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Investing.com -- UBS Global Research upgraded Man Group Plc to Buy from Neutral, citing a rebound in performance at its AHL strategies that the firm says has not yet been reflected in the share price.
Shares of the London-listed company were up 5.2% at 06:43 ET (10:43 GMT).
“The recent rebound in AHL performance has not been reflected by the market given its current valuation,” UBS said, noting that the share price sits one standard deviation below its historical norm.
The four main AHL strategies, which account for roughly 30% of average assets under management, about 50% of management fees, and nearly 75% of performance fees over the past five years, have recovered 7% in weighted average NAV since the end of July. This follows a 17% decline over the preceding 16 months.
UBS described the rebound as “bringing forward performance fees by one year,” which also supports higher share buyback assumptions.
The improved performance has prompted UBS to raise 2026-27 management fee EPS estimates by 5-7% and performance fee EPS by 36-47%, resulting in a combined group EPS increase of 14% in 2026 and 22% in 2027.
These revisions pushed the firm’s price target up 14% to 194p, implying roughly 20% upside from current levels.
UBS said the increase in earnings and cash flow is the main driver of the higher target, while an updated US$/GBP exchange rate to 1.36 acts as a 3% headwind to the PT.
Man Group’s valuation, based on 2026 management fee EPS, is 10.6x, about two standard deviations below its seven-year historical average.
UBS highlighted that the market appears to be pricing in minimal performance fee earnings, despite the recent NAV recovery at AHL.
Analysts said that while the AHL strategies are still below their high watermarks, the gap has narrowed considerably over the past two months
UBS also noted that Man Group has diversified in recent years through acquisitions, including private debt managers Varagon and Bardin Hill, but absolute return strategies remain the primary driver of revenues.
The brokerage expects the improvement in AHL performance, combined with share buybacks funded by higher performance fees, to support further upgrades to consensus EPS in the near term.
UBS outlined three scenarios for 2026-27. In the base case, average performance fee earnings are forecast at $170m, with a fee margin of 53 basis points and an EBITDA margin of 39.1%.
In an upside scenario, performance fees could reach $250m with a 55 basis point margin and EBITDA of 41%. A downside scenario assumes $50m in performance fees, a 51 basis point margin, and EBITDA of 35%.
UBS added that while the AHL recovery drives the upgrade, the main risk remains if recent performance reverses. “The biggest risk to our upgrade is if AHL’s recent performance reverses,” the report said. “In that case, we would expect shares to revert to current valuations.”