Underlying Profits Rose Strongly At GAM Holding In 2013; AuM Dips, Hit By Forex

Tom Burroughes

4 March 2014

, the Swiss-listed wealth management and investment group, reported adjusted underlying net profit in 2013 of SFr210.2 million ($237.7 million), a 30 per cent year-on-year rise, with earnings per share rising by 34 per cent to SFr1.26 per share.

The group's operating income totalled SFr670.2 million, up 13 per cent from a year earlier. The rise was mainly achieved by a 12 per cent rise in net management fees and commissions to SFr554.1 million, reflecting the positive effect of improved margins in investment management and an increase in average asset levels, it said in a statement today.

Performance fees on the group's single manager absolute return products also exceeded those achieved in 2012 (up 23 per cent to SFr100.7 million). The biggest contributions came from non-directional equity strategies, unconstrained fixed income and global rates/macro strategies. These developments were partly offset by a revenue decline in the much smaller private labelling business.

Operating expenses were SFr437.1 million for 2013, up 9 per cent from the previous year. General expenses rose slightly, by 2 per cent, to SFr108.7 million.

GAM's cost/income ratio was 65.2 per cent, at the top end of the 60-65 per cent targeted over the medium term. The improvement from the 67.2 per cent reported in 2012 reflects the growth in overall net fee and commission income, combined with expense control.

Assets under management in investment management at 31 December 2013 dopped to SFr69.8 billion from SFr72.6 billion a year earlier.

The weakness of the dollar against the group's Swiss franc reporting currency in the second half of the year compounded the effect of net new money outflows and led to a decline in period-end assets under management, GAM said.

Overall, foreign exchange movements had a negative impact of SFr700 million. Market performance had a positive effect of SFr5000 million, with the rebound in financial markets in the second half more than offsetting the adverse impact recorded in the first six months.

Net new money outflows in investment management for 2013 totalled SFr2.6 billion, compared with net outflows of SFr100 million in 2012. This result reflects substantial redemptions from lower-margin products - such as the physical gold fund and money market funds - and from emerging market and traditional fixed income products, which were all inevitably affected by a market-wide sell-off of those asset classes. It also includes the loss of a historical, one-off sub-advisory equity mandate managed by GAM, recorded in the first quarter of the year.

These negative developments were mitigated - and from a profitability standpoint more than offset - by strong net inflows into higher-margin products in the Group's absolute return single manager range, primarily in the first half of the year. The non-directional, long/short equity strategies acquired with the Lugano-based boutique Arkos Capital SA in 2012 were important net new money contributors. The assets managed by the team have tripled since it joined GAM.

Net flows into the GAM's largest flagship absolute return/unconstrained fixed income strategy were positive for the year, but not consistent across client segments, it said.