This content is from: Corner Office
A Beleaguered Asset Manager Was Poised for a Turnaround. Then the Pandemic Hit.
GAM experienced $9.1 billion in outflows for the first half of this year.
Before the coronavirus pandemic hit, investment firm GAM Holding’s turnaround strategy seemed to be working.
But its results for the first half of 2020 show that the pandemic — and subsequent market volatility — may have stymied GAM’s immediate comeback efforts after its 2018 bond fund liquidation.
During the first half of 2020, the company’s outflows grew while its 2019 profits turned to 2020 losses. Prior to this year, following the implementation of some of its turnaround plan, GAM’s 2019 second-half net outflows had declined and its profits, compared to the first half of 2019, had improved.
As for the first half of 2020, GAM’s earnings results, published on its website Tuesday, show that its underlying loss before taxes was CHF 2 billion (US$2.1 billion). This is compared to the first half of 2019, when the firm brought in CHF 2.1 billion, its presentation shows.
Meanwhile, GAM reported outflows of CHF 8.5 billion outflows for the first half of the year, driven by its specialist fixed income strategies, which lost CHF 5.7 billion, its half-year 2020 report shows. According to that report, net outflows in the second quarter were lower than those in the first — CHF 2 billion versus CHF 6.5 billion.
“Investment performance of our strategies is improving, and we have seen materially lower outflows in the second quarter compared to the first,” the firm’s CEO Peter Sanderson said in a statement published alongside the company’s earnings announcement.
GAM’s investment performance, too, resulted in losses during the first half of the year. The firm lost CHF 3.9 billion, again driven by losses in its fixed-income portfolio to the tune of CHF 2 billion, its first-half report shows.
But the firm is trying to reduce costs.
Since June 2019, GAM has reduced its headcount by more than 100 — from 863 to 747 full-time employees. The business also reported a 42 percent decrease in variable bonuses because of lower revenues. In sum, this decreased the firm’s personnel expenses by 23 percent. GAM said in its earnings announcement that it expects these cost cuts to save CHF 65 million for the year.
[II Deep Dive: ISS Says GAM’s Executive Bonuses Should Be Capped]
In late July of 2018, GAM gated its unconstrained/absolute return bond funds to stem outflows. Soon after, the firm liquidated those funds and fired the funds’ director, Tim Haywood, for allegedly failing to conduct sufficient due diligence on certain investments.
In December 2018, the firm announced a turnaround strategy, which it has since been implementing. In July 2019, the firm named a new chief executive officer, and was hoping to “close on the past and focus on the future,” a spokesperson told Institutional Investor at the time.