GAM assets rise in Q1 on low-margin inflows

Date: Tuesday, April 13, 2010
Author: Reuters

Swiss asset manager GAM Holding (GAMH.VX) said assets rose 5 percent in the first quarter as performance gains and money flows into mainly low-margin products outweighed client withdrawals from funds of hedge funds.

GAM Holding said inflows into its Swiss and Global (S&G) unit were mainly in commodities and fixed-income products, with smaller inflows in higher-margin equity products.

In the GAM unit, whose products command higher margins than at S&G, single manager, mainly fixed-income hedge funds had inflows. Outflows continued from managed portfolios and funds of hedge funds, though these slowed relative to 2009.

"Q1 seems to continue H2's positive momentum. While it's not yet a big leap forward, positive business continuation supports our buy case," said Kepler Capital Markets analyst Mathias Bueeler.

GAM shares rose 1.6 percent to 13.70 Swiss francs by 0726 GMT, outperforming a 0.2 percent decline in the Swiss all-share index .SSHI.

"Inflows in the single manager hedge funds are encouraging," said GAM Holding spokesman Thomas Schneckenburger.

"The continued outflows from managed portfolios and funds of hedge funds from third-party private clients were expected, and came at a slower rate than in 2009."

Analysts said earlier this year that profit margins at GAM could face continued pressure from withdrawals, mainly from funds of funds, by clients at former owners Julius Baer (BAER.VX) and UBS (UBSN.VX), and declining inflows from those banks.[ID:nLI311680]

Assets under management (AuM) climbed to 119.1 billion Swiss francs ($112.4 billion) from 113.6 billion francs at the end of 2009, with performance-related gains in equity and fixed-income funds also adding to the increase.

The total excludes the double count of 12.9 billion francs of funds distributed by S&G, a "white label" unit that distributes third-party products, but managed by Augustus Asset Managers, part of the GAM unit.

Augustus manages GAM's fixed-income hedge funds, which have lower margins than other single hedge funds. The Augustus funds had the largest single hedge fund inflows, which had the effect of increasing overall margins at S&G but depressing them at GAM. Fees earned by the GAM fund of hedge funds unit have slumped since 2008, when assets shrank by about 40 billion francs as values tumbled and clients fled to safer, lower-margin cash and government bonds. Assets are currently at around a third of their peak level.

The company, which split from Swiss private bank Julius Baer (BAER.VX) in October, is made up of former Baer hedge fund of funds unit GAM Holding, and S&G.

Margins are higher at the GAM unit, which now also offers single hedge funds and a managed portfolio platform. ($1=1.060 Swiss Franc)