Ad hoc announcement - GAM Holding AG announces full-year 2021
results
17 February 2022
PRESS RELEASE
Ad hoc announcement pursuant to Art. 53 listing
rules: GAM Holding AG announces full-year
2021
results
Financial Highlights
- Group assets under
management (AuM) were
CHF 100 billion as at 31
December 2021 (compared with CHF 122 billion as at 31 December
2020)
- Investment Management saw
net client outflows of CHF 4.4 billion, with Fund Management
Services (formerly private labelling) recording net client outflows
of CHF 20.5 billion primarily due to
one large client departure previously
announced
- Continued strong investment
performance from equities and strong recovery in fixed income;
68% and 60% of investment
management AuM outperformed their
benchmark over three and five years,
respectively
- Cost discipline continues to
deliver to plan; achieved
cost saving
target of CHF 15.5
million
- Underlying
loss before tax of CHF
9.6 million
(compared with underlying loss of CHF
14.9 million in
FY 2020)
- IFRS net loss of
CHF 23.3 million (compared with a
net loss of CHF 388.4 million
in FY 2020)
- Financial
targets for 2024 revised to
reflect current levels of
AuM
Strategic progress
- One technology platform now
in operation across all equity portfolios
and most fixed income portfolios
enabling a scalable
future
- Distribution strategy
successfully diversifying client
interest across asset classes,
with net positive client
flows into equities for five consecutive
quarters
- Refocused
distribution footprint
to align with
evolving client demand
- Continuing to attract and
retain talent; stable and high calibre bench of
investment and client facing professionals
- Aligning to
client demand with product innovation and focus on
sustainability
- New leadership for
Fund
Management
Services in
Luxembourg
- Increased focus on
Wealth
Management with appointment of new
leadership
- All
historic regulatory
matters now resolved
- Returned 100% of client
investment in the supply chain finance fund
Peter Sanderson, Group CEO, said: “2021 was a
pivotal year of strategic progress for GAM, which has put us in a
good position to focus on delivering value to our stakeholders
through bringing GAM to growth. In the new post-pandemic paradigm,
we are seeing an increased appetite for actively managed
alternative, sustainable and high-conviction strategies and
solutions from our existing and potential clients, which plays to
our strengths as a firm.”
2021
Group results
Net fee and commission income decreased by 2.5%
to CHF 227.3 million compared with CHF 233.2 million in
FY 2020. This decrease was primarily driven by lower net management
fees and commissions because of the lower average AuM and a
slightly lower average management fee margin in Investment
Management. This is offset by an increase to CHF 19.3 million from
CHF 2.8 million in net underlying performance fees. The main
contributors were GAM Star Disruptive Growth, our core macro as
well as our non-directional equity strategies. IFRS net fee and
commission income amount to CHF 229.5 million. The difference
between the underlying and the IFRS net fee and commission income
of CHF 2.2 million relates to performance fees attributed to
external interests1.Underlying personnel
expenses decreased by 5.0% to CHF 143.1 million in FY 2021
from CHF 150.5 million in FY 2020. Variable compensation came in at
CHF 38.3 million and was 19% higher compared to 2020, mainly driven
by increased performance fee bonuses. Fixed personnel costs were
CHF 104.8 million, a decrease of 11%, mainly driven by lower
headcount which stood at 605 FTEs, as at 31 December 2021, compared
with 701 FTEs at the end of 2020. This compares to IFRS personnel
expenses of CHF 144.4 million. The difference between the
underlying and the IFRS personnel expenses of CHF 1.3 million
mainly relates to a reorganisation charge of CHF 1.3 million1.
Underlying general expenses
totalled CHF 73.2 million, a decrease of 2% compared with CHF 75.0
in FY 2020. This was driven by lower marketing and administration
costs. This compares to IFRS general expenses of CHF 86.7 million.
The difference between the underlying and the IFRS general expenses
of CHF 13.5 million mainly relates to a fine agreed between GAM
International Management Limited (GIML) and the UK Financial
Conduct Authority (FCA) of CHF 11.3 million1.
The underlying
operating margin stood at negative 3.2%, compared
with negative 4.7% in FY 2020. The improvement was driven mainly by
operating leverage as expenses decreased by 4%, outweighing the
reduction in income of 2%. This compares to an IFRS operating
margin of negative 9.6%. The difference between the underlying and
the IFRS operating margin mainly relates to higher IFRS expenses of
CHF 251.6 million compared to underlying expenses of CHF
234.51.
The underlying loss
before taxes was CHF 9.6 million in FY 2021,
compared to a CHF 14.9 million underlying loss before tax in FY
2020. The reduced loss was driven mainly by lower fixed and general
expenses offsetting the decrease in AuM resulting in lower net fee
and commission income. This compares to an IFRS net loss before tax
of CHF 15.2 million. The difference between the underlying and the
IFRS net loss before tax of CHF 5.6 million mainly relates to
higher IFRS net fee and commission income and higher IFRS other
income. This is more than offset by higher IFRS expenses1.
The underlying effective tax rate for 2021 was
21.9% compared with 0.0% in 2020. The increase in the effective tax
rate was primarily driven by a tax credit from an increase in
deferred tax assets based on higher future UK corporation tax
rates. This compares to an IFRS tax rate of negative 53.3%. The
difference between the underlying and the IFRS effective tax rate
mainly relates to an adjustment of deferred tax assets of CHF 10.7
million based on the re-assessment of the future recoverability of
tax losses carried forward1.
Diluted underlying earnings per share were
negative CHF 0.05, up from negative CHF 0.10 in 2020 and resulting
from the underlying net loss. This compares to a diluted IFRS
earnings per share of negative CHF 0.15. The difference between the
diluted underlying and the diluted IFRS earnings per share of CHF
0.10, mainly relates to the higher IFRS net loss of CHF 23.3
million compared to an underlying net loss of CHF 7.5 million1.
The IFRS net loss after tax
was CHF 23.3 million, mainly driven by the underlying net loss
after tax of CHF 7.5 million and non-core items of CHF 24.0 million
that included a fine agreed between GIML and the FCA of CHF 11.3
million and a CHF 10.7 million adjustment relating to a
re-assessment of the future recoverability of tax losses carried
forward. These were partially offset by after-tax
acquisition-related income of CHF 8.2 million. This compares to an
IFRS net loss after tax of CHF 388.4 million in FY 2020 which was
mainly impacted by the impairment of legacy goodwill of CHF 373.7
million.
Business Update
Investment
Management –
Assets, flows and
investment performance
Assets under management movements (CHF bn)
Capability |
Opening AuM 1 Jan 2021 |
Net flows 2021 |
Funds in Liquidation |
Market/FX2021 |
Closing AuM 31 Dec 2021 |
Fixed income |
17.1 |
(2.3) |
(0.8) |
0.1 |
14.1 |
Multi asset |
7.5 |
(0.4) |
- |
0.6 |
7.7 |
Equity |
6.9 |
0.3 |
- |
0.8 |
8.0 |
Systematic |
2.9 |
(1.7) |
- |
- |
1.2 |
Alternatives |
0.7 |
(0.3) |
- |
- |
0.4 |
Absolute return |
0.8 |
- |
(0.3) |
- |
0.5 |
Total |
35.9 |
(4.4) |
(1.1)2 |
1.5 |
31.9 |
AuM totalled CHF 31.9 billion as at 31 December 2021, down from
CHF 35.9 billion at year-end 2020, primarily driven by net outflows
of CHF 4.4 billion and CHF 1.1 billion of funds in liquidation,
helped by net positive market and foreign exchange movements of CHF
1.5 billion.
Net flows by capabilityIn fixed income, net
outflows totalled CHF 2.3 billion, primarily driven by the GAM
Local Emerging Bond and GAM Star Credit Opportunities, which were
only slightly offset by inflows into the GAM Star Cat Bond
fund.
Multi asset strategies experienced net outflows of CHF 0.4
billion in 2021, driven by redemptions primarily from institutional
and private clients.
In equity, GAM saw net inflows of CHF 0.3 billion primarily
driven by the GAM Star Disruptive Growth, GAM Star Continental
European Equity and GAM Luxury Brands Equity funds which exceeded
withdrawals primarily from the GAM Emerging Markets Equity and GAM
Health Innovation funds.
In systematic, net outflows of CHF 1.7 billion were driven by
redemptions from the GAM Systematic Alternative Risk Premia and GAM
Systematic Core Macro funds.
In alternatives, GAM saw net outflows of CHF 0.3 billion, driven
by redemptions from one client.
Absolute return was overall net flat in respect of client flows,
while CHF 0.3 billion of absolute return assets are in liquidation
following the realignment of our Lugano capabilities.
Investment performanceOver the three-year
period to 31 December 2021, 68% of AuM in funds outperformed their
respective benchmark compared with 23% as at 31 December 2020. This
improvement was primarily driven by a strong recovery in fixed
income investment performance and continued strong performance from
our equities strategies, with many in the top quartile across time
periods. Over the five-year period to 31 December 2021,
60% of AuM in funds outperformed their respective benchmark, down
from 70% as at 31 December 2020. With respect to GAM’s
AuM tracked by Morningstar, 70% and 62% of outperformed their peer
groups over three and five-year periods as at 31 December 2021,
respectively.3
Fund Management
ServicesAssets and
flows
Assets under management movements (CHF bn)
Fund domicile |
Opening AuM 1 Jan 2021 |
Net flows 2021 |
Market/FX 2021 |
Closing AuM 31 Dec 2021 |
Rest of Europe |
51.2 |
2.6 |
(0.2) |
53.6 |
Switzerland |
34.9 |
(23.1) |
2.6 |
14.4 |
Total |
86.1 |
(20.5) |
2.4 |
68.0 |
Assets under management were CHF 68.0 billion as at 31 December
2021, down from CHF 86.1 billion in 2020. This was driven by net
outflows of CHF 20.5 billion, primarily due to one client’s
decision to transfer their business to another provider as a part
of a broader strategic relationship with that entity, partially
offset by positive market performance of CHF 3.9 billion, and
negative foreign exchange movements of CHF 1.5 billion.
Wealth Management
In 2021, we announced an increased focus on Wealth Management
under new leadership.
We currently report the assets within our Investment Management
business, but as at 31 December 2021, GAM Wealth Management
reported AuM of CHF 2.9 billion. Our clients are mainly located in
the UK, Switzerland and Asia.
Strategy Update
Growth
- Strong investment
performance, good client momentum and increased
diversification
- Strong recovery in fixed income
investment performance and continued strong performance in
equities, with many strategies in the top quartile across time
periods
- Net positive inflows into equities
in each quarter in 2021
- More diversified pipeline across
investment capabilities, reducing concentration risk
- Ongoing positive conversations with
longstanding and potential new clients
- Deeper understanding of our clients’
needs and objectives and ability to offer investment capabilities
and solutions that meet their investment goals: an example is our
recently announced strategic partnership with Liberty Street
Advisors to provide clients with access to late stage,
privately-owned high-growth innovation companies
- Enhanced digitisation in client
engagement
- Distribution
footprint refocused to align with evolving client
demand
- Strengthened presence in Asia, a
strategic growth market for GAM, with new hires and the opening of
our Singapore office
- Reinforced institutional team with
new hires in the USA and Switzerland, along with a new Global Head
of Consultant Relations
- Strong progress with our
sustainability strategy
- New Global Head of Sustainable and
Impact Investment and new hires in our sustainability team
- Successful launch of sustainable
local emerging bond and sustainable climate bond strategies and
development underway on a range of sustainable thematic equity
funds
- Improved sustainable investment
framework with the introduction of a proprietary ESG dashboard
- Proprietary ESG, climate and impact
assessment framework to be rolled out in 2022
- Introduced a sustainability
exclusion policy
- Listed as signatory to the UK
Stewardship Code, certified as CarbonNeutral® company for
operational emissions, joined the Net Zero Asset Managers
initiative, committing to supporting investing aligned with the
goal of net zero by 2050 or sooner
- Appointed new
Global Head of Fund Management Services
and CEO of Luxembourg
- Focused on revenue growth using the
full suite of GAM capabilities in response to client demand for an
enhanced offering
- Increased focus on Wealth
Management to drive growth from
our existing base of private clients
Transparency
- GAM ranked best
Swiss-listed financial services provider
in Inrate’s Corporate Governance zRating for
the third consecutive year
- Launch of ESG client reports
for more than two-thirds of GAM
funds
- Continued to strengthen our
policies and disclosure
- Published first ever standalone
Sustainability Report, enhanced Stewardship Report and first
disclosure on our management of climate risk using the TCFD
(Taskforce on Climate-related Financial Disclosure) framework
- Reached settlement with UK
Financial Conduct Authority in December 2021, bringing the
investigation into the Absolute Return Bond Fund matter to a
close
- Closed the supply chain
finance fund, marking the end of GAM’s legacy
business relationship with Greensill
- Returned over 100% of value of the
GAM Greensill Supply Chain Finance fund to clients
Excellence
- Delivered cost
reduction target
- CHF 15.5 million of savings in fixed
personnel and general expenses
- Since 2018, reduced total expenses
from CHF 373.5 million to CHF 234.5 million, down 37%
- Continuing to drive efficiency gains
to assist meeting our revised financial targets
- Investment in new operating
platform completed
- One technology platform now in
operation across all equity portfolios, most fixed income
portfolios and delivering excellence across ‘One GAM’. Wealth
Management now supported by a new client administration platform,
agile technology successfully rolled out across the firm to
facilitate a hybrid way of working, enhanced collaboration with a
flexible approach to doing business and reduced office space
- Implementation of Workday, our new
Finance and HR operating platform, completed with legacy systems
decommissioned
- Implementation of
operational changes
- Strengthened high performing global
equity team
- Realignment of systematic
capabilities to focus on GAM Systemic Alternative Risk Premia and
GAM Systematic Core Macro
- Closure of some long-short
strategies to align with client demand
- Further simplification of
firm’s legal structure
- Continued to merge legal entities to
create a simplified branch structure
Liquidity and capital management
Liquidity
Cash and cash equivalents at the end of 2021 amounted to CHF
234.8 million, down from CHF 270.9 million one year earlier,
reflecting mainly changes in accrued distribution fees and third
party payments, as well as compensation-related share-repurchases,
acquisition-related deferred consideration and investment into the
GAM platform.
Adjusted tangible equity at the end of 2021 was CHF 174.2
million, compared with CHF 188.7 million a year earlier. The main
contributors to this decrease were the IFRS net loss after tax of
CHF 23.3 million and investment in developed software of CHF 18.0
million, partially offset by a pension remeasurement of CHF 32.2
million.
Dividend
Recognising GAM’s underlying loss in 2021, the Board of
Directors proposes to shareholders that, in line with our long-term
dividend policy, no dividend will be paid for the financial year
2021. The Board of Directors continues to target a minimum dividend
pay-out of 50% of underlying net profit to shareholders.
Compensation
The compensation framework for our Group Management Board (GMB)
members drives their remuneration through clear goals aligned to
our shareholders’ expectations. Although the Board recognises the
significant continuing progress against those goals and the Group’s
strategic priorities, based on the Group’s financial performance
for 2021 there will be no variable compensation for a third
successive year proposed for granting to the GMB. This decision was
made in full recognition of the GMB’s unwavering commitment, but
the financial underperformance continues to make it appropriate
that neither annual bonus nor long-term incentive (LTIP) awards are
made.
Outlook
We have revisited our financial targets and given current assets
under management, we now target an underlying pre-tax profit of at
least CHF 50 million, an underlying operating margin of between 20%
and 30% and a compensation ratio of 45-50% by full year 2024.
GAM is well positioned to help clients navigate the new paradigm
that is emerging from the pandemic. We expect the market
environment to remain volatile, but client demand for actively
managed alternative, sustainable and high-conviction strategies and
solutions, to be strong. GAM is focused on growth and delivering
excellence for clients.
The presentation for analysts and investors on the results of
GAM Holding AG for 2022 will be webcast on 17 February 2022 at
8:30am (CET). A presentation for media will be webcast at 10:00am
(CET). Materials relating to the results (presentation slides, 2021
Annual Report and press release) are available at www.gam.com.
Upcoming events:
20 April
2022
Q1 2022 Interim management
statement28 April
2022
Annual General Meeting
20223 August
2022
Half-year results 202220
October 2022
Q3 2022 Interim management statement
For further information please contact:
Charles Naylor
Global Head of
Communications and Investor RelationsT +44 20 7917 2241
Investor
Relations Media
Relations Media
Relations Jessica
Grassi Kathryn
Jacques Ute Dehn
Christen T +41 58
426 31 37 T +44 20 7393
8699 T +41 58 426 31
36
Visit us: www.gam.comFollow us: Twitter and LinkedIn
About GAM
GAM is a leading independent, pure-play asset manager. The
company provides active investment solutions and products for
institutions, financial intermediaries and private investors
through three businesses: Investment Management, Fund Management
Services and Wealth Management. GAM employed 605 FTEs in 14
countries with investment centres in London, Cambridge, Zurich,
Hong Kong, New York, Milan and Lugano as at 31 December 2021. The
investment managers are supported by an extensive global
distribution network. Headquartered in Zurich, GAM is listed on the
SIX Swiss Exchange with the symbol ‘GAM’. The Group has AuM of CHF
100 billion (USD 109.4 billion) as at 31 December 2021.
Disclaimer regarding our financial result
To ensure reader-friendliness, we are commenting on underlying
Group KPIs and on the most relevant IFRS figures.
Disclaimer regarding forward-looking
statements
This press release by GAM Holding AG (‘the Company’) includes
forward-looking statements that reflect the Company’s intentions,
beliefs or current expectations and projections about the Company’s
future results of operations, financial condition, liquidity,
performance, prospects, strategies, opportunities and the industry
in which it operates. Forward-looking statements involve all
matters that are not historical facts. The Company has tried to
identify those forward-looking statements by using words such as
‘may’, ‘will’, ‘would’, ‘should’, ‘expect’, ‘intend’, ‘estimate’,
‘anticipate’, ‘project’, ‘believe’, ‘seek’, ‘plan’, ‘predict’,
‘continue’ and similar expressions. Such statements are made on the
basis of assumptions and expectations which, although the Company
believes them to be reasonable at this time, may prove to be
erroneous.
These forward-looking statements are subject to risks,
uncertainties, assumptions and other factors that could cause the
Company’s actual results of operations, financial condition,
liquidity, performance, prospects or opportunities, as well as
those of the markets it serves or intends to serve, to differ
materially from those expressed in, or suggested by, these
forward-looking statements. Important factors that could cause
those differences include, but are not limited to: changing
business or other market conditions, legislative, fiscal and
regulatory developments, general economic conditions, and the
Company’s ability to respond to trends in the financial services
industry. Additional factors could cause actual results,
performance or achievements to differ materially. The Company
expressly disclaims any obligation or undertaking to release any
update of, or revisions to, any forward-looking statements in this
press release and any change in the Company’s expectations or any
change in events, conditions or circumstances on which these
forward-looking statements are based, except as required by
applicable law or regulation.
1 For further information, see note 6 of the consolidated
financial statements in the FY 2021 Annual Report.
2 Funds in liquidation include CHF 0.8 billion of GAM Greensill
Supply Chain Finance Fund SCSp, the liquidation of which was
announced on 2 March 2021, as well as some long-short strategies of
CHF 0.3 billion, as announced on 23 September 2021.
3 The peer group comparison is based on ‘industry-standard’
Morningstar Direct Sector Classification. The share class
references in Morningstar have been set to capture the oldest
institutional accumulation share class for each and every fund in a
given peer group.
- 2022 02 17 Ad hoc FY21_Media Release_EN
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