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UK-listed hedge fund firm Man Group on Thursday beat its own pre-close guidance to post funds under management of $44 billion for the six months to end-September and offered encouraging comments about its outlook.

The moderate increase in FUM from just over $43 billion at end-June supported the theory that the world’s largest listed hedge fund manager is tentatively moving forward on the road to recovery. Pretax profits for the six months came in at $302 million, which despite being less than half the previous year’s was better than the market had expected. Management and performance fees also topped forecasts at $245 million and $47 million, respectively.

Man Group maintained its interim dividend at 19.2 US cents per share—a move that Evolution Securities analyst Michael Sanderson described as demonstrating the company’s strong balance sheet and providing a clear sign of management’s confidence in the potential for future earnings growth.

“Man’s 1H results are likely to represent the trough earnings for the business,” Sanderson wrote in a note to clients this morning. “Having surpassed its own pre-close guidance, short term sentiment is likely to be good, and with a positive outlook statement over the demand for the new fund platform, a return to EPS growth looks likely.”

Evolution expects to see good news on flows through 2010 but does not believe this growth potential is appreciated by the market, with Man shares trading at a discount to the wider sector. The broker reiterated its Buy stance and 345p price target.

Numis Securities’ Gurjit Kambo and David McCann offered similarly upbeat comments following the results. The analysts said they continue to believe that Man’s strong capital position and balance sheet liquidity provide it with a competitive advantage, particularly as they expect the regulatory environment to become more challenging.

At end-September, Man’s balance sheet contained $1.6 billion in excess regulatory capital, $2.1 billion in cash and $2.4 billion of undrawn facilities.

With the stock yielding around 9% and significant cash on the books, the shares look attractive to Numis over the medium term, hence its Buy recommendation and 400p price target.

At Shore Capital, analyst Danny Clarke also flagged his Buy advice on the back of today’s numbers. Clarke said he is encouraged by Man’s maintained balance sheet strength, fund performance in line with expectations and managed account platform (MAC) gaining traction. He also highlighted the potential for Man to outperform in the second half of the 2009/2010 fiscal year.

By midday, Man shares were outperforming the broader market with a rise of 0.6% to 327p, while the FTSE 100 index fell back 0.6% to 5,079.8.

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