with International Financial Reporting Standards (IFRSs) and
interpretations (IFRICs) as adopted by the EU. Man’s principal accounting policies have been consistently applied across the Group in the
preparation of the financial statements. Accounting policies are included in the relevant sections, and significant policies are outlined on page 117.
The impact, if any, of new accounting standards and amendments applicable for the year ended 31 December 2019 and accounting standards that
are not yet effective are detailed on pages 117 to 118.
Consolidated group and presentation currency
The consolidated group is Man Group plc (the Company) and its subsidiaries (together the Group or Man). 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. Man’s presentation currency is United States dollars (USD).
The consolidated financial information contained within these financial statements incorporates the results, cash flows and financial position of the
Company and its subsidiaries (Note 29) for the year to 31 December 2019. Subsidiaries are entities controlled by Man (including structured entities,
as defined by IFRS 12 ‘Disclosure of Interests in Other Entities’, see Note 13.4 for further details), and are consolidated from the date on which
control is transferred to Man until the date that control ceases. Control exists when Man has 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 between Group entities
are eliminated on consolidation.
Business combinations (acquisitions) are accounted for using the acquisition method. The acquisition date is the date on which Man effectively
obtains control of the acquiree. The cost of an acquisition is measured as the fair value at the acquisition date of assets transferred, liabilities
incurred and equity instruments issued by the Group. The fair value of an acquisition is calculated at the acquisition date by recognising the
acquiree’s identifiable assets and liabilities at their fair values at that date, and costs relating to acquisitions are recognised in the Group income
statement as incurred. Any contingent consideration is recognised at fair value at the acquisition date, with any subsequent changes to the fair value
recognised in the Group income statement.
Man’s relationship with independent fund entities
Man acts as the investment manager/advisor to fund entities. Man assesses such relationships on an ongoing basis to determine whether each fund
entity is controlled by the Group and therefore consolidated into the Group’s results. Having considered all significant aspects of Man’s relationships
with fund entities, the directors are of the opinion that, although Man manages the assets of certain fund entities, where Man does not hold an
investment in the fund entity, or receive the returns on the fund entity via a total return swap or sale and repurchase arrangement, the characteristics
of control are not met. For most fund entities: the existence of independent boards of directors at the fund entities; rights which allow for the removal
of the investment manager/advisor; the influence of investors; limited exposure to variable returns; and the arm’s length nature of Man’s contracts
with the fund entities, indicate that Man does not control the fund entities and their associated assets, liabilities and results should not be
consolidated into the Group financial statements. Assessment of the control characteristics for all relationships with fund entities led to the
consolidation of 15 funds for the year ended 31 December 2019 (2018: 13), as detailed in Note 13. An understanding of the aggregate funds under
management (FUM) and the fees earned from fund entities is relevant to an understanding of Man’s results and earnings sustainability, and this
information is provided in the Chief Financial Officer’s review on pages 26 to 30.
Judgemental areas and accounting estimates
The most significant area of judgement is whether the Group controls certain funds through its exposure to fund products via either direct
investments, total return swaps or sale and repurchase arrangements, and is required to consolidate them (Note 13.2). Our key judgements on this
are outlined above within ‘Man’s relationship with independent fund entities’.
Furthermore, the key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date that may have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, include the
determination of fair values for contingent consideration in relation to the Aalto acquisition (Note 26) and the valuation of goodwill and acquired
intangibles for CGUs with lower levels of headroom (Note 10). The key assumptions and range of possible outcomes are discussed in the relevant
notes.
These judgements and estimates have been an area of focus for the Group Board, and in particular the Audit and Risk Committee, during the year.
The report of the Chairman of the Audit and Risk Committee discusses the involvement of the Committee in this evaluation on page 72.
Going concern
Man’s business activity is discussed on pages 1 to 55, together with the significant risk factors (pages 37 to 39). Man’s liquidity and capital positions
are set out in Notes 12 and 21 respectively. The directors monitor Man’s capital and liquidity positions and forecasts throughout the year, and in
addition they have approved a budget, medium-term financial plan, and a capital and liquidity plan, which cover the foreseeable future and include
rigorous analysis of stressed capital and liquidity scenarios. Man’s business typically has a good conversion of profits into cash flows which helps
protect the business in stressed scenarios. The directors have concluded that there is a reasonable expectation that Man has adequate resources to
continue in operational existence for the foreseeable future. Accordingly, the Group financial statements have been prepared on a going concern
basis using the historical cost convention, except for the measurement at fair value of certain financial instruments that are held at fair value through
profit or loss. The directors have also made a longer-term viability statement, as set out on page 35.
Corporate reorganisation
In May 2019 the Group adjusted its corporate structure as described in the Chairman’s statement on page 5. Man Group plc was incorporated in
Jersey on 26 October 2018 and became the new listed holding company of the Group on 28 May 2019 via a court-approved scheme of
arrangement under Part 26 of the UK Companies Act 2006, with the former holding company being renamed Man Group Limited. Under the
scheme of arrangement, shares in the former holding company of the Group were cancelled and the same number of new ordinary shares were
issued to the new holding company in consideration for the allotment to shareholders of one ordinary share of 3 3/7 US cents in the new holding
company for each ordinary share of 3 3/7 US cents they held in the former holding company. On 28 May 2019, Man Group plc effected a reduction
of its share capital by cancelling its share premium and recognising an equivalent increase in the profit and loss account in reserves.
1. Basis of preparation continued
Financial reporting controls
Details of the Group’s systems of internal control are included on page 35.
Significant accounting policies schedule
Policy
Revenue
Distribution costs and asset servicing
Tax
Goodwill and acquired intangibles
Investments in fund products and other investments
Leases
Deferred compensation arrangements
Pension
Financial statements
117
Note
Page
2
3
7
10
13
19
20
22
118
119
121-122
123-125
127-129
132
133-134
136-139
Impact of new accounting standards
A number of new or amendments to existing accounting standards and interpretations have been issued by the International Accounting Standards
Board (IASB).
The following accounting standards relevant to the Group’s operations were effective for the first time in the year to 31 December 2019:
• IFRS 16 Leases
IFRS 16 is effective for annual periods beginning on or after 1 January 2019 and replaces IAS 17 Leases and related interpretations. This introduces
a comprehensive model for the identification of lease arrangements and accounting treatment for both lessors and lessees, which distinguishes
leases and service contracts on the basis of whether an identified asset is controlled by a customer and removes the distinction between operating
and finance leases for lessees. There is substantially no change to the accounting requirements for lessors.
Man's lease arrangements relate to business premises property leases. For arrangements where Man is 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 Man has the right to use the asset, usually the lease
commencement date, except for short-term leases and low value assets. The lease liability is measured at the present value of future lease
payments, discounted using the Group’s incremental borrowing rate. The ROU lease asset is initially measured at cost, which is equivalent to the
lease liability. Lease incentives such as rent-free periods are recognised as part of the measurement of ROU lease assets and lease liabilities. The
ROU lease asset is assessed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable and
depreciated on a straight-line basis over the shorter of the lease term or the useful life of the asset, adjusted for any remeasurements of the lease
liability. The lease liability is subsequently adjusted for lease payments and the interest unwind, as well as the impact of any subsequent lease
modifications.
Man has taken advantage of the IFRS 16 exemption for low value lease assets and leases with a lease term of one year or less, recognising the
lease payments on a straight-line basis over the lease term within other costs in the Group income statement.
Where Man is acting as a lessor, the Group has determined that these arrangements are classified as operating leases in accordance with IFRS 16.
Sub-lease rental income is recognised on a straight line basis over the life of the lease in the Group income statement.
Transition considerations
IFRS 16 has been adopted using the cumulative catch-up approach as set out in IFRS 16.C8(b)(i) where the cumulative effect of initial application is
recognised in retained earnings at 1 January 2019, without restatement of the prior year comparatives. When applying the cumulative catch-up
approach, the Group has measured the ROU lease assets as if it had applied IFRS 16 since the lease commencement date using its incremental
borrowing rate at transition date. The Group has applied the practical expedients under IFRS 16 to: (1) reclassify onerous lease balances of $19
million at 31 December 2018 against the ROU lease assets as an alternative to performing an impairment review at transition date; (2) apply a single
discount rate to leases with reasonably similar characteristics; and (3) use hindsight in determining lease terms.
The impact on transition is summarised below:
$m
Deferred rent and lease incentives1
Onerous lease provisions (Note 16)
Right-of-use lease assets
Right-of-use lease assets – impairment (practical expedient)
Deferred tax asset (Note 7)
Lease liability
Retained earnings
As presented at
31 December
2018
Adjustment for
adoption of
IFRS 16
1 January
2019
(40)
(19)
–
–
–
–
(499)
40
19
247
(19)
5
(316)
24
–
–
247
(19)
5
(316)
(475)
Note:
1
Included within trade and other payables at 31 December 2018. In addition, $17 million of deferred rent receivable balances, which were previously included net within trade and other payables,
have been reclassified at 1 January 2019 to fee and other receivables.
Man Group plc Annual Report 2019
118
Notes to the Group financial statements continued
1. Basis of preparation continued
As a result of applying IFRS 16, the Group holds an ROU lease asset of $209 million and lease liability of $307 million on the Group balance sheet as
at 31 December 2019, of which $166 million and $257 million respectively relate to our Riverbank House premises in London.
Depreciation of ROU lease assets of $20 million (Note 5) and interest costs of $14 million (Note 6), as well as sub-lease rental income of $14 million,
have been recognised in the Group income statement for the year to 31 December 2019. If the leases had continued to be recognised under IAS
17, we would have recognised occupancy costs of around $15 million for the year ended 31 December 2019. The higher comparable net expense
of $5 million for the year ending 31 December 2019 is a result of the front-loading of the charge in the earlier years of the lease in accordance with
the IFRS 16 recognition profile. The reduction in reserves at 1 January 2019 will be offset in future years by a lower Group income statement charge
over the remaining life of the leases, as the total charge over the life of each lease is the same as under the previous IAS 17 requirements.
The lease liability recognised at 1 January 2019 can be reconciled to the operating lease commitments as disclosed at 31 December 2018 as
follows:
$m
Operating lease commitments at 31 December 2018 (excluding sub-lease arrangements) (Note 19)
Exclude service charges, short-term and low value leases not in scope for IFRS 16
Exclude payments made in advance
Adjust for extension options reasonably certain to be exercised
Add the effect of discounting at the Group’s incremental borrowing rate
Lease liability at 1 January 2019
442
(2)
(6)
4
(122)
316
In addition to IFRS 16, the following standards relevant to the Group’s operations also became effective in the year to 31 December 2019:
• IFRIC 23 Uncertainty over Income Tax Treatments and the amendments to IAS 19 Employee Benefits: these do not have a significant impact on
the Group’s reported results.
• Amendments included in the Annual Improvements to IFRS Standards 2015-2017 Cycle including amendments to IFRS 3 Business
Combinations, IAS 12 Income Taxes and IAS 23 Borrowing Costs: these amendments do not have a significant impact on the Group’s reported
results.
The following standards are relevant to the Group’s operations and have been issued by the IASB but are not yet mandatory and have not been
early adopted:
• Amendments to IFRS 3 Business Combinations (applied prospectively to all business combinations and asset acquisitions for which the
acquisition date is on or after the first annual period beginning on or after 1 January 2020).
• Amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (applied
prospectively for annual periods beginning on or after 1 January 2020).
• Amendments to References to the Conceptual Framework in IFRS Standards (effective for annual periods beginning on or after 1 January 2020).
No other standards or interpretations issued and not yet effective are expected to have an impact on the Group’s financial statements.
2. Revenue
Fee income is Man’s primary source of revenue, which is derived from the investment management agreements that are in place with the fund
entities.
Management fees net of rebates, which include all non-performance related fees, are recognised in the year in which contractual investment
management services are provided and do not include any other performance obligations. Fees are generally based on an agreed percentage of net
asset value (NAV) or FUM and are typically charged in arrears and receivable within one month.
Performance fees net of rebates relate to the performance of the funds 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 a fund investor. Until the performance period ends, market movements could significantly move the NAV of the fund
products. For AHL, GLG, FRM and GPM strategies, Man 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, at which point a fund investor’s investment surpasses the high water mark. Numeric performance
fees are earned only when performance is in excess of a predetermined strategy benchmark (positive alpha), with performance fees being generated
for each strategy either based on achieving positive alpha (which resets at a predetermined interval, i.e. every one to three years) or, in the case of
alternatives strategies, exceeding high water mark. 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 crystallisation date.
Rebates relate to repayments of management and performance fees charged, typically to institutional investors, and are presented net within gross
management and other fees and performance fees in the Group income statement.
Analysis of FUM, margins and performance is provided in the Chief Financial Officer’s review on pages 26 to 29.
Financial statements
119
3. Distribution costs and asset servicing
Distribution costs are paid to external intermediaries for marketing and investor servicing, largely in relation to retail investors. Distribution costs are
variable with FUM and the associated management fee revenue. Distribution costs are expensed over the period in which the service is provided.
Distribution costs have decreased from $51 million in 2018 to $38 million in 2019, despite broadly stable average FUM, largely as a result of the
continued mix shift towards institutional assets.
Asset servicing includes custodial, valuation, fund accounting, registrar, research and administration functions performed by third parties under
contract to Man, on behalf of the funds, and is recognised in the period in which the service is provided. The costs of these services vary based on
transaction volumes, the number of funds, and fund NAVs.
4. Compensation
$m
Salaries
Variable cash compensation
Share-based payment charge
Fund product based payment charge
Social security costs
Pension costs
Restructuring costs (adjusting item per page 149)
Total compensation costs
Year ended
31 December
2019
Year ended
31 December
2018
163
187
28
50
36
13
(1)
476
153
175
25
41
32
10
1
437
Compensation is the Group’s largest cost and an important component of Man’s ability to retain and attract talent. In the short term, the variable
component of compensation adjusts with revenues and profitability.
Total compensation costs, excluding restructuring, have increased by 9% compared to 2018, largely due to the increase in performance fee
revenues year on year, as reflected in increased variable cash compensation. The compensation ratio, as outlined on page 151, has decreased to
43% from 48% in 2018 as a result of the higher level of performance fee revenue.
Salaries have increased from the prior year largely as a result of the 3% increase in average headcount, reflecting the full year impact of investment in
people within the business during 2018, together with a less favourable hedged sterling (GBP) to USD rate in 2019 (1.36) compared to the hedged
rate in 2018 (1.29), which had a $6 million impact compared to the prior year.
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. The accounting for share-based and fund product based compensation arrangements is detailed in
Note 20.
Pension costs relate to Man’s defined contribution and defined benefit plans (Note 22). A credit of $2 million arising due to a change in the
conversion factors of the Swiss defined benefit pension plan has been classified as an adjusting item within restructuring costs.
Average headcount
The table below provides average headcount by function, including directors, employees, partners and contractors:
Investment management
Sales and marketing
Support functions
Average headcount
Year ended
31 December
20191
Year ended
31 December
2018
375
195
843
1,413
490
186
700
1,376
Note:
1 Technology staff supporting the investment management side of the Group’s business have been included within support functions in the year ended 31 December 2019. Previously these staff
were included within the investment management headcount. All staff performing technology-based roles are now included within support functions.
Man Group plc Annual Report 2019
120
Notes to the Group financial statements continued
5. Other costs
$m
Occupancy
Technology and communications
Temporary staff, recruitment, consultancy and managed services
Audit, tax, legal and other professional fees
Benefits
Travel and entertainment
Insurance
Marketing and sponsorship
Other cash costs, including irrecoverable VAT
Restructuring (adjusting item per page 149)
Total other costs before depreciation and amortisation
Depreciation of leasehold property and equipment, and amortisation of other intangibles
Depreciation of ROU lease assets1 (Note 19)
Total other costs
Year ended
31 December
2019
Year ended
31 December
2018
13
26
21
26
15
13
3
5
13
7
142
27
20
189
27
26
24
21
14
13
4
6
11
5
151
24
–
175
Note:
1 As IFRS 16 was adopted on 1 January 2019 and not applied retrospectively, there is no comparative for 2018 (see Note 1 for further details).
Other costs, before depreciation and amortisation, have decreased from $151 million to $142 million in 2019, largely due to the adoption of IFRS 16
in 2019 (Note 1), whereby the net lease costs of around $15 million previously recognised within occupancy costs are reflected in depreciation (of
the ROU lease assets), finance expense (unwind of the discounted lease liability) and sub-lease rental income in the Group income statement from 1
January 2019 (see Note 1 for further details). This decrease is partially offset by a $4 million impact from the less favourable hedged GBP to USD
rate in 2019.
Other restructuring costs of $7 million in 2019 relate to professional fees incurred in relation to the Group’s corporate reorganisation (2018: $3
million). In 2018 we also included a reassessment of our onerous property lease provision of $2 million (prior to the 2019 adoption of IFRS 16 as
outlined in Note 1).
Depreciation and amortisation has increased by $23 million in 2019 compared to 2018, driven by $20 million due to the adoption of IFRS 16 (Note 1)
as well as increased investment in software development projects across our operating platforms in recent years.
Auditor’s remuneration, including advisory and professional services, is disclosed in the Corporate Governance section on page 74.
6. Finance expense and finance income
$m
Finance expense:
Interest payable on borrowings (Note 12)
Revolving credit facility costs and other (Note 12)
Unwind of lease liability discount1 (Note 1)
Unwind of contingent consideration discount (adjusting item per page 149)
Total finance expense
Finance income:
Interest on cash deposits
Total finance income
Year ended
31 December
2019
Year ended
31 December
2018
(6)
(4)
(14)
(18)
(42)
8
8
(9)
(3)
–
(28)
(40)
7
7
Note:
1 As IFRS 16 was adopted on 1 January 2019 and not applied retrospectively, there is no comparative for 2018 (see Note 1 for further details).
The unwind of lease liability discount relates to leases accounted for under IFRS 16. Interest payable on borrowings has decreased by $3 million in
2019 due to the repayment of the Group’s Tier 2 notes in September 2019 (see Note 12 for further details).
7. Tax
$m
Analysis of tax expense:
Current tax:
UK corporation tax on profits
Foreign tax
Adjustments to tax charge in respect of previous years
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Recognition of US deferred tax assets (adjusting item per page 150)
Total deferred tax
Total tax expense
Financial statements
121
Year ended
31 December
2019
Year ended
31 December
2018
46
4
2
52
(3)
(27)
(30)
22
29
5
1
35
(10)
(20)
(30)
5
Man is a global business and therefore operates 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 Man operates 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 majority of the Group’s profits in the period were earned in the
UK, Switzerland and the US. The Group’s US federal tax rate is effectively nil as a result of accumulated US deferred tax assets, as detailed on
page 122.
The current effective tax rate of 7% (2018: 2%) differs from the applicable underlying statutory tax rates principally as a result of the incremental
recognition of the US deferred tax assets of $27 million (2018: $20 million). The effective tax rate is otherwise consistent with this earnings profile. As
the US deferred tax assets are recognised in full at 31 December 2019, the Group’s future statutory tax rate is expected to be more aligned with the
rate applicable to the mix of profits by jurisdiction.
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. The
principal factors which may influence our future tax rate are changes in tax regulation in the territories in which the Group operates, the mix of
income and expenses earned and incurred by jurisdiction and the timing of the recognition of available deferred tax assets.
The current tax liabilities of $14 million (2018: $10 million) on the Group balance sheet, comprise gross current tax liabilities of $16 million (2018:
$15 million) net of current tax assets of $2 million (2018: $5 million).
Man’s tax expense is lower than the amount that would arise using the theoretical tax rate applicable to the profits of the Group as follows:
$m
Profit before tax
Theoretical tax expense at UK rate: 19% (2018: 19%)
Effect of:
Overseas tax rates compared to UK
Adjustments to tax charge in respect of previous periods
Disposal of investment in Nephila (Note 17)
Recognition of US deferred tax asset
Other
Tax expense
Year ended
31 December
2019
Year ended
31 December
2018
307
58
(10)
2
–
(27)
(1)
22
278
53
(8)
1
(22)
(20)
1
5
The effect of overseas tax rates compared to the UK includes the impact of the 0% effective federal tax rate of our US business.
Movements in deferred tax are as follows:
$m
Deferred tax liability
At 1 January
Credit to the Group income statement
Deferred tax liability at 31 December
Deferred tax asset
At 1 January
Adjustment for adoption of IFRS 16 (Note 1)
Credit to the Group income statement
Charge to other comprehensive income and equity
Deferred tax asset at 31 December
Year ended
31 December
2019
Year ended
31 December
2018
(33)
5
(28)
93
5
25
(3)
120
(48)
15
(33)
81
–
15
(3)
93
The deferred tax liability of $28 million (2018: $33 million) largely relates to deferred tax arising on acquired intangible assets.
Man Group plc Annual Report 2019
122
Notes to the Group financial statements continued
7. Tax continued
The deferred tax asset income statement credit of $25 million (2018: $15 million) predominantly relates to the recognition of US deferred tax assets
of $27 million (2018: $20 million). The charge to other comprehensive income and equity of $3 million (2018: $3 million) relates to movements in
relation to pensions, unrealised cash flow hedge balances and employee share scheme balances.
The gross amount of UK non-trading losses for which a deferred tax asset has not been recognised is $45 million (2018: $45 million). These losses
are not subject to an expiration period.
The deferred tax asset comprises:
$m
US tax assets
Defined benefit pension schemes
Employee share schemes
Tax allowances over depreciation
Other
Deferred tax asset
31 December
2019
31 December
2018
89
4
15
7
5
120
62
6
11
8
6
93
The Group has accumulated deferred tax assets in the US of $89 million (2018: $108 million). These deferred tax assets comprise accumulated
operating losses from existing operations of $48 million (2018: $53 million), future amortisation of goodwill and intangible assets generated from
acquisitions of $31 million (2018: $45 million of which $9 million was recognised) and other timing differences of $10 million (2018: $10 million, none
of which was recognised) that will be available to offset future taxable profits in the US. From the maximum available deferred tax assets of $108
million at 31 December 2018, a deferred tax asset of $62 million was recognised on the Group balance sheet, representing amounts which could be
offset against probable future taxable profits. Given the recent history of US taxable profits and forecast future profitability, we consider it appropriate
to recognise all of the available US deferred tax assets ($89 million) on the Group balance sheet at 31 December 2019. As we expect to fully utilise
these deferred tax assets over the foreseeable future, no impairment is indicated. Should forecast US profits decrease by 10%, the expected
utilisation period of the US deferred tax assets would increase by less than one year.
Man does not currently expect to pay federal tax on any profits it may earn in the US until 2023. Accordingly, any movements in the deferred tax
asset in the year are classified as an adjusting item (see page 150). The gross amount of US non-trading losses for which a deferred tax asset has
not been recognised is nil (2018: nil). For US tax purposes, the losses will expire over a period of 12 to 17 years.
8. Earnings per ordinary share (EPS)
The calculation of basic EPS is based on post-tax profit of $285 million (2018: $273 million), and ordinary shares of 1,509,534,942 (2018:
1,578,826,775), being the weighted average number of ordinary shares in issue during the period after excluding the shares owned by the Man
Employee Trust and Treasury shares. For diluted EPS, the weighted average number of ordinary shares in issue is adjusted to assume conversion of
all dilutive potential ordinary shares, being ordinary shares of 1,543,490,112 (2018: 1,602,842,248).
The details of movements in the number of shares used in the basic and dilutive EPS calculation are provided below.
Number of shares at beginning of year
Issues of shares
Repurchase of own shares
Number of shares at period end
Shares held in Treasury reserve
Shares owned by Employee Trust
Basic number of shares
Share awards under incentive schemes
Employee share options
Diluted number of shares
The basic and diluted earnings per share figures are provided below.
Basic and diluted post-tax earnings ($m)
Basic earnings per share (cents)
Diluted earnings per share (cents)
Year ended 31 December 2019
Year ended 31 December 2018
Total
number
(million)
1,610.1
–
(68.3)
1,541.8
(25.7)
(28.6)
1,487.5
Weighted
average
(million)
1,610.1
–
(41.9)
1,568.2
(31.0)
(27.7)
1,509.5
33.2
0.8
1,543.5
Total
number
(million)
1,643.6
2.4
(35.9)
1,610.1
(54.2)
(25.2)
1,530.7
Weighted
average
(million)
1,643.6
1.9
(28.6)
1,616.9
(14.3)
(23.8)
1,578.8
22.5
1.5
1,602.8
Year ended
31 December
2019
Year ended
31 December
2018
285
18.9
18.4
273
17.3
17.0
9. Dividends
$m
Ordinary shares
Final dividend paid for the year to 31 December 2018 – 5.1 cents (2017: 5.8 cents)
Interim dividend paid for the six months to 30 June 2019 – 4.7 cents (2018: 6.4 cents)
Dividends paid
Proposed final dividend for the year to 31 December 2019 – 5.1 cents (2018: 5.4 cents)
Financial statements
123
Year ended
31 December
2019
Year ended
31 December
2018
80
72
152
76
90
99
189
83
Dividend distribution to the Company’s shareholders is recognised directly in equity in Man’s financial statements in the period in which the dividend
is paid or, if required, approved by the Company’s shareholders. Details of the Group’s dividend policy are included in the Chief Financial Officer’s
review on page 33. Details of dividends waived in the period are included in Note 20.
10. Goodwill and acquired intangibles
$m
Net book value at beginning of the
year
Purchases/acquisitions1
Amortisation
Impairment
Currency translation
Net book value at year end
Allocated to cash-generating units
as follows:
AHL
GLG
FRM
Numeric
GPM
Year ended 31 December 2019
Investment
management
agreements
Distribution
channels
Brand
names
Goodwill
Year ended 31 December 2018
Investment
management
agreements
Distribution
channels
Brand
names
Total
Goodwill
642
–
–
–
(1)
641
452
–
–
134
55
268
–
(70)
(5)
–
193
1
94
6
86
6
19
–
(4)
–
–
15
–
6
–
–
9
9
–
(4)
–
–
5
–
3
–
2
–
938
–
(78)
(5)
(1)
854
453
103
6
222
70
648
–
–
–
(6)
642
453
–
–
134
55
340
3
(75)
–
–
268
1
141
14
104
8
24
–
(5)
–
–
19
–
9
–
–
10
12
–
(3)
–
–
9
–
6
–
3
–
Total
1,024
3
(83)
–
(6)
938
454
156
14
241
73
Note:
1 Purchases/acquisitions in 2018 relate to the purchase of investment management agreements in relation to strategic bond strategies.
Goodwill
Goodwill represents the excess of consideration transferred over the fair value of identifiable net assets of the acquired business at the date of
acquisition. Goodwill is carried on the Group balance sheet at cost less accumulated impairment, has an indefinite useful life, is not subject to
amortisation and is tested for impairment annually, or whenever events or circumstances indicate that the carrying amount may not be recoverable.
Investment management agreements (IMAs), distribution channels and brand names
IMAs, distribution channels and brand names are recognised at the present value of the expected future cash flows and are amortised on a straight-
line basis over their expected useful lives, which are between three and 13 years (IMAs and brands), and eight and 12 years (distribution channels).
Amortisation of acquired intangible assets of $78 million (2018: $83 million) primarily relates to the investment management agreements recognised
on the acquisitions of GLG and Numeric.
Allocation of goodwill to cash-generating units
For impairment review purposes, the Group has identified five cash-generating units (CGUs): AHL, GLG, FRM, Numeric and GPM.
Calculation of recoverable amounts for cash-generating units
An impairment expense is recognised for the amount by which the asset’s carrying value exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (CGUs). The recoverable amounts of the Group’s CGUs are assessed each year using a
value in use calculation. The value in use calculation gives a higher valuation compared to the fair value less cost to sell approach, as this would
exclude some of the revenue synergies available to Man through its ability to distribute products using its well established distribution channels,
which may not be fully available to other market participants.
The value in use calculations at 31 December 2019 use cash flow projections based on the Board approved financial plan for the year to
31 December 2020 and a further two years of projections (2021 and 2022), plus a terminal value. The valuation analysis is based on best practice
guidance whereby a terminal value is calculated at the end of a short discrete budget period and assumes, after this three-year budget period, no
growth in asset flows above the long-term growth rate. In order to determine the value in use of each CGU, it is necessary to notionally allocate the
majority of the Group’s cost base relating to operations, product structuring, distribution and support functions, which are managed on a centralised
basis. Lease payments are treated as cash outflows in line with the former IAS 17 classification. Whilst this represents a mismatch between the
valuation model and the lease costs recognised in the Group income statement under IFRS 16, the calculation of the value in use is not significantly
different under the two approaches.
The value in use calculations for AHL, GLG, FRM, Numeric and GPM are presented on a post-tax basis, consistent with the prior year, given most
comparable market data is available on a post-tax basis. These are not significantly different to their pre-tax equivalent.
Man Group plc Annual Report 2019
124
Notes to the Group financial statements continued
10. Goodwill and acquired intangibles continued
The assumptions applied in the value in use calculation are derived from past experience and assessment of current market inputs. A bifurcated
discount rate has been applied 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 the Group’s 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 Man’s beta, similar alternative asset managers, and the asset management
sector as a whole. The terminal value is calculated based on the projected closing FUM at 31 December 2022 and applying the mid-point of a range
of historical multiples to the forecast cash flows associated with management and performance fee profits.
The Group has considered the impact of the exit of the United Kingdom from the European Union on 31 January 2020, including a range of
reasonably possible Brexit scenarios, and currently does not expect this to have a material impact on the value in use calculations of the Group at
31 December 2019. Further discussion on Brexit is provided in the Market environment (page 14) and Risk management (page 34) sections of the
Strategic report.
The recoverable amount of each CGU (the value in use) has been assessed at 31 December 2019. The key assumptions applied to the value in use
calculations for each of the CGUs are provided below.
Key assumptions:
Compound average annualised growth in FUM (over three years)
Discount rate
– Management fees1
– Performance fees2
Terminal value (mid-point of range of historical multiples)3
– Management fees
– Performance fees
AHL
11%
11%
17%
GLG
1%
11%
17%
13.0x
5.5x
13.0x
5.5x
FRM
7%
11%
17%
5.3x
3.5x
Numeric
3%
11%
17%
13.0x
5.5x
GPM
28%
15%
21%
16.8x
5.5x
Notes:
1 The pre-tax equivalent of the net management fees discount rate is 13%, 13%, 14%, 14% and 17% for each of the AHL, GLG, FRM, Numeric and GPM CGUs, respectively.
2 The pre-tax equivalent of the net performance fees discount rate is 21%, 20%, 21%, 22% and 24% for each of the AHL, GLG, FRM, Numeric and GPM CGUs, respectively.
3 The implied terminal growth rates are 1%, 3%, -10%, 3% and 9% for each of the AHL, GLG, FRM, Numeric and GPM CGUs, respectively. The terminal value is added to cash flow projections
based on the Board approved financial plan for the year to 31 December 2020 and a further two years of projections (2021 and 2022), and discounted.
The results of the valuations are further explained in the following sections, 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 FUM forecast assumption for each CGU, stressing this by 2% and
also to the point at which impairment would arise, except as stated otherwise. In particular, for the GPM CGU, which has a low level of headroom,
we have stressed this by 10% to indicate a more extreme downside scenario. Each assumption, or set of assumptions, is stressed in isolation. The
results of these sensitivities make no allowance for actions that management would take if such market conditions persisted.
AHL cash-generating unit
The AHL value in use calculation at 31 December 2019 indicates a value of $3.1 billion, with around $2.6 billion of headroom over the carrying value
of the AHL business. Therefore, no impairment charge is deemed necessary at 31 December 2019 (2018: nil). The valuation at 31 December 2019
is around $0.4 billion higher than the value in use calculation at 31 December 2018, primarily due to higher than forecast performance in 2019.
Sensitivity analysis:
Key assumption stressed to:
Modelled headroom/(impairment) ($m)
Compound average
annualised growth in FUM
Management fee/
performance fee
Discount rates (post-tax)
Multiples (post-tax)
Management fee/
performance fee
11%
2,566
9%
2,210
1%1
1,009
10%/16%
2,6362
12%/18%
2,4962
14.0x/6.5x
2,9063
12.0x/4.5x
2,2263
Notes:
1 Stressed by 10%, as opposed to the point of impairment, given an impairment scenario is not reasonably foreseeable.
2 An increase/decrease in the value in use calculation of $70 million.
3 An increase/decrease in the value in use calculation of $340 million.
GLG cash-generating unit
The GLG value in use calculation at 31 December 2019 indicates a value of $190 million, with around $60 million of headroom over the carrying
value of the GLG business. Therefore, no impairment charge is deemed necessary at 31 December 2019 (2018: nil). The valuation at 31 December
2019 is around $130 million lower than the value in use calculation at 31 December 2018 largely due to lower than forecast net flows and
performance in 2019. Amortisation of acquired intangibles reduced the carrying value by $53 million during the year.
Sensitivity analysis:
Key assumption stressed to:
Modelled headroom/(impairment) ($m)
Discount rates (post-tax)
Multiples (post-tax)
Compound average
annualised growth in FUM
Management fee/
performance fee
Management fee/
performance fee
1%
63
(1%)
22
(2%)1
–
10%/16%
672
12%/18% 14.0x/6.5x
793
592
12.0x/4.5x
473
Notes:
1 Stressed in a downside scenario to determine the point at which headroom would be reduced to nil, after which impairment would arise.
2 An increase/decrease in the value in use calculation of $4 million.
3 An increase/decrease in the value in use calculation of $16 million.
Financial statements
125
10. Goodwill and acquired intangibles continued
FRM cash-generating unit
The FRM value in use calculation at 31 December 2019 indicates a value of $41 million, with $31 million of headroom over the carrying value of the
FRM business. Therefore, no impairment charge is deemed necessary at 31 December 2019 (2018: nil). The valuation at 31 December 2019 is
around $8 million higher than the value in use calculation at 31 December 2018 due to higher than previously forecast net management fee margins
and amortisation of acquired intangibles of $3 million, which lowers the carrying value, partly offset by lower than forecast flows during the year.
Sensitivity analysis:
Key assumption stressed to:
Modelled headroom/(impairment) ($m)
Discount rates (post-tax)
Multiples (post-tax)
Compound average
annualised growth in FUM
Management fee/
performance fee
Management fee/
performance fee
7%
31
5%
26
(10%)1
–
10%/16%
322
12%/18%
302
6.3x/4.5x
373
4.3x/2.5x
253
Notes:
1 Stressed to determine the point at which headroom would be reduced to nil, after which impairment would arise.
2 An increase/decrease in the value in use calculation of $1 million.
3 An increase/decrease in the value in use calculation of $6 million.
Numeric cash-generating unit
The Numeric value in use calculation at 31 December 2019 indicates a value of around $670 million, with around $440 million of headroom over the
carrying value of the Numeric business. Therefore, no impairment charge is deemed necessary at 31 December 2019 (2018: nil). The valuation at
31 December 2019 is around $30 million lower than the value in use calculation at 31 December 2018, primarily as a result of outflows during the
year and lower net management fee margins. Amortisation of acquired intangibles reduced the carrying value by $19 million during the year.
Sensitivity analysis:
Key assumption stressed to:
Modelled headroom/(impairment) ($m)
Discount rates (post-tax)
Multiples (post-tax)
Compound average
annualised growth in FUM
Management fee/
performance fee
Management fee/
performance fee
3%
442
1%
363
(31%)1
–
10%/16%
4582
12%/18% 14.0x/6.5x
4883
4262
12.0x/4.5x
3963
Notes:
1 Stressed to determine the point at which headroom would be reduced to nil, after which impairment would arise.
2 An increase/decrease in the value in use calculation of $16 million.
3 An increase/decrease in the value in use calculation of $46 million.
GPM cash-generating unit
The GPM value in use calculation at 31 December 2019 indicates a value of around $73 million, with $3 million of headroom over the carrying value
of the GPM business. We have updated our terminal growth rate, which is applied after three years of forecast cash flows, to 9% (2018: 7%) to
reflect higher than steady-state growth that we expect to realise in the medium term (until December 2025), with a terminal growth rate assumption
of 7% thereafter. A higher growth rate in the medium term better reflects the operating leverage we expect to realise from increased investment in
the business in 2019 and the industry outlook for private markets more generally. The results of our valuation indicate that no impairment charge is
deemed necessary at 31 December 2019 (2018: nil), however, as below if future results differ to the forecast it is reasonably foreseeable that
impairment could arise.
The valuation at 31 December 2019 is around $17 million lower than the value in use calculation at 31 December 2018, primarily as a result of
slower than forecast growth and increased investment expenditure in the business, partially offset by $3 million of amortisation of acquired
intangibles during the year.
Sensitivity analysis:
Key assumption stressed to:
Modelled headroom/(impairment) ($m)
Notes:
1 Stressed by 10% to indicate a possible downside scenario.
2 An increase/decrease in the value in use calculation of $2 million.
3 An increase/decrease in the value in use calculation of $4 million.
11. Other intangibles
$m
Net book value at beginning of the year
Additions
Disposals
Amortisation
Net book value at year end
Discount rates (post-tax)
Multiples (post-tax)
Compound average
annualised growth in FUM
Management fee/
performance fee
Management fee/
performance fee
28%
3
26%
(8)
18%1
(44)
14%/20%
52
16%/22% 17.8x/6.5x
73
12
15.8x/4.5x
(1)3
Year ended
31 December
2019
Year ended
31 December
2018
26
17
–
(12)
31
23
16
(3)
(10)
26
Other intangibles relate to capitalised computer software. Capitalised computer software 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
and are subject to regular impairment reviews. 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. Additions relate to the continued investment in Man’s
operating platforms.
Man Group plc Annual Report 2019
126
Notes to the Group financial statements continued
12. Cash, liquidity and borrowings
$m
Cash and cash equivalents1
Undrawn committed revolving credit facility
Total liquidity
Borrowings: 2024 fixed rate reset callable guaranteed
subordinated notes
31 December 2019
31 December 2018
Total
220
500
720
–
Less than
1 year
Greater than
1 year
220
–
220
–
–
500
500
–
Total
344
500
844
150
Less than
1 year
Greater than
1 year
344
–
344
–
–
500
500
150
Note:
1 Excludes $61 million (2018: $26 million) of restricted cash held by consolidated fund entities (Note 13.2).
Liquidity resources support ongoing operations and potential liquidity requirements under stressed scenarios. The amount of potential liquidity
requirements is modelled based on scenarios that assume stressed market and economic conditions. The funding requirements for Man relating to
the investment management process are discretionary. The liquidity profile of Man is monitored on a daily basis and the stressed scenarios are
updated regularly. The Board reviews Man’s funding resources at each Board meeting and on an annual basis as part of the strategic planning
process. Man’s available liquidity is considered sufficient to cover current requirements and potential requirements under stressed scenarios.
In September 2014, Man issued $150 million ten-year fixed rate reset callable guaranteed subordinated notes (Tier 2 notes) with a fixed coupon of
5.875% until 15 September 2019. Man elected to exercise the option to redeem the notes on 16 September 2019 given the increased financing
flexibility resulting from the Group’s corporate reorganisation in May 2019.
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less, net of outstanding bank
overdrafts and at 31 December 2019 includes cash at bank of $186 million (2018: $175 million) and short-term deposits of $34 million (2018: $169
million). The carrying amount of these assets is approximately equal to their fair value. Cash ring-fenced for regulated entities totalled $34 million at
year end (2018: $36 million). Cash is invested in accordance with strict limits consistent with the Board’s risk appetite, which consider both the
security and availability of liquidity. Accordingly, cash is held in on-demand and short-term bank deposits, and at times invested in short-term US
Treasury bills. At 31 December 2019, the $220 million cash balance (excluding cash held by consolidated fund entities per Note 13.2) is held with
19 banks (2018: $344 million with 19 banks). The single largest counterparty bank exposure of $106 million is held with an A+ rated bank (2018:
$91 million with an A+ rated bank). At 31 December 2019, balances with banks in the AA ratings band aggregate to $27 million (2018: $85 million)
and balances with banks in the A ratings band aggregate to $192 million (2018: $259 million).
As a result of the Group’s corporate reorganisation in May 2019, the committed revolving credit facility was renegotiated and the facility reduced in
size from $500 million to $478 million. This was then refinanced in December 2019 and replaced with a new committed revolving credit facility of
$500 million, which was undrawn at 31 December 2019 (undrawn at 31 December 2018). The facility was put in place as a five-year facility and
includes the option for Man to request the banks to extend the maturity date by one year on each of the first and second anniversaries. The
participant banks have the option to accept or decline Man’s request. The facility is currently scheduled to mature in December 2024 and
incorporates an ESG target-linked interest rate component. To maintain maximum flexibility, the facility does not include financial covenants.
Intra-day and overnight credit facilities
Man guarantees the obligations under a $100 million intra-day (2018: $100 million) and $25 million overnight credit facilities (2018: $25 million), used
to settle the majority of the Group’s banking arrangements. As at 31 December 2019, the exposure under the intra-day facility is nil (2018: nil) and
the overnight facility exposure is nil (2018: nil). The fair value of these commitments has been determined to be nil (2018: nil).
Foreign exchange and interest rate risk
Man is subject to risk from changes in interest rates and foreign exchange rates on monetary assets and liabilities.
In respect of Man’s monetary assets and liabilities which earn/incur interest indexed to floating rates, as at 31 December 2019 a 50 basis points
increase/decrease in these rates, with all other variables held constant, would have resulted in a $1 million increase/decrease
(2018: $1 million increase/decrease) in net interest income.
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 $26 million (2018: $1 million loss/gain), with a corresponding impact on equity. This exposure is based on USD balances held
by non-USD functional currency entities and non-USD balances held by USD functional currency entities within the Group. The increase in the year
is primarily due to the unhedged GBP lease liability arising on the application of IFRS 16, as detailed in Note 19.
In certain circumstances, the Group uses derivative financial instruments, specifically forward foreign exchange contracts, to hedge its risk
associated with foreign exchange movements. Where fixed foreign currency denominated costs are hedged, the associated derivatives may be
designated as cash flow hedges. Up to 31 December 2019, the Group’s risk management objective was to determine a foreign exchange rate at
which future foreign currency costs are ultimately realised one year in advance, thereby providing increased certainty around the future USD costs
recognised in the Group income statement. Effective unrealised gains or losses on these instruments were recognised within the cash flow hedge
reserve in equity and, when realised, these were reclassified to the Group income statement in the same line as the hedged item, within
compensation and other costs (as outlined in Note 4 and Note 5). From 1 January 2020, Man changed its policy such that fixed foreign currency
denominated costs are no longer hedged.
Foreign currency derivative assets and liabilities are included within derivative financial instruments in fee and other receivables (Note 14) and trade
and other payables (Note 15) respectively. Fair value gains and losses on cash flow hedges, and gains and losses realised on maturing cash flow
hedges which have been reclassified from the cash flow hedge reserve into profit or loss, are separately shown in the Group statement of
comprehensive income.
13. Investments in fund products and other investments
$m
Loans to fund products
Investments in fund products
Other investments
Investments in line-by-line consolidated funds
$m
Loans to fund products
Investments in fund products
Other investments
Investments in line-by-line consolidated funds
Financial statements
127
31 December 2019
Financial
assets at fair
value through
profit or loss
Investments in
fund products
and other
investments
Net non-
current assets
held for sale
Loans and
receivables
Total
investments
–
349
3
420
772
4
–
–
–
4
4
349
3
420
776
31 December 2018
–
–
–
–
–
4
349
3
420
776
Financial
assets at fair
value through
profit or loss
Investments in
fund products
and other
investments
Net non-
current assets
held for sale
Loans and
receivables
Total
investments
–
401
3
357
761
9
–
–
–
9
9
401
3
357
770
–
39
–
–
39
9
440
3
357
809
Man’s seeding investments are included in various Group balance sheet line items. In summary, the total seeding investments portfolio is made up
as follows:
$m
Investments in fund products
Less fund investments for deferred compensation arrangements
Consolidated net investments in funds – held for sale
Consolidated net investments in funds – consolidated line-by-line
Loans to funds
Seeding investments portfolio
Note
13.1
13.1
13.2
13.2
13.3
31 December
2019
31 December
2018
349
(98)
–
259
4
514
401
(87)
39
300
9
662
13.1 Investments in fund products
Man uses capital to invest in our fund products as part of our ongoing business, to build our product breadth and to trial investment research
developments before we market 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 Man may obtain
exposure to seed investments via total return swap (TRS) arrangements. Exposures to fund products via TRS and repo arrangements were
$62 million and $36 million respectively at 31 December 2019 (2018: nil and nil). Under a repo arrangement, Man is committed to repurchase the
underlying seed investments at maturity and pays an interest charge over the period, with the obligation to repurchase the assets on maturity
recorded as a liability within trade and other payables (Note 15). Under a TRS arrangement, Man is under no form of repayment obligation and has
no ownership interest (or voting rights) in the underlying investment. In exchange for the returns on the underlying seed investments, Man pays the
banks a floating rate of interest.
Regardless of whether Man is exposed to a fund product’s returns by way of a direct investment, repo or TRS, the control considerations are the
same. Where Man is deemed not to control the fund, the fund is classified within investments in fund products. Investments in fund products are
classified at fair value through profit or loss, with net gains due to movements in fair value of $33 million for the year ended 31 December 2019
(2018: $11 million loss) recognised through income or gains/(losses) on investments and other financial instruments. Purchases and sales of
investments are recognised on trade date.
The fair values of investments in fund products are derived from the reported NAVs of each of the fund products, which in turn are based upon the
value of the underlying assets held within each of the fund products and the anticipated redemption horizon of the fund product. 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. Whilst these valuations are performed independently of Man, Man has established oversight procedures and due diligence processes
to ensure that the NAVs reported by the external valuation service providers are reliable and appropriate. Man makes adjustments to these NAVs if
the anticipated redemption horizon, events or circumstances indicate that the NAVs are not reflective of fair value. The fair value hierarchy of financial
assets is disclosed in Note 26.
Investments in fund products expose Man to market risk and therefore this process is subject to limits consistent with the Board’s risk appetite. The
largest single investment in fund products is $66 million (2018: $105 million). The market risk from seeding investments, including those financed via
repo and TRS arrangements, is modelled using a value at risk methodology using a 95% confidence interval and one-year time horizon. The value at
risk is estimated to be $22 million at 31 December 2019 (2018: $25 million).
Fund investments for deferred compensation arrangements
At 31 December 2019, investments in fund products included $98 million (2018: $87 million) of fund products related to deferred compensation
arrangements (as detailed in Note 20). The associated fund product investments are held to offset any change in deferred compensation over the
vesting period, and at vesting the value of the fund investment is delivered to the employee. The fund product investments are recorded at fair value
with any gains or losses during the vesting period recognised as income or gains/(losses) on investments and other financial instruments in the
Group income statement.
Man Group plc Annual Report 2019
128
Notes to the Group financial statements continued
13. Investments in fund products and other investments continued
13.2 Consolidation of investments in funds
Seed capital invested into funds may be deemed to be controlled by the Group (Note 1). The control considerations under IFRS 10 also apply to the
fund products underlying the Group’s TRS and repo instruments and therefore the Group may similarly be required to consolidate them. The fund is
consolidated into the Group’s results from the date control commences until it ceases. In 2019, 15 (2018: 13) investments in funds have met the
control criteria and have therefore been consolidated (Note 29), either consolidated on a line-by-line basis or classified as held for sale as detailed
below.
Line-by-line consolidation
The investments relating to the 15 (2018: ten) funds which are consolidated on a line-by-line basis are included within the Group balance sheet and
income statement as follows:
$m
Balance sheet
Cash and cash equivalents
Transferable securities1
Fees and other receivables
Trade and other payables
Net assets of line-by-line consolidated fund entities
Third-party interest in consolidated funds
Net investment held by Man
Income statement
Net gains/(losses) on investments2
Management fee expenses3
Performance fee expenses3
Other costs
Net gains/(losses) of line-by-line consolidated fund entities
Third-party share of (gains)/losses relating to interests in consolidated funds
Gains/(losses) attributable to net investment held by Man
31 December
2019
31 December
2018
61
420
2
(11)
472
(213)
259
63
(3)
–
(3)
57
(18)
39
26
357
21
(4)
400
(100)
300
(18)
(2)
(1)
(2)
(23)
7
(16)
Notes:
1 Included within investments in fund products and other investments.
2
3 Relate to management and performance fees paid by the funds to Man during the year, which are eliminated within gross management and other fees and performance fees, respectively, in the
Included within income or gains/(losses) on investments and other financial instruments.
Group income statement.
Held for sale
Where the Group acquires the controlling stake and actively markets the products to third-party investors, allowing the Group to redeem their share,
and it is considered highly probable that it will relinquish control within one year from the date of initial investment, the investment in the controlled
fund is classified as held for sale. The seeded fund is recognised on the Group balance sheet as non-current assets and liabilities held for sale, with
the interests of any other parties included within non-current liabilities held for sale. Amounts recognised are measured at the lower of the carrying
amount and fair value less costs to sell.
The non-current assets and liabilities held for sale are as follows:
$m
Non-current assets held for sale
Non-current liabilities held for sale
Investments in fund products held for sale
31 December
2019
31 December
2018
–
–
–
39
–
39
At 31 December 2019, no consolidated fund investments met the held for sale criteria. Two investments in funds which were classified as held for
sale at 31 December 2018 have been consolidated on a line-by-line basis at 31 December 2019 (2018: three held for sale funds at 31 December
2017).
Financial statements
129
13. Investments in fund products and other investments continued
13.3 Loans to fund products
Loans to fund products are short-term advances primarily to Man guaranteed products, which are made to assist with the financing of the leverage
associated with these products. The loans are repayable on demand and are carried at amortised cost using the effective interest rate method.
13.4 Structured entities
Man has evaluated all exposures and concluded that where Man holds an investment, fee receivable, accrued income, loan guarantee or
commitment with an investment fund or a collateralised loan obligation, this represents an interest in a structured entity as defined by IFRS 12
‘Disclosure of Interests in Other Entities’.
As with structured 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 collateralised loan obligations, the indentures.
The key considerations in assessing whether the Group controls a structured entity, and therefore should be consolidated into the Group’s financial
statements, are outlined in Note 1. Consolidated structured entities are detailed in Note 13.2.
Man’s maximum exposure to loss from unconsolidated structured entities is the sum total of any investment held, fee receivables, accrued income,
and loans to the fund entities, and is $639 million for the year ended 31 December 2019 (2018: $574 million). Man’s interest in and exposure to
unconsolidated structured entities is as follows:
31 December 2019
Alternative
Absolute return
Total return
Multi-manager
solutions
Long-only
Systematic
Discretionary
Guaranteed
Total
31 December 2018
Alternative
Absolute return
Total return
Multi-manager
solutions
Long-only
Systematic
Discretionary
Guaranteed
Total
Less infrastructure
mandates and
consolidated
fund entities1
($bn)
Total
FUM
($bn)
Total FUM
unconsolidated
structured
entities
($bn)
Net
management
fee margin2
(%)
Fair value of
investment
held
($m)
Number
of funds
Fee
receivables
and accrued
income
($m)
Loans
to funds
($m)
Maximum
exposure
to loss
($m)
30.5
27.0
14.0
27.5
18.7
–
117.7
Total
FUM
($bn)
28.9
22.5
13.5
24.7
18.8
0.1
108.5
–
–
6.9
0.2
0.2
–
7.3
30.5
27.0
7.1
27.3
18.5
–
110.4
107
60
73
107
45
4
396
1.20
0.56
0.31
0.35
0.67
5.96
91
190
2
5
56
–
344
205
28
6
33
19
–
291
–
–
–
–
–
4
4
296
218
8
38
75
4
639
Less infrastructure
mandates and
consolidated
fund entities1
($bn)
Total FUM
unconsolidated
structured
entities
($bn)
Net
management
fee margin2
(%)
Fair value of
investment
held
($m)
Number
of funds
Fee
receivables
and accrued
income
($m)
Loans
to funds
($m)
Maximum
exposure
to loss
($m)
0.1
–
5.2
0.2
0.1
–
5.6
28.8
22.5
8.3
24.5
18.7
0.1
102.9
135
58
87
116
50
7
453
1.27
0.57
0.36
0.36
0.69
5.52
153
156
2
1
77
–
389
87
24
12
31
21
1
176
–
–
–
–
–
9
9
240
180
14
32
98
10
574
Notes:
1 For infrastructure mandates where we do not act as investment manager or advisor, Man’s 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 (see page 29). Performance fees can only be earned after a high water mark is achieved. For performance fee eligible funds,
performance fees are within the range of 10% to 20%.
On occasion Man agrees to purchase illiquid investments from the funds at market rates in order to facilitate investor withdrawals. Man has not
provided any other non-contractual support to unconsolidated structured entities. Further information about risks relating to investment funds can be
found in Risk management on pages 37 to 39.
Man Group plc Annual Report 2019
130
Notes to the Group financial statements continued
14. Fee and other receivables
$m
Fee receivables
Accrued income
Prepayments
Derivative financial instruments
Other receivables
31 December
2019
31 December
2018
27
266
15
4
114
426
36
144
13
16
98
307
Fee and other receivables are initially recorded at fair value and subsequently measured at amortised cost using the effective interest rate method.
Fee receivables and accrued income represent management and performance fees from fund products and are received in cash when the funds’
net asset values are determined. The majority of fees are deducted from the NAV 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 loss model of IFRS 9, there is no impairment
at 31 December 2019 (2018: nil). The increase in accrued income in 2019 relates to the increase in performance fee income, which crystallised at
31 December 2019. Performance fees receivable at year end are $169 million (2018: $43 million).
Details of derivatives used to hedge cash flow foreign exchange risk are included in Note 12. Other derivative financial instruments, which consist
primarily of market risk hedges on some of our seeding positions and foreign exchange contracts, are measured at fair value through profit or loss.
All derivatives are held with external banks with ratings of A (2018: BBB+) or higher and mature within one year. During the year, there were
$10 million net realised and unrealised gains arising from foreign exchange hedges (2018: $3 million gains), and the notional value of foreign
exchange derivative financial assets held at 31 December 2019 is $61 million (2018: $84 million). The notional value of market risk derivative financial
assets held at 31 December 2019 is $65 million (2018: $220 million).
Other receivables principally include balances relating to the Open Ended Investment Collective (OEIC) funds business of $29 million
(2018: $37 million), collateral posted with derivative counterparties of $24 million (2018: $1 million) and sub-lease rental income receivable of
$15 million (presented net of operating lease rentals payable within trade and other payables in 2018 in accordance with IAS 17 as detailed in
Note 1). For the OEIC funds businesses, Man acts as the intermediary for the collection of subscriptions due from customers and payable to the
funds, and for redemptions receivable from funds and payable to customers. The unsettled fund payable is recorded in trade and other payables
(Note 15). The amount of collateral posted with derivative counterparties is a function of the unrealised gains or losses on the open derivatives at any
point in time. At 31 December 2019, nil (2018: $7 million) of other receivables are expected to be settled after 12 months.
15. Trade and other payables
$m
Accruals
Trade payables
Contingent consideration
Derivative financial instruments
Payables under repo arrangements
Other payables
31 December
2019
31 December
2018
338
4
24
13
36
144
559
302
2
212
15
–
170
701
Accruals primarily relate to compensation accruals. Contingent consideration relates to the amounts payable in respect of acquisitions (Note 26).
Details of derivatives used to hedge cash flow foreign exchange risk are included in Note 12. The notional value of other foreign exchange derivative
financial liabilities at 31 December 2019 is $335 million (2018: $508 million). During the year, there were $47 million net realised and unrealised
losses arising from our market risk hedges (2018: $22 million gains), and the notional value of market risk derivative financial liabilities is $245 million
(2018: $82 million). All derivative contracts mature within one year.
Payables under repo arrangements relate to obligations to repurchase fund products as detailed in Note 13.1.
Other payables include the remaining $71 million liability relating to the share repurchase announced in October 2019 (2018: $63 million relating to
the share repurchase announced in 2018), as detailed in Note 21, and payables relating to the OEIC funds business of $28 million (2018: $35
million).
Trade and other payables are initially recorded at fair value and subsequently measured at amortised cost, except for contingent consideration
payables, which are measured at fair value (Note 26). Included in trade and other payables at 31 December 2019 are balances of $23 million (2018:
$40 million) which are expected to be settled after more than 12 months, which largely relate to contingent consideration. Man’s policy is to meet its
contractual commitments and pay suppliers according to agreed terms.
16. Provisions
$m
At 1 January 2019
Adjustment for adoption of IFRS 16 (Note 1)
At 1 January 2019
Charged to the income statement
At 31 December 2019
Financial statements
131
Onerous
property lease
contracts and
dilapidations
22
(19)
3
–
3
Other
Total
4
–
4
1
5
26
(19)
7
1
8
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group 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 the Group
does not have the unconditional right to defer settlement. Provisions for restructuring are recognised when the obligation arises, following
communication of the formal plan.
Onerous property lease provisions are no longer separately recognised under IFRS 16. See Note 1 for further details.
17. Investments in associates
Associates are entities in which Man holds an interest and over which it has significant influence but not control, and are accounted for using the
equity method. In November 2018, the Group sold its investment in Nephila, recognising a gain on sale of $113 million, with an additional gain of
$1 million in 2019 on finalisation of the closing position.
$m
At beginning of the year
Share of post-tax profit
Dividends received
Sale of investment in associate
At year end
18. Leasehold improvements and equipment
Year ended
31 December 2018
Nephila Holdings Ltd
29
7
(8)
(28)
–
$m
Net book value at beginning of the year
Additions
Disposals
Depreciation expense
Net book value at year end
Year ended 31 December 2019
Year ended 31 December 2018
Leasehold
improvements
Equipment
Total
Leasehold
improvements
Equipment
Total
29
–
–
(6)
23
17
9
–
(9)
17
46
9
–
(15)
40
28
8
–
(7)
29
16
9
(1)
(7)
17
44
17
(1)
(14)
46
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 over the shorter of the life of the lease and the improvement
(up to 24 years) and for equipment is between three and ten years.
Man Group plc Annual Report 2019
132
Notes to the Group financial statements continued
19. Leases
19.1 The Group as lessee
Man’s lease arrangements relate to business premises property leases.
Man assesses whether a contract is or contains a lease at the inception of the contract. ROU lease assets are recorded 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, 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 lease term and included within other costs (Note 5).
In accordance with IFRS 16, cash payments of $34 million in relation to leases, which are recognised on the Group’s balance sheet, are presented
as unwind of lease liability discount of $14 million (within operating activities) and repayments of principal lease liability of $20 million (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 operating
activities. The remainder of the movement in the lease liability relates to non-cash movements.
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 the Group
considers that exercise of the option is reasonably certain. All lease liabilities are discounted using the interest rate implicit in the lease. If this rate
cannot be determined, the Group’s incremental cost of borrowing on the lease commencement or modification date is used to discount the lease
liability. For those leases which existed prior to the IFRS 16 transition date on 1 January 2019, a discount rate of 5% was used in calculating the
lease liability on transition. The unwind of lease liability discount is included within finance expense (Note 6).
Right-of-use lease assets
$m
Net book value on transition at 1 January 2019 (Note 1)
Additions
Depreciation expense (Note 5)
Net book value at year end
Lease liability
The maturity of the Group’s lease liability of $307 million at 31 December 2019, according to the termination date of the lease, is as follows:
$m
Lease liability
Within
1 year
1
31 December 2019
1-5
years
16
After
5 years
290
Included within liabilities associated with leases terminating after more than five years is $257 million relating to our Riverbank House premises in
London. The revaluation of our GBP lease liabilities into US dollars (the Group’s functional and presentation currency) may result in large unrealised
gains or losses in the Group income statement, and therefore these non-cash movements have been classified as an adjusting item (see page 149).
The Group’s operating lease commitments at 31 December 2018, including non-cancellable sub-lease arrangements, in accordance with IAS 17,
were as follows:
$m
Operating lease commitments under IAS 17
Offsetting non-cancellable sublease arrangements (included net above)
Within
1 year
18
17
31 December 2018
1–5
years
64
57
After
5 years
275
11
Total
357
85
The prior year operating lease commitments under IAS 17 primarily include the agreements for lease contracts for our Riverbank House premises in
London (expiring in 2035) and our New York office (expiring in 2022), which aggregated to $304 million.
19.2 The Group as lessor
Man also acts as lessor in respect of certain sub-leased business premises arrangements, which are classified as operating leases under IFRS 16.
Sub-lease rental income was $14 million in 2019. As a result of the adoption of IFRS 16 in 2019 (as outlined in Note 1), comparatives for 2018
whereby this was included net within other costs have not been restated. Rental income from operating leases is recognised on a straight-line basis
over the lease term.
At 31 December 2019, the undiscounted operating lease payments receivable on an annual basis are as follows:
$m
Operating lease payments receivable
31 December 2019
Within
1 year
16
1-2
years
16
2-3
years
14
3-4
years
14
4-5
years
16
After
5 years
117
Total
193
Year ended
31 December
2019
Total
228
1
(20)
209
Total
307
Financial statements
133
20. Deferred compensation arrangements
Man operates equity-settled share-based payment schemes as well as fund product based compensation arrangements.
For compensation plans whereby deferred compensation is invested in fund products managed by Man, the fair value of the employee services
received in exchange for the fund units is recognised as an expense over the vesting period, with a corresponding liability. The total amount to be
expensed is determined by reference to the fair value of the awards, which is remeasured at each reporting date, and equates to the fair value of the
underlying fund products at settlement date.
During the year, $78 million (2018: $66 million) relating to share-based payments and deferred fund product plans is included within compensation
costs (Note 4), consisting of share-based payments of $28 million (2018: $25 million) and deferred fund product plans of $50 million
(2018: $41 million). The unamortised deferred compensation at year end is $50 million (2018: $64 million) and has a weighted average
remaining vesting period of 1.6 years (2018: 2.0 years).
20.1 Employee Trust
The Employee Trust has the obligation to deliver share and fund product based payments which have been granted to employees. Man contributed
funds of $34 million in 2019 (2018: $42 million) in order for the Employee Trust to meet its current period obligations.
The Employee Trust is fully consolidated into Man and shares held are treated as treasury shares for EPS purposes (Note 8). The Employee Trust is
controlled by independent trustees and their assets are held separately from those of Man. At 31 December 2019, the net assets of the Employee
Trust amounted to $106 million (2018: $99 million). These assets include 28,627,805 (2018: 25,154,953) ordinary shares in the Company,
$10 million notional value options over Man shares (2018: $10 million), and $39 million of fund units (2018: $36 million) to deliver against the future
obligations. The shares are recorded at cost and shown as a deduction from shareholders’ funds. During the year, the trustees of the Employee
Trust waived all of the interim dividend for the year ended 31 December 2019 on each of the 28,206,246 ordinary shares registered in its name at
the relevant date for eligibility for the interim dividend (2018 interim dividend: waived on all 24,431,128 shares) and all of the final dividend for the year
ended 31 December 2018 on each of 27,561,827 of the ordinary shares (2017 final dividend: waived on all 23,224,517 shares).
20.2 Share-based payments
Share-based payments are remuneration payments to selected employees that take the form of an award of shares in Man Group plc. Awards
typically vest over three years, although conditions vary between different types of award. In respect of equity-settled share-based payment
schemes, the fair value of the employee services received in exchange for the share awards and options granted is recognised as an expense, with
the corresponding credit being recognised in equity. The total amount to be expensed over the vesting period is determined by reference to the fair
value of the share awards and options at grant date. The fair value of the share awards and options granted in exchange for employee services is
calculated using the Black-Scholes valuation model that takes into account the effect of both financial and demographic assumptions. Forfeiture and
early vesting assumptions are based on historical observable data. Changes to the original estimates, if any, are included in the Group income
statement, with a corresponding adjustment to equity.
Share options
The fair values of share options granted in the year under the Sharesave share option scheme, and the assumptions used in the calculations, are as
follows:
Grant date
Weighted average share price at grant date ($)1
Weighted average exercise price at grant date ($)2
Share options granted in the period
Vesting period (years)
Expected share price volatility (%)
Dividend yield (%)
Risk-free rate (%)
Expected option life (years)
Number of options assumed to vest
Average fair value per option granted ($)
Notes:
1 Sterling share price each year of £1.59 and £1.69, respectively.
2 Sterling exercise price each year of £1.27 and £1.37, respectively.
10/9/2019
2.1
1.6
2,653,200
3–5
30
6
0.4
3.4
2,025,055
0.4
11/9/2018
2.2
1.8
1,401,989
3–5
45
6
0.9
3.2
1,067,819
0.6
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.
Man Group plc Annual Report 2019
134
Notes to the Group financial statements continued
20. Deferred compensation arrangements continued
20.2 Share-based payments continued
Movements in the number of share options outstanding are as follows:
Share options outstanding at beginning of the year
Granted
Forfeited
Expired
Exercised
Share options outstanding at year end
Share options exercisable at year end
Note:
1 Calculated at 31 December exchange rates each year.
Year ended 31 December 2019
Year ended 31 December 2018
Weighted
average
exercise price1
($ per share)
3.6
1.7
2.4
–
1.2
3.6
4.0
Weighted
average
exercise price1
($ per share)
3.5
1.7
1.4
1.1
1.5
3.5
3.8
Number
44,458,781
1,401,989
(941,436)
(30,000)
(398,946)
44,490,388
38,885,437
Number
44,490,388
2,653,200
(1,170,912)
–
(2,218,500)
43,754,176
38,067,463
The share options outstanding at year end have a weighted average exercise price and expected remaining life as follows:
Range of exercise prices ($ per share)
0.00–3.00
3.01–5.00
31 December 2019
31 December 2018
Number of
share options
5,454,279
38,299,897
43,754,176
Weighted
average
exercise price
($ per share)
Weighted
average
expected
remaining life
1.7
3.9
3.7
2.6
1.0
1.2
Number of
share options
5,700,762
38,789,626
44,490,388
Weighted
average
exercise price
($ per share)
Weighted
average
expected
remaining life
1.4
3.8
3.5
2.2
2.0
2.0
Share awards
The fair values of share awards granted in the year and the assumptions used in the calculations are as follows:
Deferred share plan
Grant dates
Share awards granted in the year
Weighted average fair value per share award granted ($)
Executive directors long-term incentive plans
Grant dates
Share awards granted in the year
Weighted average fair value per share award granted ($)
Movements in the number of share awards outstanding are as follows:
Share awards outstanding at beginning of the year
Granted
Forfeited
Exercised
Share awards outstanding at year end
Share awards exercisable at year end
1/3/2019 – 23/12/2019 1/3/2018 – 23/10/2018
12,325,515
2.4
10,668,972
1.8
Long-Term Incentive Plan Deferred Executive Incentive Plan
12/3/2019
4,892,392
1.8
12/3/2018
2,009,891
2.4
Year ended
31 December
2019
Number
Year ended
31 December
2018
Number
34,188,523 28,637,911
15,561,364 14,335,406
(1,262,014)
(6,060,404)
(7,522,780)
(8,089,213)
35,600,270 34,188,523
107,999
6,915
Financial statements
135
21. Capital management
Details of the Group’s capital management and dividend policy are provided within the Chief Financial Officer’s Review on page 33.
Share capital and capital reserves
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction from the proceeds, net of tax.
Own shares held through the Employee Trust (Note 20) and Treasury shares are recorded at cost, including any directly attributable incremental
costs (net of tax), and are deducted from equity attributable to the Company’s equity holders until the shares are transferred to employees or sold.
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 attributable to the Company’s equity holders.
As set out in Note 1, the Group adjusted its corporate structure in May 2019. The scheme of arrangement had no impact on the Group’s aggregate
share capital and capital reserves, with a new reorganisation reserve created following the reversal of the existing share premium account, capital
redemption reserve, merger reserve and reorganisation reserve balances. The share premium arising on the issue of shares by Man Group plc was
subsequently cancelled by way of a capital reduction, with an equivalent increase recognised in the profit and loss account in reserves.
Ordinary shares
Ordinary shares have a par value of 3 3/7 US cents per share (2018: 3 3/7 US cents per share) and represent 100% of issued share capital. 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. Ordinary shareholders have the right to receive notice of, attend, vote and speak at general meetings. A holder of ordinary
shares is entitled to one vote per ordinary share held when a vote is taken on a poll and one vote only when a vote is taken on a show of hands.
As part of the corporate reorganisation in May 2019 (as further detailed in Note 1), ordinary shares in the Group’s former holding company were
cancelled and the same number of new ordinary shares were issued to the new holding company in consideration for the allotment to shareholders
of one ordinary share of 3 3/7 US cents in the new holding company for each ordinary share of 3 3/7 US cents they held in the former holding
company.
During the year ended 31 December 2019, $92 million (2018: $211 million) of shares were repurchased at an average price of 149.1 pence (2018:
169.5 pence), buying back 48.0 million shares (2018: 93.5 million shares), which had an accretive impact on EPS (Note 8) of 1.6% (2018: 2.8%).
This relates to the completion of the remaining $63 million of the share repurchase announced in October 2018, and the partial completion of
$29 million of the anticipated $100 million share repurchase announced in October 2019. As at 27 February 2020, Man Group had an unexpired
authority to repurchase up to 121,658,078 of its ordinary shares. A special resolution will be proposed at the forthcoming Annual General Meeting
(AGM), pursuant to which the Company will seek authority to repurchase up to 151,244,149 of its ordinary shares, representing 10% of the issued
share capital at 27 February 2020.
Deferred sterling shares
50,000 unlisted deferred sterling shares with a par value of £1 per share (representing 0.1% of the former Group holding company’s issued share
capital prior to the corporate reorganisation in May 2019) were necessary for the former holding company to continue to comply with Section 763 of
the UK Companies Act 2006. Following the corporate reorganisation, which created a new Jersey parent holding company, the deferred shares
were cancelled.
Issued and fully paid share capital
Year ended 31 December 2019
Year ended 31 December 2018
Ordinary
shares
Number
Unlisted
deferred
sterling shares
Number
Nominal
value
$m
Ordinary
shares
Number
Unlisted
deferred
sterling shares
Number
Nominal
value
$m
At 1 January
Purchase and cancellation of own shares
Scheme of arrangement (Note 1):
– Cancellation of shares in former holding company
–
Issue of ordinary shares: Partnership
Issue of shares in new holding company
Plans and Sharesave
At 31 December
1,610,142,313
(68,347,543)
50,000
–
55
(2)
1,643,593,289
(35,892,738)
50,000
–
(1,541,794,770)
1,541,794,770
(50,000)
–
(53)
53
–
–
–
–
–
1,541,794,770
–
–
–
53
2,441,762
1,610,142,313
–
50,000
56
(1)
–
–
–
55
Man Group plc Annual Report 2019
136
Notes to the Group financial statements continued
22. Pension
Man operates 12 (2018: 12) defined contribution plans and two (2018: two) funded defined benefit plans.
Defined contribution plans
Man pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. Man has no
further payment obligation once the contributions have been paid. Defined contribution pension costs totalled $12 million for the year to
31 December 2019 (2018: $9 million) and 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, Man
ultimately underwrites the risks related to the defined benefit plans. The risks that this exposes Man to include:
– Uncertainty in benefit payments: The value of Man’s 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: Man is 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 Man being required to provide higher levels of
cash.
The two 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). At 31 December 2019, the UK Plan comprised 94% (31 December 2018: 94%) of the Group’s total defined benefit
pension obligations.
The UK Plan is operated separately from Man 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 and the trustees of the UK Plan are required to agree a funding strategy and
contribution schedule for the UK Plan.
The UK Plan was closed to new members in May 1999 and to future accrual in May 2011. Employed members of the UK Plan retain enhanced
benefits, including a link to salary, on their accrued benefits in the UK Plan. Future benefits are provided via a defined contribution plan.
No cash contributions were made to the UK Plan in the year to 31 December 2019. The next actuarial valuation has an effective date of
31 December 2020. As part of this valuation, a new recovery plan may be agreed. In 2018, the UK Plan’s Reservoir Trust (which was wound up in
2018) returned $19 million of assets to the Group.
For the UK Plan, the Group has concluded that it has no requirement to adjust the balance sheet to recognise either a current surplus or a minimum
funding requirement on the basis that the Group has an unconditional right to a refund of a current or projected future surplus at some point in the
future.
In Switzerland, the Group operates a retirement foundation with assets which are held separately from the 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 the 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.
Previously, the Swiss Plan held some of its assets in an employer contribution reserve, which was used to pay contributions into the Swiss Plan. The
measured Swiss Plan surplus of $1 million has been derecognised as it is restricted to the value of this employer contribution reserve, which was
fully utilised at 31 December 2019.
The amounts recognised in the Group balance sheet are determined as follows:
$m
Present value of funded obligations
Fair value of plan assets
Surplus
Amount not recognised due to asset ceiling
Net pension asset
31 December
2019
31 December
2018
(422)
439
17
(1)
16
(376)
400
24
–
24
The decrease in the net pension asset from 31 December 2018 to 31 December 2019 is driven by the UK Plan, largely as a result of a decrease in
the discount rate assumption, partially offset by assets performing above the liability growth rate (discount rate).
Financial statements
137
22. Pension continued
Pensions: actuarial information
Changes in the present value of the defined benefit obligations are as follows:
$m
Present value of funded obligations at beginning of the year
Currency translation difference
Current service cost (employer portion)
Interest cost
Employee contributions
Remeasurements due to:
– changes in financial assumptions
– changes in demographic assumptions
– experience adjustments
Actual benefit payments
Past service credit
Curtailments and settlements
Present value of funded obligations at year end
Changes in the fair value of plan assets are as follows:
$m
Fair value of plan assets at beginning of the year
Currency translation difference
Interest income on plan assets
Actual return on plan assets less interest on plan assets
Employer repayments on wind-up of Reservoir Trust
Employee contributions
Benefits paid
Assets distributed on curtailments and settlements
Fair value of plan assets at year end
The plan assets primarily relate to investments in bonds, liability-driven investments (LDIs) and diversified growth funds.
The change in the net pension asset recognised on the Group balance sheet is as follows:
$m
Net pension asset at start of the year
Total pension credit/(expense)
Amount recognised outside profit and loss
Employer repayments on wind-up of Reservoir Trust
Currency translation difference
Net pension asset at end of the year
The amounts recognised in the Group income statement are as follows:
$m
Current service cost (employer portion)
Interest on net pension asset
Past service credit
Gains on settlement/curtailment/transfers
Total (credit)/expense
Year ended
31 December
2019
Year ended
31 December
2018
376
15
2
10
1
46
(3)
1
(24)
(2)
–
422
464
(22)
1
10
1
(33)
(3)
(2)
(29)
–
(11)
376
Year ended
31 December
2019
Year ended
31 December
2018
400
16
11
35
–
1
(24)
–
439
499
(24)
10
(26)
(19)
1
(29)
(12)
400
Year ended
31 December
2019
Year ended
31 December
2018
24
1
(10)
–
1
16
32
(2)
15
(19)
(2)
24
Year ended
31 December
2019
Year ended
31 December
2018
2
(1)
(2)
–
(1)
1
–
–
1
2
The $2 million past service credit relates to changes in the conversion factors of the Swiss Plan.
The $1 million allowance for the estimated costs of removing Guaranteed Minimum Pension inequalities in the UK Plan as at 31 December 2019 is
unchanged from 31 December 2018.
Man Group plc Annual Report 2019
138
Notes to the Group financial statements continued
22. Pension continued
The amounts recognised in other comprehensive income are as follows:
$m
Net actuarial (losses)/gains in the year due to:
– changes in financial assumptions
– changes in demographic assumptions
– experience adjustments on benefit obligations
Actual return on plan assets less interest on plan assets
Adjustment to recognise the effect of the asset ceiling
Amount recognised in other comprehensive income
The most significant actuarial assumptions used in the valuations of the two plans are:
Discount rate
Price inflation
Future salary increases
Interest crediting rate
Social security increases
Pension in payment increases
Deferred pensions increases
Year ended
31 December
2019
Year ended
31 December
2018
(46)
3
(1)
35
(1)
(10)
33
3
2
(26)
3
15
UK Plan
Swiss Plan
31 December
2019
% p.a.
31 December
2018
% p.a.
31 December
2019
% p.a.
31 December
2018
% p.a.
2.1
3.1
3.1
–
–
3.6
5.0
2.9
3.3
3.3
–
–
3.7
5.0
0.4
1.2
1.2
0.4
1.0
–
–
1.0
1.2
1.2
1.0
1.0
–
–
At 31 December 2019, mortality rates in the UK Plan are assumed to be in line with 100% of the S2NA Light tables for all members with pensions of
more than £50,000 p.a. at 31 December 2018 (“high earners”) and S2NA tables for all other members (2018: same as at 31 December 2019).
These mortality tables are assumed to be projected by year of birth with allowance for future improvements in longevity in line with the 2018 CMI
projections with a long-term rate of improvement of 1.25% p.a. and an initial improvements parameter of 0.5% p.a. for high earners and 0.25% p.a.
for all other members (2018: in line with the 2017 CMI projections with a long term rate of improvement of 1.25% p.a.).
At 31 December 2019 mortality rates in the Swiss Plan are assumed to be in line with the Swiss BVG 2015 generational tables (2018: same as at
31 December 2019).
Illustrative life expectancies are set out in the table below (the UK Plan life expectancies are based on the S2NA tables).
Years
Life expectancy of male aged 60 at year end
Life expectancy of male aged 60 in 20 years
Life expectancy of female aged 60 at year end
Life expectancy of female aged 60 in 20 years
UK Plan
Swiss Plan
31 December
2019
26.6
28.2
28.8
30.3
31 December
2018
26.8
28.4
29.0
30.5
31 December
2019
31 December
2018
27.4
29.3
29.7
31.4
27.3
29.2
29.6
31.4
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 to produce the below figures have been carried out using the same method and data as Man’s pension figures. Each
assumption has been varied individually and a combination of changes in assumptions could produce a different result.
As at 31 December 2019:
$m
Discount rate decreased by 0.1% p.a.
Inflation rate increased by 0.1% p.a.
One year increase in assumed life expectancy
UK Plan
Swiss Plan
Increase in obligation
7
2
16
–
–
–
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 16 years, and the duration of the Swiss Plan is approximately 18 years.
22. Pension continued
The assets held by the two plans as at 31 December 2019 are as follows:
Swiss equities
Non-Swiss equities
Index-linked government bonds
Absolute return bonds
Swiss bonds
Non-Swiss bonds
Property
Hedge funds
LDI
Diversified growth funds
Man Alternative Risk Premia fund
Cash
Total assets
Financial statements
139
UK Plan
Swiss Plan
$m
–
–
41
119
–
–
–
–
110
61
56
26
413
%
–
–
10%
29%
–
–
–
–
27%
15%
13%
6%
100%
$m
3
7
–
–
4
6
4
1
–
–
–
1
26
%
12%
27%
–
–
15%
23%
15%
4%
–
–
–
4%
100%
The UK investment strategy is set by the trustees of the UK Plan. The current strategy is broadly split into growth and matching portfolios. The
growth portfolio is invested in diversified growth funds and Man Alternative Risk Premia. The matching portfolio is invested primarily in government
and corporate bonds (the latter through the “absolute return bonds” holdings), and liability-driven investment (LDI) funds.
The government bond assets and diversified growth funds have prices quoted in active markets and the absolute return bonds, LDI and Man
Alternative Risk Premia are primarily unquoted. At 31 December 2019, around 25% of the UK Plan assets relate to those with quoted prices and
75% with unquoted prices (2018: around 25% quoted and 75% unquoted). The UK Plan does not invest directly in property occupied by Man or in
Man’s own transferable financial securities. 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, whose main goal is to hedge movements in the liabilities
due to changes in interest rate and inflation expectations. The current investment strategy aims to hedge around 100% of the movement in the
“technical provisions” funding measure, as opposed to the IAS 19 accounting measure, due to both interest rate and inflation expectation changes.
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.
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, the Group will consider how to remove a deficit as quickly as possible.
23. Segmental analysis
The criteria for identifying an operating segment is that it is a component of Man whose results are regularly reviewed by the Board and the Senior
Management Governance Committee to make decisions about resources to be allocated to the segment and to assess its performance.
Management information regarding revenues, net management fee margins and investment performance relevant to the operation of the investment
managers, products and the investor base are reviewed by the Board and the Senior Management Governance Committee. A centralised shared
infrastructure for operations, product structuring, distribution and support functions for each of the five investment managers which Man
incorporates (AHL, GLG, FRM, Numeric and GPM) means that operating costs are not allocated to constituent parts of the investment management
business. As a result, performance is assessed, resources are allocated and other strategic and financial management decisions are determined by
the Board and the Senior Management Governance Committee on the basis of the investment management business of Man as a whole.
Accordingly, we operate and report as a single segment investment management business, together with relevant information regarding FUM flows
and net margins, to allow for analysis of the direct contribution of products and the respective investor base.
Man Group plc Annual Report 2019
140
Notes to the Group financial statements continued
24. Geographical disclosure
$m
Cayman Islands
Ireland
United Kingdom and the Channel Islands
United States of America
Other countries
Year ended 31 December 2019
Year ended 31 December 2018
Revenues by
fund location
Non-current
assets
Revenues by
fund location
Non-current
assets1
540
180
137
115
141
1,113
–
–
828
262
44
1,134
380
202
124
107
147
960
–
–
691
275
44
1,010
Note:
1 As previously presented at 31 December 2018, the location of these assets was considered to be the domicile of the Group’s acquiring subsidiary. A portion of goodwill and acquired intangibles
have been reclassified in the 2018 comparatives, predominantly from the United States to the United Kingdom and the Channel Islands, in order to reflect the location of the individuals managing
the assets as described below.
Disclosure of revenue by geographic location is based on the registered domicile of the fund entity paying Man fees. Revenue from one fund
marginally exceeded 10% of total annual fee revenues, due to performance fees crystallising during the year. Excluding performance fees, revenues
from no single fund exceeded 10% of revenues for the year.
Non-current assets are allocated based on where the assets are located, and include goodwill and other acquired intangible assets, other
intangibles, leasehold improvements and equipment, and right-of-use lease assets. For goodwill and other acquired intangible assets, we consider
that the location of the intangibles is best reflected by the location of the individuals managing those assets.
25. Foreign currencies
The majority of revenues, assets, liabilities and financing are denominated in USD and therefore Man’s presentation currency is USD.
For consolidated entities with a USD functional currency, monetary assets and liabilities denominated in foreign currencies are translated at each
balance sheet date rate. 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. 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 balance sheet date
rate. Income and expenses are translated at the average rate for the period in which the transactions occur. Resulting exchange differences are
recorded in other comprehensive income.
Financial statements
141
26. Fair value of financial assets/liabilities
Man discloses 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 fair value of financial assets and liabilities can be analysed as follows:
$m
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
31 December 2019
31 December 2018
Financial assets held at fair value:
Investments in fund products and other
investments (Note 13)
Investments in line-by-line consolidated funds
(Note 13)
Derivative financial instruments (Note 14)
Financial liabilities held at fair value:
Derivative financial instruments (Note 15)
Contingent consideration (Note 15)
3
–
–
3
–
–
–
180
385
4
569
13
–
13
169
35
–
204
–
24
24
352
420
4
776
13
24
37
3
–
–
3
–
–
–
246
316
16
578
15
–
15
155
41
–
196
–
212
212
404
357
16
777
15
212
227
During the year, there were no significant changes in the business or economic circumstances that affected the fair value of Man’s financial assets
and no significant transfers of financial assets or liabilities held at fair value between categories. For investments in fund products, Level 2
investments comprise holdings primarily in unlisted, open-ended, active and liquid funds, which have daily or weekly pricing derived from third-party
information.
A transfer into Level 3 would be deemed to occur where the level of prolonged activity, as evidenced by subscriptions and redemptions, is deemed
insufficient to support a Level 2 classification. This, as well as other factors such as a deterioration of liquidity in the underlying investments, would
result in a Level 3 classification. The material holdings within this category are priced on a recurring basis based on information supplied by third
parties, with a liquidity premium adjustment applied based on the expected timeframe for exit. Reasonable changes in the liquidity premium
assumptions would not have a significant impact on the fair value.
The basis of measuring the fair value of Level 3 investments is outlined in Note 13.1. The movements in Level 3 financial assets and financial liabilities
measured at fair value are as follows:
$m
Level 3 financial assets/(liabilities) held at fair value
At beginning of the year
Transferred into level 3
Purchases
(Charged)/credited to the income statement
Sales or settlements
Change in line-by-line consolidated funds held
At year end
Total (losses)/gains for the year included in the Group statement
of comprehensive income for assets/(liabilities) held at year end
Year ended 31 December 2019
Year ended 31 December 2018
Financial
assets at
fair value
through profit
or loss
Financial
liabilities at
fair value
through profit
or loss
Financial
assets at
fair value
through profit
or loss
Financial
liabilities at
fair value
through profit
or loss
196
–
27
(6)
(7)
(6)
204
(6)
(212)
–
–
19
169
–
(24)
19
112
22
88
(9)
(17)
–
196
(9)
(243)
–
(1)
3
29
–
(212)
3
Man Group plc Annual Report 2019
142
Notes to the Group financial statements continued
26. Fair value of financial assets/liabilities continued
The financial liabilities in Level 3 relate to the contingent consideration payable.
$m
Numeric
Aalto
Other
Total
Numeric
Aalto
Other
Total
Year ended 31 December 2019
Year ended 31 December 2018
Contingent consideration payable
At beginning of the year
Purchases
Revaluation of contingent consideration
Unwind of contingent consideration
discount (Note 6)
Sales or settlements
At year end
172
–
(22)
13
(161)
2
37
–
(20)
5
–
22
3
–
5
–
(8)
–
212
–
(37)
18
(169)
24
175
–
(17)
20
(6)
172
60
–
(10)
8
(21)
37
8
1
(4)
–
(2)
3
243
1
(31)
28
(29)
212
The revaluation of contingent consideration in the Group income statement is an adjustment to the fair value of expected acquisition earn-out
payments.
The $22 million decrease (2018: $17 million) in the fair value of the Numeric contingent consideration is largely as a result of lower than expected
Numeric performance during 2019 and refinements to forecasts. In September 2019, Man exercised the call option to purchase the 18.3% equity
interest held by Numeric management in the Numeric business at five years post-closing. The amount paid under the call option totalled
$154 million, with other amounts paid in the year relating to annual dividends. The year end creditor of $2 million relates to the remainder of the
annual dividends payable in early 2020.
The Aalto contingent consideration is dependent on levels of run rate management fees measured following four, six and eight years from
completion on 1 January 2017. The maximum aggregate amount payable by Man is capped at $207 million. The $20 million decrease (2018: $10
million) in the fair value of the Aalto contingent creditor is due to slower than forecast growth.
The fair values are based on discounted cash flow calculations, which represent the expected future profits of each business as per the earn-out
arrangements. The fair values are determined using a combination of inputs, such as weighted average cost of capital, net management fee
margins, performance, operating margins and the growth in FUM, as applicable. The post-tax discount rate applied for Aalto management fees
is 15%.
The most significant inputs into the valuations at 31 December 2019 are as follows:
Weighted average net management fee margin (over the remaining earn-out period)
Compound growth in average FUM (over the remaining earn-out period)
Aalto
0.6%
20%
Changes in inputs would result in the following increase/(decrease) in the fair value of the contingent consideration creditor at 31 December 2019,
with a corresponding (expense)/gain in the Group income statement:
$m
Weighted average net management fee margin (over the remaining earn-out period)
0.1% increase
0.1% decrease
Compound growth in average FUM (over the remaining earn-out period)
5% increase
5% decrease
Aalto
21
(22)
15
(13)
Financial statements
143
27. Related party transactions
Related parties comprise key management personnel, associates and fund entities which Man is deemed to control. All transactions with related
parties were carried out on an arm’s length basis.
Refer to Note 17 for details of income earned from associates. Management fees earned from fund entities in which Man holds a controlling interest
are detailed in Note 13. Contingent consideration payable to Aalto management is outlined in Note 26.
The Executive Committee, together with the non-executive directors, are considered to be the Group’s key management, being those directors,
partners and employees having authority and responsibility for planning, directing and controlling the activities at Man.
Key management compensation $m
Salaries and other short-term employee benefits1
Share-based payments
Fund product based payment charge
Pension costs (defined contribution)
Total
Note:
1
Includes salary, benefits and cash bonus.
Year ended
31 December
2019
Year ended
31 December
2018
29
13
9
1
52
30
12
8
1
51
Man made a charitable donation of £2,500 to Greenhouse Sports Ltd during the year (2018: £25,500) and nil (2018: £7,200) was paid to VWA
Search Ltd, a recruitment firm, which are considered related parties.
28. 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.
Man Group disputes the allegations and considers there is no merit to the claim (in respect of liability and quantum). We will therefore vigorously and
robustly defend the proceedings.
Man Group is subject to various other claims, assessments, regulatory enquiries and investigations in the normal course of its business. The
directors do not expect such matters to have a material adverse effect on the financial position of the Group.
Man Group plc Annual Report 2019
144
Notes to the Group financial statements continued
29. Group investments
Details of the Group’s subsidiaries and consolidated structured entities, which have been consolidated into the Group’s results, and details of
investments in associates are provided below. The country of operation is the same as the country of incorporation, the year end is 31 December,
and effective Group interest represents both the percentage held and voting rights, unless otherwise stated.
Subsidiaries
Principal operating subsidiaries
Registered address
Direct or
indirect
Country of
incorporation
Effective Group
interest %
Asset management
AHL Partners LLP1
GLG Partners LP
Numeric Investors LLC
Group services company
E D & F Man Limited
Man Investments AG
Man Investments Holdings Inc.
Group treasury and holding company
Man Property Holdings Limited
Man Investments Finance Limited
Group holding and other subsidiaries
Man Group plc
Man Group Treasury Limited
Man Group Limited
Aalto Invest Cayman Limited
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Indirect
Indirect
Indirect
UK
UK
US
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Huobstrasse 3, 8808 Pfäffikon SZ
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Indirect
UK
Indirect Switzerland
US
Indirect
22 Grenville Street, St Helier, Jersey, JE4 8PX
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Indirect
Indirect
Jersey
UK
22 Grenville Street, St Helier, Jersey, JE4 8PX
22 Grenville Street, St Helier, Jersey, JE4 8PX
Riverbank House, 2 Swan Lane, London, EC4R 3AD
PO Box MP10085, 3rd Floor Zephyr House, 122 Mary
Street, George Town, Grand Cayman, KY1-1001
Direct
Indirect
Indirect
Jersey
Jersey
UK
Cayman
Man Global Private Markets (UK) Limited
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Indirect
UK
(Previously Aalto Invest UK Ltd)
E. D. & F. Man Investments B.V.
E D & F Man Investments Limited
FA Sub 2 Limited
Beurs – World Trade Center, Beursplein 37,
3011 AA, Rotterdam
15 Esplanade, St Helier, JE1 1RB
Ritter House, Wickhams Cay II, Road Town, Tortola,
Indirect
Netherlands
Indirect
Indirect
Jersey
BVI
VG1110
FA Sub 3 Limited
Ritter House, Wickhams Cay II, Road Town, Tortola,
Indirect
BVI
VG1110
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Financial Risk Management Limited
FRM Holdings Limited
Gaspé House, 66-72 Esplanade, St Helier, JE2 3QT
FRM Investment Management GP (USA) LLC 4001 Kennett Pike, Suite 302, Wilmington DE 19807
FRM Investment Management Limited
PO Box 186, Royal Chambers, St. Julian’s Avenue,
St Peter Port, GY1 4HP, Guernsey
4001 Kennett Pike, Suite 302, Wilmington DE 19807
FRM Investment Management (USA) LLC
FRM Thames Fund General Partner 1 Limited 89 Nexus Way, Camana Bay, P.O. BOX 31106,
GLG Capital Management LLC
GLG Holdings Limited
GLG LLC
GLG Partners GP LLC
GLG Partners Hong Kong Limited
GLG Partners Limited
GLG Partners UK Group Ltd
GLG Partners UK Holdings Ltd
Habitare Homes Limited
Man Group Investments Limited (previously
GLG Partners UK Ltd)
Knox Pines Limited
Man Asset Management (Cayman) Limited
Man Asset Management (Ireland) Limited
Man Australia GP Limited
Grand Cayman, KY1-1205
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Wickhams Cay, PO Box 662, Road Town, Tortola
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Unit 2206-2207, 22/F Man Yee Building,
No. 68 Des Voeux Road, Central
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Wickhams Cay, PO Box 662, Road Town, Tortola
89 Nexus Way, Camana Bay, P.O. BOX 31106,
Grand Cayman, KY1-1205
70 Sir John Rogerson’s Quay, Dublin 2
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Indirect
Indirect
Indirect
Indirect
UK
Jersey
US
Guernsey
Indirect
Indirect
US
Cayman
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
US
BVI
US
US
Hong Kong
UK
UK
UK
UK
UK
BVI
Cayman
Ireland
UK
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Financial statements
145
Country of
incorporation
Effective Group
interest %
29. Group investments continued
Subsidiaries continued
Group holding and other subsidiaries
Registered address
Man Australia LP
Man (Europe) AG
Man Fund Management (Guernsey) Limited
Man Fund Management Netherlands BV
Level 27, Chifley Tower, 2 Chifley Square, Sydney,
NSW 2000
Austrasse 56, 9490, Vaduz, Liechtenstein
PO Box 186, Royal Chambers, St. Julian’s Avenue,
St Peter Port, GY1 4HP, Guernsey
Beurs – World Trade Center, Beursplein 37, 3011 AA,
Rotterdam
Direct or
indirect
Indirect
Australia
Indirect
Indirect
Liechtenstein
Guernsey
Indirect
Netherlands
Man Fund Management UK Limited
Man GLG Partners LLP1
Man Global Private Markets (USA) Inc.
Man Global Private Markets SLP LLC
Man Group Holdings Limited
Man Group Japan Limited
Man Group Services Limited
Man Group UK Limited
Man Investments Australia Limited
Man Investments (CH) AG
Man Investments Finance Inc.
Man Investments Holdings Limited
Man Investments (Hong Kong) Limited
Man Investments Inc.
Man Investments Limited
Man Investment Management (Shanghai)
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Riverbank House, 2 Swan Lane, London, EC4R 3AD
PO Box 556, 1st Floor, Les Echelons Court, Les Echelons,
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
South Esplanade, St Peter Port, GY1 6JB, Guernsey
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Level 27, Chifley Tower, 2 Chifley Square, Sydney,
NSW 2000
Huobstrasse 3, 8808 Pfäffikon SZ
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Unit 2206-2207, 22/F Man Yee Building,
No.68 Des Voeux Road, Central
15 North Mill Street, Nyack, NY 10960, United States
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Room 1857 Bund Centre, No. 222 Yan An East Road,
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
UK
UK
US
US
UK
Guernsey
UK
UK
Australia
Switzerland
US
UK
Hong Kong
US
UK
China
Co., Ltd
Shanghai, 200002
Man Investments (Shanghai) Limited
Room 1818, Bund Centre, No. 222 Yan An East Road,
Indirect
China
Man Investments (USA) Corp.
Man Investments USA Holdings Inc.
Man Mash Limited
Man Principal Strategies Corp
Man Solutions Limited
Man Solutions (USA) LLC
Man Solutions SLP LLC
Man Strategic Holdings Limited
Man UK Strategies Limited
Man Valuation Services Limited
Man Worldwide Operations Management
Limited
Mount Garnet Limited
Mount Granite Limited
Numeric Holdings LLC
Numeric Midco LLC
RBH Holdings (Jersey) Limited
RMF Co-Investment Limited
Silvermine Capital Management LLC
GLG Holdings Inc. (in dissolution)
GLG Inc. (in dissolution)
GLG Partners Inc. (in dissolution)
Man Financial Australia Pty Limited
(in liquidation)
Shanghai, 200002
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Riverbank House, 2 Swan Lane, London, EC4R 3AD
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Riverbank House, 2 Swan Lane, London, EC4R 3AD
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
22 Grenville Street, St Helier, Jersey, JE4 8PX
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Wickhams Cay, PO Box 662, Road Town, Tortola
Wickhams Cay, PO Box 662, Road Town, Tortola
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
IFC 5, St Helier, JE1 1ST, Jersey
PO Box 309, Ugland House, South Church Street, George
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Town, Grand Cayman, KY1-1104
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Level 27, Chifley Tower, 2 Chifley Square, Sydney, NSW
Indirect
Indirect
Indirect
Indirect
Indirect
2000
US
US
UK
US
UK
US
US
UK
UK
UK
Jersey
BVI
BVI
US
US
Jersey
Cayman
US
US
US
US
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Man Group plc Annual Report 2019
146
Notes to the Group financial statements continued
29. Group investments continued
Subsidiaries continued
Group holding and other subsidiaries
Registered address
Direct or
indirect
Country of
incorporation
Effective Group
interest %
Man Fund Management Limited
70 Sir John Rogerson’s Quay, Dublin 2
Indirect
Ireland
(in liquidation)
Man Litchfield Inc. (in dissolution)
Man Washington Inc. (in dissolution)
Seabrook Holding Inc (in dissolution)
Note:
1 The financial year end is 31 March.
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Indirect
Indirect
Indirect
US
US
US
100
100
100
100
Consolidated structured entities
The following investment funds, which the Group is deemed to control, have been consolidated on a line-by-line basis (Note 13):
Strategy
AHL Insight
Registered address
Country of incorporation/
principal place of
operation
% of net asset
value held
C/O Citi Hedge Fund Services Ltd, Hemisphere House, Hamilton
Bermuda
100
Man GLG European Income Opportunities
Man GLG Global Emerging Markets Bond
Man GLG Iberian Opportunities Fund
Man GLG Select Opportunities
HM 11
70 Sir John Rogerson's Quay, Dublin 2
70 Sir John Rogerson's Quay, Dublin 2
70 Sir John Rogerson's Quay, Dublin 2
c/o Maples Corporate Services Limited, PO Box 309,
Ugland House, Grand Cayman KY 1-11-4
Man GPM US Residential Real Estate Fund
Suite 400, Wilmington, New Castle County, Delaware 19808
Man Numeric China A Core
Man Numeric European Equity
Man Numeric US High Yield Bond
Man Numeric US Liquid Private Equity
Alternative
Man GLG High Yield Opportunities
Man GLG Global Credit Multi Strategy
Alternative
Man GLG RI Global Sustainable Growth
Man GLG Global Debt Total Return
Man GLG US Absolute Alpha
c/o Maples Corporate Services Limited, PO Box 309,
Ugland House, Grand Cayman KY 1-11-4
70 Sir John Rogerson's Quay, Dublin 2
c/o Maples Corporate Services Limited, PO Box 309,
Ugland House, Grand Cayman KY 1-11-4
c/o Maples Corporate Services Limited, PO Box 309,
Ugland House, Grand Cayman KY 1-11-4
Riverbank House, 2 Swan Lane, London, EC4R 3AD
70 Sir John Rogerson's Quay, Dublin 2
70 Sir John Rogerson's Quay, Dublin 2
70 Sir John Rogerson's Quay, Dublin 2
70 Sir John Rogerson's Quay, Dublin 2
Ireland
Ireland
Ireland
Cayman
US
Cayman
Ireland
Cayman
Cayman
UK
Ireland
Ireland
Ireland
Ireland
24
61
58
71
100
100
97
59
100
47
100
100
100
100
Five year record
Unaudited
$m
Income statement
Gross management and other fees
Performance fees
Profit before adjusting items
Adjusting items1
Pre-tax profit/(loss)
Tax (expense)/credit
Profit/(loss) for the year
Adjusted management fee profit before tax
Adjusted performance fee profit before tax
Earnings per share (diluted) (cents)
Balance sheet
Net cash
Net assets
Other statistics
Cash flow from operating activities (before working capital movements) ($m)
Ordinary dividends per share (cents)
Funds under management ($bn)
Average headcount2
GBP/USD exchange rates
Average
Year end
Financial statements
147
Year to
31 December
2019
Year to
31 December
2018
Year to
31 December
2017
Year to
31 December
2016
Year to
31 December
2015
788
325
386
(79)
307
(22)
285
172
214
18.4
281
1,624
385
9.8
117.7
1,413
834
126
251
27
278
(5)
273
217
34
17.0
220
1,593
311
11.8
108.5
1,376
781
287
384
(112)
272
(17)
255
203
181
15.3
229
1,716
431
10.8
109.1
1,313
746
81
205
(477)
(272)
6
(266)
178
27
(15.8)
277
1,674
245
9.0
80.9
1,250
833
302
400
(216)
184
(13)
171
194
206
10.0
458
2,215
402
10.2
78.7
1,183
0.7830
0.7544
0.7489
0.7837
0.7759
0.7396
0.7384
0.8093
0.6544
0.6786
Notes:
1 Statutory profit/(loss) before tax is adjusted to give a fuller understanding of the underlying profitability of the business. See pages 148-151 for details of the Group’s alternative performance measures.
2 The average headcount includes directors, employees, partners and contractors.
Man Group plc Annual Report 2019
148
Alternative performance measures
We assess the performance of the Group using a variety
of alternative performance measures (APMs). We discuss the
Group’s results on an ‘adjusted’ basis as well as a statutory
basis. The rationale for using adjusted measures is explained
below.
We also explain financial performance using measures that are not
defined under IFRS and are therefore termed ‘non-GAAP’ measures.
These non-GAAP measures are also explained below. The alternative
performance measures we use may not be directly comparable with
similarly titled measures by other companies.
Funds under management (FUM)
FUM is the assets that the Group manages for investors in fund entities.
FUM is a key indicator of our performance as an investment manager
and our ability to remain competitive and build a sustainable business.
FUM is measured based on management fee earning capacity. Average
FUM multiplied by our net management fee margin (see below) equates
to our management fee earning capacity. FUM is shown by product
groupings that have similar characteristics (as shown on page 28).
Management focus on the movements in FUM split between the
following categories:
Net inflows/outflows
Net inflows/outflows are a measure of our ability to attract and retain
investor capital. Net flows are calculated as sales less redemptions.
Further details are included on page 28.
Investment movement
Investment movement is a measure of the performance of the
funds we manage for our investors. It is calculated as the fund
performance of each strategy multiplied by the FUM in that strategy.
Further details are included on page 28.
FX and other movements
Some of the Group’s FUM is denominated in currencies other than USD.
FX movements represent the impact of translating non-USD
denominated FUM into USD. Other movements principally relate to
maturities and leverage movements.
Asset weighted performance versus benchmark
The asset weighted performance relative to peers for the period stated is
calculated using the daily asset weighted average performance relative
to peers for all strategies where we have identified and can access an
appropriate peer composite. The performance of our strategies is
measured net of management fees charged and, as applicable,
performance fees charged. As at 31 December 2019, it covers 89% of
the FUM of the Group and excludes infrastructure mandates, Global
Private Markets and collateralised loan obligations. Asset weighted
performance versus benchmark is a KPI (page 24).
Net management fee revenue and margins
Margins are an indication of the revenue margins negotiated with our
institutional and retail investors net of any distribution costs paid to
intermediaries and are a primary indicator of future revenues. Net
management fee revenue is defined as gross management fee revenue
and share of post-tax profits of associates less distribution costs,
excluding any amounts related to consolidated fund entities (Note 13.2).
This represents a change in definition of the measure as described
below. Net management fee margin is calculated as net management
fee revenue, excluding share of post-tax profits of associates divided by
FUM. Net management fee revenue and margins are shown on
page 29.
Core net management fee revenue and core profit before tax
Core net management fee revenue excludes net management fee
revenue relating to guaranteed products and share of post-tax profits of
associates. These items have been excluded in order to better present
the management fees of the core business given the roll-off of the
legacy guaranteed product FUM and share of post-tax profits of
associates which is generated externally and for which our remaining
equity interest was sold during 2018 (Note 17). The detailed calculation
of core net management fee revenue is shown on page 29. Core profit
before tax is defined as core management fee profit before tax plus
adjusted performance fee profit before tax.
Run rate net management fee revenue and margins
In addition to the net management fee revenue and margins for the year,
as detailed above, we also use run rate net management fee revenue
and run rate margins as at the end of the year. These measures give the
most up to date indication of our revenue streams at the period end
date. The run rate net management fee margin is calculated as net
management fee revenue for the last quarter divided by the average
FUM for the last quarter on a fund by fund basis. Run rate net
management fee revenue is calculated as the run rate net management
fee margin applied to the closing FUM as at the period end.
Adjusted profit before tax and adjusted earnings per share
Adjusted profit before tax is a measure of the Group’s underlying
profitability. The directors consider that in order to assess underlying
operating performance, the Group’s profit period on period is most
meaningful when considered on a basis which excludes acquisition and
disposal related items (including non-cash items such as amortisation of
acquired intangible assets), impairment of assets, costs relating to
substantial restructuring plans, unrealised foreign exchange movements
on lease liabilities and associated deferred tax and certain significant
event driven gains or losses, which therefore reflects the revenues and
costs that drive the Group’s cash flows and inform the base on which
the Group’s variable compensation is assessed. Movements in deferred
tax relating to the recognition of tax assets in the US are similarly
excluded from adjusted profit after tax in order to best reflect cash taxes
paid. The directors are consistent in their approach to the classification
of adjusting items period to period, maintaining an appropriate symmetry
between losses and gains and the reversal of any accruals previously
classified as adjusting items.
Changes to APMs in 2019
We have amended the definition of net management fee revenue in
2019 to also exclude the third-party share of management fees relating
to consolidated fund entities in order to better reflect the associated
income and expenses of these funds together with other seeding-
related activity which is recognised within performance fee profits. This
would have a 2018 comparative impact of increasing management fee
profits by $3 million and decreasing performance fee profits by the same
amount. There is no impact on adjusted profit or statutory profit before
tax.
Financial statements
149
Adjusted earnings per share (EPS) is calculated as adjusted profit after tax divided by the weighted average diluted number of shares.
The reconciliation of statutory profit before tax to adjusted profit before tax, and the reconciliation of statutory diluted EPS to the adjusted EPS
measures are shown below.
$m
Statutory profit before tax
Adjusting items:
Acquisition and disposal related
Impairment of acquired intangible assets
Amortisation of acquired intangible assets
Revaluation of contingent consideration
Unwind of contingent consideration discount
Gain on sale of investment in Nephila
Unrealised foreign exchange movements on lease liabilities and associated deferred tax
Compensation – restructuring
Other costs – restructuring
Adjusted profit before tax
Tax on adjusted profit
Adjusted profit after tax
Note to the
Group financial
statements
Year ended
31 December
2019
Year ended
31 December
2018
307
278
10
10
26
6
17
4
5
5
78
(37)
18
(1)
10
(1)
7
386
(59)
327
–
83
(31)
28
(113)
–
1
5
251
(35)
216
Further details on adjusting items are included within the related notes to the Group financial statements.
Adjusted management fee and performance fee profit before tax
Adjusted profit before tax is split between adjusted management fee profit before tax and adjusted performance fee profit before tax to separate out
the variable performance fee related earnings of the business from the underlying management fee earnings of the business. See page 148 for
details of changes to this APM in 2019.
$m
Gross management and other fees1,2
Sub-lease rental income
Share of post-tax profit of associates
Less:
Distribution costs
Asset servicing
Compensation (management fee)
Other costs2
Net finance expense
Adjusted management fee profit before tax
Exclude: Net management fees from guaranteed products and share of post-tax profits of associates
Core management fee profit before tax
Performance fees1,2
Gains/(losses) on investments and other financial instruments1
Less:
Compensation (performance fee)
Finance expense
Adjusted performance fee profit before tax
Core profit before tax
Year ended
31 December
2019
Year ended
31 December
2018
791
14
–
(38)
(55)
(352)
(178)
(10)
172
(2)
170
325
20
(125)
(6)
214
384
835
–
7
(51)
(51)
(357)
(170)
4
217
(14)
203
127
(5)
(79)
(9)
34
237
Notes:
1 In 2018, gross management and other fees included $1 million of management fee revenue and performance fees included $1 million of performance fee revenue for the third-party share relating
to line-by-line consolidated fund entities (per Group financial statements Note 13.2 on page 128), reclassified to gains/(losses) on investments.
2 In 2019, gross management and other fees, performance fees and other costs exclude amounts for line-by-line consolidated fund entities, with these reclassified to gains/(losses) on investments
together with the third-party share.
Man Group plc Annual Report 2019
150
Alternative performance measures continued
Core profit before tax and core management fee profit before tax
Core management fee profit before tax is adjusted management fee profit before tax, excluding net management fees relating to guaranteed
products and share of post-tax profits of associates, which relate to our legacy business. Core profit before tax is core management fee profit before
tax plus adjusted performance fee profit before tax, equivalent to adjusted profit before tax excluding net management fees relating to guaranteed
products and share of post-tax profits of associates. Core profit before tax is a KPI (page 25).
The impact of adjusting items on the Group’s tax expense is outlined below:
$m
Statutory tax expense
Less tax credit on adjusting items:
Amortisation of acquired intangible assets
Unrealised foreign exchange movements on lease liabilities and associated deferred tax
Tax adjusting item
7
Tax expense on adjusted profit before tax
Made up of:
Tax expense on adjusted management fee profit before tax
Tax expense on adjusted performance fee profit before tax
Note to the
Group financial
statements
Year ended
31 December
2019
Year ended
31 December
2018
22
8
2
27
59
21
38
5
10
–
20
35
28
7
Adjusted tax rate
The adjusted tax rate is the effective tax rate on adjusted profit before tax and is equal to the tax on adjusted profit divided by adjusted profit before
tax. As outlined above adjusted profit before tax is a measure of the Group’s underlying profitability. The tax expense on adjusted profit before tax is
calculated by excluding the tax benefit/expense related to adjusting items from the statutory tax expense, except for any tax relief recognised as a
result of available US tax assets (Note 7). Therefore, the tax on adjusted profit best reflects the cash taxes payable by the Group. The adjusted tax
rate is 15% for 2019 (2018: 14%), which has increased due to a higher weighting of profits in the UK where the applicable statutory tax rate is 19%.
Certain adjusting items are included within the notes to the Group financial statements, which can be reconciled to their adjusted equivalents as
outlined below:
$m
Total compensation costs
Adjusting items (page 149)
Total compensation costs excluding adjusting items
Made up of:
Fixed compensation (includes salaries and associated social security costs, and pension costs)
Variable compensation (includes variable cash compensation, share-based payment charge,
fund product payment charge and associated social security costs)
$m
Total other costs
Adjusting items (page 149)
Total other costs excluding adjusting items
$m
Total finance expense
Total finance income
Net finance expense, including adjusting items
Adjusting items (page 149)
Net finance expense excluding adjusting items
Note to the
Group financial
statements
Year ended
31 December
2019
Year ended
31 December
2018
4
5
6
6
476
1
477
193
284
189
(7)
182
42
(8)
34
(18)
16
437
(1)
436
179
257
175
(5)
170
40
(7)
33
(28)
5
Financial statements
151
Adjusted management fee EPS
Man’s dividend policy is disclosed on page 33. Dividends paid to shareholders (based on adjusted management fee EPS) are determined based on
the adjusted management fee profit before tax. Adjusted management fee EPS is calculated using post-tax profits excluding performance fee profits
and adjusting items, divided by the weighted average diluted number of shares.
The reconciliation from EPS (Note 8) to adjusted EPS is provided below:
Statutory profit after tax
Adjusting items
Tax adjusting items
Adjusted profit after tax
Less adjusted performance fee profit
Adjusted management fee profit after tax
Year ended 31 December 2019
Year ended 31 December 2018
Basic and
diluted post-
tax earnings
$m
Basic
earnings
per share
cents
Diluted
earnings
per share
cents
Basic and
diluted post-
tax earnings
$m
Basic
earnings
per share
cents
Diluted
earnings
per share
cents
285
79
(37)
327
(176)
151
18.9
5.2
(2.5)
21.6
(11.6)
10.0
18.4
5.1
(2.4)
21.1
(11.3)
9.8
273
(27)
(30)
216
(27)
189
17.3
(1.7)
(1.9)
13.7
(1.7)
12.0
17.0
(1.7)
(1.8)
13.5
(1.7)
11.8
Compensation ratio
The compensation ratio measures our compensation costs relative to our revenue. The Group’s compensation ratio is generally between 40% and
50% of net revenue, depending on the mix and level of revenue. It is calculated as total compensation divided by net revenue. Details of the current
year compensation ratio are included on page 30.
Net financial assets/liabilities
The Group is no longer subject to consolidated supervision by the UK’s Financial Conduct Authority following the corporate reorganisation in May
2019 (Note 1), and therefore pro forma surplus capital is no longer included as an APM. Net financial assets/liabilities is considered a proxy for
Group capital, and is equal to the Group's cash and seed book less borrowings, contingent consideration payable and payables under repo
arrangements, made up as follows:
$m
Seeding investment portfolio
Cash and cash equivalents1
Borrowings
Contingent consideration payable
Payables under repo arrangements
Net financial assets
Note:
1 Cash and cash equivalents excludes $61 million (2018: $26 million) of cash relating to line-by-line consolidated fund entities (Note 13.2).
Note to the
Group financial
statements
31 December
2019
31 December
2018
13
12
12
26
15
514
220
–
(24)
(36)
674
662
344
(150)
(212)
–
644
152 Shareholder information
In this section we have provided some key
information to assist you in managing your
shareholding in Man Group. If you have a
question that is not answered below, please
contact us at: shareholder@man.com
Man Group (www.man.com)
The Man Group website contains a wealth of information about the
Company, including details of the industry in which we operate, our
strategy and business performance, recent news from Man Group and
corporate responsibility initiatives. The Investor Relations section is a key
tool for shareholders with information on share price and financial results,
reports and presentations. This section of the website also contains
information on dividends and shareholder meeting details as well
as useful Frequently Asked Questions.
Equiniti Shareview (www.shareview.co.uk/shareholders)
Man Group’s register of shareholders is maintained by Equiniti, the
Company’s Registrars. Many aspects of managing your shares, such as
checking your current shareholding, managing dividend payments, and
updating your contact details, can be carried out by registering on the
Equiniti Shareview website. To do this you will need your Shareholder
Reference, which can be found on your share certificate or dividend
confirmation.
Dividends
Final dividend for the year ended 31 December 2019
5.1 cents per share
The directors have recommended a final dividend of 5.1 cents per share in
respect of the year ended 31 December 2019. Payment of this dividend is
subject to approval at the 2020 Annual General Meeting (AGM). Key dates
relating to this dividend are given below:
Ex-dividend date
Record date
DRIP election date
AGM (to approve final dividend)
Sterling conversion date
Payment date
CREST accounts credited with DRIP shares
DRIP share certificates received
2 April 2020
3 April 2020
23 April 2020
1 May 2020
1 May 2020
15 May 2020
20 May 2020
21 May 2020
Dividend policy
Man Group’s dividend policy is to pay out at least 100% of adjusted
management fee earnings per share in each financial year by way
of ordinary dividend. In addition, the Group expects to generate
significant capital over time, primarily from net performance fee
earnings. Available capital, after taking into account our required
capital (including liabilities for future earn-out payments) and potential
strategic opportunities, will be distributed to shareholders over time
by way of higher dividend payments and/or share repurchases. The
Company is currently undertaking a share repurchase programme
pursuant to which up to a maximum of $100 million is being returned
to shareholders. Details of the number of shares repurchased
during 2019 can be found in Note 21 of the financial statements.
The Group will fix the dividend currency conversion rate on 1 May 2020.
The achieved sterling rate will be announced at this time, in advance
of the payment date. This is a change from the previous practice of
converting and announcing this on the dividend announcement date.
Dividend payment methods
You can choose to receive your dividend in a number of ways. Dividends
will automatically be paid to you by cheque and sent to your registered
address unless you have chosen one of the options below:
1. Direct payment to your bank: We recommend that you apply for
cash dividends to be paid directly into your UK bank or building society
account to speed up the payment process and to avoid the risk of
cheques becoming lost or delayed in the post. The associated dividend
confirmation will be sent direct to your registered address. To switch to
this method of payment simply download a dividend mandate form from
the Dividends section of our website. Alternatively, dividend mandate
forms are available from the Equiniti Shareview website. If you have any
queries please contact Equiniti on 0371 384 21121 (+44 121 415 7592
if calling from outside the UK), who will be able to assist.
2. Overseas payment service2: If you live overseas, Equiniti offers
an overseas payment service which is available in certain countries.
This may make it possible to receive dividends directly into your bank
account in your local currency. Further information can be found on the
Equiniti Shareview website or via the Equiniti helpline 0371 384 21121
(+44 121 415 7592 if calling from outside the UK).
3. Dividend Reinvestment Plan (DRIP): The Company is pleased to
offer a DRIP, which gives shareholders the opportunity to build their
shareholding in the Company in a convenient and cost effective way.
Instead of receiving your dividend in cash, you receive as many whole
shares as can be bought with your dividend, taking into account related
purchase costs; any residual cash is then carried forward and added to
your next dividend. If you wish to join the DRIP, you can download
copies of the DRIP terms and conditions and the DRIP mandate form
from the Dividends section of the Man Group website. Simply complete
the DRIP mandate form and return it to Equiniti. Should you have any
questions regarding the DRIP, or to request a paper mandate form,
please contact Equiniti on 0371 384 21121 (+44 121 415 7592 if calling
from outside the UK). Please note that if you wish to join the DRIP in
time for the payment of the forthcoming final dividend for the year ended
31 December 2019, Equiniti must have received your instruction by
5.00pm on 23 April 2020. Instructions received after this date will be
applied to the next dividend payment.
Dividend history
To help shareholders with their tax affairs, details of dividends paid in
the 2019/20 tax year can be found above. Please note that the dividend
amounts are declared in US dollars but paid in sterling. For ease of
reference the sterling dividend amounts have been detailed in the table.
For details of historical payments, please refer to the Dividends section
of our website, which can be found under Investor Relations.
1 Lines are open from 8.30am to 5.30pm, each business day.
2 Please note that a payment charge will be deducted from each individual payment before
conversion to your local currency.
Man Group plc Annual Report 2019
153
Dividends paid in the 2018/19 tax year
Interim dividend for the year ended 31 Dec 2019
Final dividend for the year ended 31 Dec 2018
Dividend
no
0/25
0/24
Payment
date
4/9/19
17/5/19
Amount per
share
(p)
3.87
4.06
Ex-dividend
date
8/8/19
4/4/19
Record
date
9/8/19
5/4/19
DRIP share
price
(p)
174.1271
152.3066
DRIP
purchase
date
6/9/19
20/5/19
Shareholder communications
Annual and Interim Reports
Man Group publishes an Annual and Interim Report every year. The
Annual Report is published on the website and is sent to shareholders
through the post if they have requested to receive a copy. The Interim
Report is published on the website in early August and printed copies
are available on request from the Company Secretary.
How your details are protected from cybercrime
Man Group takes the protection of its shareholders’ personal data from
the ever-increasing threat of cybercrime very seriously. Shareholder details
are maintained by Equiniti, our Registrars, who safeguard this information
to the highest standards. Equiniti’s security measures include multiple
levels of firewall, no wireless access to the corporate network, and regular
external vulnerability scans and system penetration tests.
E-communications
You can help Man Group to reduce its printing and postage costs as
well as its carbon footprint by signing up to receive communications
electronically rather than receiving printed documents such as
Annual Reports and notices of AGMs in the post. To sign up for
e-communications, simply register on the Equiniti Shareview website.
You will need your Shareholder Reference, which can be found on your
share certificate or dividend confirmation or proxy card, in order to register.
Once registered, you will need to change your mailing preference to
e-communications and provide your email address. You will then receive
an email each time a shareholder communication or document becomes
available on the Man Group website.
Managing your shareholding
Online, by post, or by phone
Many aspects of your shareholding can be managed by registering on the
Equiniti Shareview website. For enquiries about your shareholding you can
also contact Equiniti in writing at Equiniti, Aspect House, Spencer Road,
Lancing, West Sussex BN99 6DA, or by telephone on 0371 384 2112
(+44 121 415 7592 if calling from outside the UK), quoting Ref No 874.
Please quote your Shareholder Reference when contacting Equiniti.
Share dealing service
Equiniti provides a share dealing facility through which you can buy or
sell Man Group plc shares in the UK. The service is provided by Equiniti
Financial Services Limited and can be accessed via the dealing section
of the Equiniti Shareview website (www.shareview.co.uk/dealing). To use
Equiniti’s telephone dealing service, please call 03456 037 037 between
8.00am and 4.30pm Monday to Friday. You can also buy and sell shares
through any authorised stockbroker or bank that offers a share dealing
service in the UK, or in your country of residence if outside the UK.
Be a ScamSmart investor – avoid investment and
pension scams
Even seasoned investors have been caught out by sophisticated share or
investment scams where smooth-talking fraudsters cold call from ‘boiler
rooms’ to offer them worthless, overpriced or even non-existent shares,
or to buy shares they currently hold at a price higher than the market value.
All shareholders are advised to be extremely wary of any unsolicited
advice, offers to buy shares at a discount, or offers of free reports about
the Company. The Financial Conduct Authority (FCA) provides helpful
information about such scams on its website, including practical tips on
how to protect your savings and how to report a suspected investment
scam. Man encourages its shareholders to read the information on the site
which can be accessed at www.fca.org.uk/scamsmart. You can also call
the FCA Consumer Helpline on 0800 111 6768.
Company contact details
Registered office
Man Group plc
22 Grenville Street
St Helier
Jersey
JE4 8PX
Telephone: + 44 (0) 20 7144 1000
Website: www.man.com
Registered in Jersey with registered no: 127570
London office
Riverbank House
2 Swan Lane
London
EC4R 3AD
United Kingdom
Telephone: +44 (0) 20 7144 1000
Investor relations
investor@man.com
Head of Investor Relations – Alex Dee
Company secretariat
shareholder@man.com
Interim Company Secretary – Alice Rivers
Company advisers
Independent auditor
Deloitte LLP
Corporate brokers
Credit Suisse
J.P. Morgan Cazenove
Corporate communications
Finsbury
Registrars
Equiniti Limited
Shareholder information 154 Glossary
Absolute performance
Percentage rise/fall in the value of the fund over the stated period
Absolute return
Alternative strategies where clients expect the strategy may have net
long, short or neutral exposure to asset classes, and that may make use
of leverage to achieve those exposures. This includes trend following
and discretionary long/short strategies
Actively managed
The management of assets based on active decision-making as opposed
to aiming to replicate an index
AGM
Annual General Meeting
Alpha
Excess return over beta relative to a market benchmark, or a measure
of the ‘value add’ by an investment manager
Alternative
An alternative investment is an asset that is not one of the conventional
investment types, such as stocks, bonds and cash
ARCom
Audit and Risk Committee
Basis point (bps)
One one-hundredth of a percentage point (0.01%)
Benchmark
A standard against which the performance of a security, mutual fund
or investment manager can be measured, generally broad market and
market-segment stock and bond indexes are used for this purpose
Beta
Market returns
Brexit
A blend of the words ‘British’ and ‘exit’ which refers to the United
Kingdom’s withdrawal from the European Union
Carbon dioxide equivalent (CO2e)
A standard unit for measuring carbon footprints. It enables the impact
of our different greenhouse gas emissions on global warming to be
expressed using an equivalent amount of carbon dioxide (CO2)
as reference
Cash costs
Costs excluding depreciation and amortisation
Defined contribution (DC) pension scheme
A pension benefit where the employer’s contribution to an employee’s
pension is measured as, and limited to, a specified amount, usually
a percentage of salary
Discretionary
Discretionary investment management is a form of investment
management in which buy and sell decisions are made by a portfolio
manager. The term ‘discretionary’ refers to the fact that investment
decisions are made at the portfolio manager’s discretion
Drive
Drive is our global internal diversity and inclusion network which is
designed to inform, support and inspire our people. The network’s mission
is to advance Man Group’s efforts in promoting and valuing diversity
and inclusion throughout the firm
Employee benefit trust
An employee benefit trust is a type of discretionary trust established to
hold cash or other assets for the benefit of employees, such as satisfying
share awards, with a view to facilitating the attraction, retention and
motivation of employees
ESG
Environmental, Social and Governance
External Audit
An external auditor performs an audit, in accordance with specific laws
or rules, of the financial statements of an organisation and is independent
of the entity being audited
FCA
Financial Conduct Authority
FRC
Financial Reporting Council
Funds under management (FUM)
Calculated as the sum of the absolute value of all assets of all funds
managed by the firm. This includes funds where the firm has delegated
the management function but excludes funds that it is managing
as a delegate.
GDPR
The General Data Protection Regulation
HMRC
Her Majesty’s Revenue and Customs
ICAAP
Internal Capital Adequacy and Assessment Process
CLO
Collateralised loan obligations are a security backed by a pool of debt,
often low-rated corporate loans
IFRS
International Financial Reporting Standards
D&I
Diversity and Inclusion
Internal Audit
Provide independent assurance that an organisation’s risk management,
governance and internal control processes are operating effectively
Defined benefit (DB) pension scheme
A pension benefit where the employer has an obligation to provide
participating employees with pension payments that represent a specified
percentage of their salary for each year of service
Man Group plc Annual Report 2019 Investment returns
The increase in FUM attributable to investment performance,
market movements and foreign exchange
Senior Governance Executive Committee
Committee of executives within Man Group that work together to advise
the CEO and are in charge of specific aspects of the Group
155
SMCR
Senior Managers Certification Regime. New FCA regulation which aims to
strengthen market integrity by making senior individuals more accountable
for their conduct and competence
Systematic
Systematic investment managers attempt to remove the behavioural
component of investing by using computer algorithms to make investment
decisions
Total return
Alternative strategies where clients expect the strategy to have some
positive exposure to particular risk factors over the course of a market
cycle although the level of exposure may vary over time. This includes
EM debt total return, Man GPM, risk premia, and CLO strategies
Total return swap or TRS
A total return swap is a swap agreement in which Man receives the return
on an underlying fund investment in exchange for an interest payment
on the notional investment
UN PRI
The United Nations-supported Principles for Responsible Investment
Initiative is an international network of investors working together to
implement the six Principles for Responsible Investment. Its goal is to
understand the implications of sustainability for investors and support
signatories to incorporate these issues into their investment decision-
making and ownership practices
KPI
Key Performance Indicators
Long-only
Long-only refers to a policy of only holding ‘long’ positions in assets
and securities
Machine learning
A process in which a range of applied algorithms recognise repeatable
patterns and relationships within observed data
MiFID II
The second iteration of the Markets in Financial Instruments Directive
Multi-manager solutions
Multi-manager solutions includes traditional fund of fund and infrastructure
and segregated mandates
Net Asset Value or NAV
Net Asset Value or NAV is the sum total of the market value of all the
shares held in the portfolio including cash, less the liabilities, divided
by the total number of units outstanding
Passive products
Products which are intended to replicate an index
Pillar 1
The minimum regulatory capital requirements in relation to credit risk,
operational risk and market risk taken by the Group as principal
Pillar 2
The requirement for companies to assess the level of additional regulatory
capital held against risk not covered in Pillar 1
Pillar 3
This complements Pillar 1 and Pillar 2 with the aim of improving market
discipline by requiring companies to publish certain details of their risks,
capital and risk management. Man Group’s Pillar 3 disclosures are
available at www.man.com/investor-relations
Quantitative or quant
Quantitative strategies use computer models to make trading decisions.
A quant is a person who specialises in the application of mathematical
and statistical methods to financial and risk management problems
Regulatory capital
Regulatory capital is the amount of risk capital set by legislation or local
regulators, which companies must hold against any difficulties such
as market or credit risks
Seed capital
Seed capital comprises initial investment put into a fund by the business
to allow it to develop a performance track record before it is marketed
to potential clients
Shareholder information 156 Notes
Man Group plc Annual Report 2019 Man Group plc
Riverbank House
2 Swan Lane
London EC4R 3AD
man.com