The difficult situation on the financial markets in the first six months of 2022 thus led to a decline in assets under management to 83.2 billion francs at the end of June, compared to 94.8 billion at the end of March, i.e. a fall of 12.2 %.
Asset manager GAM issued a profit warning on Monday, saying it expects a heavy first-half loss and a decline in assets under management. The convalescent establishment spoke of a “negative market environment” marked by significant volatility. The action paradoxically soared.
“In the first half of 2022, we experienced an exceptional economic and geopolitical situation which had a considerable impact on the markets,” said chief executive Peter Sanderson, quoted in a press release. The leader added that customers had suddenly displayed “greater caution”.
The difficult situation on the financial markets in the first six months of 2022 thus led to a decline in assets under management to 83.2 billion francs at the end of June, compared to 94.8 billion at the end of March, i.e. a fall of 12.2 %.
Of all assets under management, 27.1 billion come from activity with products labeled GAM (Investment Management), down 9.7% compared to the end of March, and 56.1 billion from activity with products provided under white label (Fund Management Services).
Around 80% of the decline in assets under management is the result of negative movements on the equity markets amounting to 12.4 billion, while currency effects weighed in at 0.7 billion.
GAM, formerly attached to the Julius Bär group, also suffered net cash flows of 1.1 billion in Investment Management and 2.5 billion in Fund Management Services.
This decline caused a depreciation of intangible assets, with no effect on cash, of 264 million francs. This should lead to a net loss, according to the IFRS accounting standard, of 275 million francs in the first half, following a negative result of 2.7 million a year earlier.
The impairment and net loss “have no effect on the group’s material equity, liquidity, or operational or customer-related activities,” GAM said.
At the operational level, the company expects a pre-tax loss of 15 million francs, following an operating profit of 0.8 million in the first half of 2021.
Mixed analysts
The full results will be published on August 3, along with an update on the group’s strategy. In mid-April, management once once more declared itself optimistic for the 2022 financial year, despite the multiplication of uncertainties linked to the war in Ukraine and the rise in interest rates.
This earnings warning did not deter investors. GAM shares ended up 3.1% at 0.955 francs, in an SPI up 0.31%.
Brokers have explained the rise in the action by buying coverage and by the logic of “buying on bad news” (“buy on bad news”). Given the sharp decline in the share since the start of the year (-35.8%), registered shares have already integrated a good part of the negative results announcements.
Analysts are more mixed. For those of the Zurich Cantonal Bank (ZKB), the profit warning is “negative”. “Until net new money inflows show a positive sign, the stock should not jump higher.” The specialists of the cantonal institution recalled that the fall in assets under management had a direct effect on recurring income from management fees.
For Vontobel on the other hand, the announced loss “is not a big surprise”. Analysts at the Zurich management bank were certainly expecting a loss in the first half, but not of this magnitude. “The road to recovery will be long,” they warned.
