Shares of British hedge-fund operator Man Group Plc (EMG.L, MNGPY, MNGPF) climbed about 8 percent Thursday morning on the London Stock Exchange, after the company said that the Group's capital requirement is around $250 million lower today.
The firm attributed the reduction mainly to the less balance sheet intensive nature of the company's activities relative to earlier years. The company confirmed with the Financial Conduct Authority or FCA the change of its regulatory status from being a Full Scope Group to a Limited Licence Group.
As mentioned in the company's 2012 results presentation, the Group held a Capital Planning Buffer of around $300 million which it no longer required to hold by the FCA.
Additionally, in light of the Group's change in status, it has submitted a revised Internal Capital Adequacy Assessment Process or ICAAP document to the FCA. The ICAAP is part of the mechanism through which regulated firms are set capital requirements by the FCA.
The ICAAP submission remains subject to review by the FCA, which is expected in the third quarter and could lead to higher or lower capital requirements in the future.
As mentioned earlier, Man Group's pro forma surplus capital in excess of the Capital Planning Buffer as at January 1, 2014 is $370 million, after taking into account the payment of the full year dividend in respect of 2012 and the expected impact of the Capital Requirements Directive IV.
This figure is increased by $300 million due to the removal of the Capital Planning Buffer, and a further $250 million owing to reduced capital requirements as a Limited Licence Group.
Pro forma for these changes therefore, Man Group would have surplus capital of up to $920 million as at January 1, 2014, an increase of up to $550 million.
Man Group said its Board would continue to assess the appropriate level of capital required to operate the business from time to time and the potential uses of any surplus capital. The firm will provide further detail in due course in connection with future results announcements.
EMG.L is currently trading at 105.10 pence, up 7.58 percent on the LSE.
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