Troubled Swiss money manager GAM has pushed back its financial targets to 2024, as its net loss deepened in 2020.
Background
GAM’s troubles began after an internal probe revealed breaches in the risk management and record keeping processes of star fund manager Tim Haywood.
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Haywood was eventually dismissed while the absolute return bond fund (ABRF) range managed by him was liquidated.
The firm, which is undergoing a strategic overhaul, was already reeling under the Covid-19 pandemic that stymied its road to recovery.
The board of directors has proposed no dividend for the financial year 2020 and said that the group Management Board will not be given any bonus for 2020.
Performance Highlights of 2020
The IFRS net loss stood at CHF388.4m in 2020, versus a loss of CHF3.5m in the previous year.
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By GlobalDataThe loss was the result of the impairment of legacy goodwill of CHF373.7m, largely driven by the takeover of GAM by Julius Baer in 2005 and prior to that UBS in 1999.
Underlying loss before tax was CHF14.9m in 2020, as against CHF10.5m in 2019.
Net fee and commission income dropped 29% year-on-year to CHF233.2m.
Assets under management (AuM) reached CHF35.9bn at the end of December 2020, compared with CHF48.4bn a year ago.
This was led by net outflows of CHF10.6bn, net negative market and foreign exchange movements of CHF1bn.
However, the firm was able to keep its expenses in check, which fell 23% to CHF244.1m in 2020 from CHF315.7m a year ago. Personnel expenses dropped 24% to CHF150.5m from CHF197m, with voluntary and involuntary redundancy programmes in 2020 resulting in a fall in fixed personnel costs.
Lower consulting services, technology, travel and marketing costs led to a 25% decline in general expensesto CHF75m.
Private labelling
In the unit, AuM grew to CHF86.1bn in 2020 from CHF84.3bn in 2019 as net outflows of CHF0.4bn were outweighed by net positive market and foreign exchange movements of CHF2.2bn.
Moreover, GAM revealed that one of its private labelling customers with CHF21.5bn in assets will move its business to another service provider as part of a broader strategic relationship with that firm. The transfer by the unnamed customer will start in the second half of this year.
Investment management
Net outflows of CHF10.6bn along with net negative market and foreign exchange movements of CHF1bn hit the unit’s AuM last year. The unit’s AuM dropped to CHF35.9bn in 2020 from CHF48.4bn a year ago.
However, the bright spot was net inflows of CHF0.3bn in Q4 2020 in investment management. This was said to be the first quarter of new money since the beginning of 2018
Financial targets
The firm has now postponed its targets by two years. The targets are underlying pre-tax profit of CHF100m, operating margin of 30% and a compensation ratio of 45-50%.
GAM group CEO Peter Sanderson said:“GAM has continued to make strong progress on our strategy focused on efficiency, transparency and growth, even in the very challenging conditions of 2020.
“As a team we were confident in our strategy as demonstrated by the steps we took in March to accelerate our efforts to future-proof the firm.”
