Investment group

Swiss investment group GAM issues earnings warning

Swiss investment group GAM issued a profit warning and blamed a volatile market environment for suffering a heavy accounting loss in the first half of 2022.

The Zurich-based company said on Monday it expects to report an underlying pre-tax loss of around 275 million Swiss francs ($282 million) for the first six months of the year.

GAM said the impact of the fallout from the war in Ukraine on markets caused its assets under management to fall 17% from SFr99.8 billion on December 31 to SFr83.2 billion on June 30. accounted for nearly 80% of the reduction in assets under management in the first half.

This decline in assets means that GAM expects to report a non-cash impairment charge of approximately 246 million Swiss francs, related to the intangible brand value that was created by the acquisition of GAM by UBS in 1999 and Julius Baer in 2005, before it regained its independence.

Peter Sanderson, Managing Director of GAM Investments, said in a statement: “During the first half of 2022, we have seen extraordinary economic and geopolitical conditions significantly impact markets. Due to this volatility, customers have been more cautious.

GAM’s ad hoc announcement is the latest sign of a tough start to the year for asset managers, as market volatility has unsettled investors and depressed the value of the portfolios that generate their fee income. BlackRock’s results last week fell short of sharply reduced expectations in what the world’s largest fund manager described as the worst environment in decades.

GAM Group has been struggling since the dramatic departure of its former star asset manager and fixed income chief Tim Haywood in July 2018.

Under Sanderson, a BlackRock veteran who took over as chief executive in July 2019, GAM has attempted to turn the tide. Sanderson launched significant cost-cutting measures and cut hundreds of jobs. But its efforts have been hampered by legacy issues and external shocks such as the disruptions caused by the pandemic and the war in Ukraine.

Sanderson said despite greater client caution, the company was “encouraged” to see “improving resilience” in its investment flows. Clients allocated funds to a number of the manager’s ‘active strategies’ designed to help them navigate the current ‘challenging environment’.

GAM, which will release its full first-half results on Aug. 3, said the writedown would not affect its cash position or any customer-related or operational functions.