GAM H1 profit rises as hedge funds recover

Date: Tuesday, August 24, 2010
Author: Martin de Sa'Pinto, Reuters

GAM H1 net profit 106.3 mln Sfr

Assets under management climb to 116.6 bln Sfr * Hedge funds unit has first net inflows in two years

Company to buy back up to 10 pct of shares (Adds analyst details, background)

Swiss asset manager GAM Holding (GAMH.S) said first-half net profit rose 36 percent after the company staunched losses from its hedge funds unit, where clients added net new money for the first time in two years.

Assets under management rose 3 percent from the year end to 116.6 billion Swiss francs ($112.9 billion) as net new money of 5.6 billion francs offset foreign exchange losses and the impact of falling equities.

The company said it remained cautious over the near term outlook, however.

"Private investors remain generally risk-averse and, in particular, continue to favour other asset classes over equities and hedge fund strategies," Chairman and Chief Executive Johannes de Gier said in a statement.

The company also announced a buyback of up to 10 percent of its shares, equivalent to around 240 million Swiss francs, based on the company's closing price at the end of June, and said it may seek to increase assets through acquisitions.

"The share buy-back programme complements our intention of returning approximately 50 percent of net profits to shareholders through dividends. We expect to be able to fund it largely with 2010 and 2011 earnings," de Gier said.

"Given our strong capital position, it does not impede the group's growth prospects: we continue to invest in the organic growth of our business and to screen the market for opportunities to make targeted, accretive acquisitions," he said.

GAM manages traditional assets such as fixed income and equity products, mainly through S&G, and higher margin alternative assets like hedge funds through the GAM unit.

Overall profit margins slid in 2009 as the low margin S&G grew while the highly profitable GAM unit haemorrhaged assets as clients at former owners Julius Baer (BAER.VX) and UBS (UBSN.VX) pulled money out of fund of hedge funds. [ID:nLI311680]

As a fund-of-hedge-funds company, GAM was bought by UBS in 1999 and sold to Julius Baer in 2005. GAM Holding, comprising GAM and S&G, began trading separately from Baer last year. ($1=1.033 Swiss Franc)