Gold product inflows at Swiss & Global is silver lining on GAM Holding results

Gold and other precious metals proved their worth for GAM Holding last year as investor risk aversion, which caused net outflows from the group overall, created strong demand and net subscriptions to precious metals ETFs at its Swiss & Global unit.

Swiss & Global, along with the institutional asset management side of its GAM unit, were two bright points in an otherwise muted annual flows announcement from GAM Holding that revealed a 9% drop in assets, to CHF 107bn.

Johannes de Gier, chairman and CEO, said: “Given the turbulent market conditions in 2011, investors – particularly private investors – were understandably wary of most asset classes. Inflows were slow and combined with the widespread de-risking of investors’ portfolios in the second half of the year, this impaired the asset-gathering efforts of our businesses.

“Underlying profitability, on the other hand, held up well. Effective cost control helped us to partly counteract the negative effects of currency and market movements on our revenues. This enabled us to avoid making disruptive cuts at a time when clients need our guidance and assistance most, and allowed us to continue to pursue our strategic growth initiatives.

“Looking ahead, we have reason to be cautiously optimistic. Markets remain volatile, but the investment performance of our funds has notably improved since the beginning of the year. Steady moves towards a resolution of the European fiscal crisis should benefit market sentiment and ultimately our business results.

“We have seen positive signs during the first months of 2012, but we cannot take such an improvement for granted.”

GAM Holding reported underlying net profit for last year of CHF 165.7m, 18% lower than for 2010. However, cost management – including via bonus reductions – and lower levels of provisions helped improve the cost/income ratio from 65.4% to 64.2%. The group, which has conducted share buybacks over the past year, saw a 12% reduction in earnings per share.

Weakening of the euro and US dollar against the group’s Swiss franc reporting currency also detracted from results.

Investment losses meant group performance fees fell sharply from CHF 89.5m to just CHF 19.6m.

GAM Holding said it suffered CHF 6bn of investment losses at the group level, and CHF 3.8 net redemptions due to “an increased hesitancy among investors to engage with any type of market risk”.

But that same risk aversion and “investors’ flight to ‘safe havens'” were reasons the group said inflows came to precious metals ETFs at Swiss & Global, a unit that is the exclusive manager of the Julius Baer-branded funds.

Swiss & Global took CHF 400m net new money in 2011, a positive result even though it was small in comparison to CHF 9.7bn in 2010. It ended the year with CHF 76.9bn assets.

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