I think this is a feature. If you launch virt-manager as root (sudo),
you are able to connect. Here is an extract from the libvirt site:

========== >8 ==============
 Legacy: Xen proxy

Libvirt continues to support connections to a separately running Xen proxy 
daemon.
This provides a way to allow non-root users to make a safe (read-only) subset 
of queries to the hypervisor.

There is no specific "Xen proxy" URI. However if a Xen URI of any of the 
ordinary or legacy forms is used (eg. NULL, "", "xen", ...)
which fails, and the user is not root, and the Xen proxy socket can be 
connected to (/tmp/libvirt_proxy_conn), then libvirt will use a proxy 
connection.

You should consider using libvirt remote support in future.
========== 8< ==============

Ref:
http://libvirt.org/uri.html

-- 
Virt-Manager Error: Unable to open a connection to the Xen hypervisor/daemon. 
https://bugs.launchpad.net/bugs/220985
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