Reporting its results for the first half of 2014, GAM said over the past few years, it has built an institutional franchise and a third-party distribution network that now accounts for 89% of the assets in our investment management business, as well as expanding and diversifying its in-house investment capability such that now “well over 80%” of its assets managed by in-house professionals, that GAM says are “encouraged to deviate from benchmarks and pursue their own views”.
The restructuring of the business, is now largely complete CEO, David Solo told shareholders during the presentation after the results, a view evidenced by the fact that inflows into the risk-rated model portfolios offered by the group to UK IFAs for the first time more than offset the redemptions from the group’s managed private client portfolios.
In the commentary to the numbers, Solo said: “Looking at net inflows in investment management in the first half of 2014 in more detail confirms that the diversification and transformation of our capabilities was the right step. A strong contribution came from our specialised fixed income strategies such as products investing in cat bonds, investment grade credit and European asset-backed securities. Our largest strategy, the absolute return/unconstrained bond strategy, continued to experience robust inflows from institutions, although these were offset by the tailend of the outflows from the intermediaries channel during the first quarter, following last year’s flat investment performance.”
GAM also said it saw growth in assets in its discretionary and advisory portfolios for the first time “after a protracted decline over the past six years”.
“This reflects the growing success of GAM’s discretionary fund management service launched in 2012.”
With the direction of travel seems upwards, the group does admit that there remains work to be done.
For the period, Assets under management, within its investment management business rose £2.36bn (CHF3.6bn) to CHF73.4bn as at 30 June 2014 on the back of market performance and CHF1.3bn in net new inflows.
This 3.8% growth in net new money over the six months signals, GAM says: “a convincing return towards normalised growth levels after the disappointing £1.57bn (CHF 2.4bn) of net outflows posted in the second half of 2013.
GAM as a whole, reported a net profit of £59.46m (CHF90.8m) for the first half. This includes, it said, a £1.5m (CHF2.3m) write-down of its minority stake in QFS, a US-based alternative asset manager.
“While this is a solid six-month result, it did not match those in the previous year (down 5% from the second half of 2013, down 17% from the first half)”. The primary reason for this, it said is the the unusually low tax rate in 2013. “On a pre-tax basis, underlying profitability declined 10% from the first half of 2013 and actually improved by 6%,” it said.
