Gam Holding Ag · SIX:GAM
Gam — FY2019 Earnings Presentation
45 slides from Gam's earnings presentation, Feb 20, 2020
Slide 1: Results and Review Strategy Update Full Year 2019
Results and Review Strategy Update Full Year 2019 20 February 2020
Slide 2: Agenda
Agenda 2019 Overview Peter Sanderson, Group CEO 2019 Financial results Richard McNamara, Group CFO Strategy update and outlook Peter Sanderson, Group CEO Q&A Appendix 2
Slide 3: 2019 Overview
2019 OVERVIEW Peter Sanderson, Group CEO
Slide 4: Overview
Overview • On arrival six months ago – conviction of strong business but going through difficult times • Navigating uncertain market conditions to deliver strong investment performance • Strategic milestones achieved in 2019 • PLF – industry leading; provider of choice; record high AuM • Overall AuM
Slide 5: FY 2019 Financial Results
FY 2019 FINANCIAL RESULTS Richard McNamara, Group CFO
Slide 6: Assets under management
Assets under management Strong market performance partly offset outflows in IM – record AuM in PLF Investment management (in CHF bn) (11.1)2 3 5.9 (0.6) 56.11 (1.9)3 48.44 31.12.2018 Net flows Disposal Market performance FX impact 31.12.2019 Private labelling (in CHF bn) 9.0 (1.9) 1.1 84.3 76.1 31.1
Slide 7: Net flows
Net flows Normalisation of outflows, with inflows taking longer to reset Net flows1 • Quarterly trend (in CHF bn) Normalisation of gross outflows in H1 2019 (4.0) (3.6) (1.4) (2.1) Gross inflows more challenging and below historic average 0.1 0.1 Continued absence of offsetting effect from inf
Slide 8: Investment performance
Investment performance1 Three and five-year track record remains strong % of AuM outperforming benchmark 3-year 5-year Capability 31.12.2019 31.12.2018 31.12.2019 31.12.2018 Fixed income 89% 81% 89% 80% Absolute return 77% 49% 50% 53% Equity 22% 24% 43% 17% Systematic 81% 60% 81% 47% Alternatives2 1
Slide 9: FY 2019 Financial summary
FY 2019 Financial summary Lower cost base cushioned the impact of the revenue decline (in CHF m, except where indicated) 2019 2018 Change1 Net management fees and commissions 317.1 495.4 (36%) of which investment management 284.9 453.6 (37%) of which private labelling 32.2 41.8 (23%) Net performance
Slide 10: IM Management fee margin
IM Management fee margin December 2019 exit margin at ~55bps Management fee margin (in bps) 64.6 63.6 62.1 59.1 54.2 2015 2016 2017 2018 2019 Management fee margin by capability Capability AuM as at 31.12.2019 Management fee margin (in bps) • Reduced margin in 2019 mainly due to (in CHF bn) 2019 H1
Slide 11: Performance fees
Performance fees GAM Systematic as primary driver of performance fees Performance fee eligible assets and Performance fee eligible funds by AuM1 performance fees (in CHF) 6.7bn AuM (CHFbn) % >< HWM % >< HWM Fund as at 31.12.19 as at 31.12.19 as at 31.12.18 5.0bn MBS 1.2 2% 2% Core Macro 0.8 (1%) (11
Slide 12: Expenses
Expenses Good progress on cost reductions with CHF 40m target exceeded, but more to do 2019 2018 Change (in CHF m, except where indicated) 1 Fixed personnel expenses 139.9 153.9 (9%) Driven by headcount reduction Driven by lower contractual and discretionary bonuses as a Variable personnel expenses2
Slide 13: Restructuring
Restructuring In excess of CHF 40m run rate savings achieved by end of 2019 Fixed personnel and general expenses1 (in CHF m) 20 3 3 4 FY 2019 5 4 exit run rate savings 3 of CHF 42m 10 11 282 240 229 FY 2018 Fixed Occupancy Technology Data Professional Marketing Administration Other FY 2019 Impact of
Slide 14: Further target cost reductions
Further target cost reductions Additional CHF 40m run rate savings over the next 2 years by end 2021 Fixed personnel and general expenses Cost savings (in CHF m) • Additional CHF 40m of cost savings identified, with 75% of run rate savings to be achieved by end 2020 and the remainder by end 2021 • R
Slide 15: SIX accounting matter
SIX accounting matter Treatment of 40% of future performance fees generated by Cantab Capital Partners Historic accounting treatment of performance fees Sanction Commission decision Acquisition of Cantab Capital Partners SIX sanction • Acquisition of Cantab Capital Partners on 3 October 2016 • SIX’s
Slide 16: IFRS net loss
IFRS net loss Consistent and transparent approach (in CHF m, except where indicated) 2019 2018 Underlying profit before taxes 10.5 126.7 Acquisition-related items1,3 (12.5) 82.3 2,3 Non-recurring items 3.2 (1,130.1) 3 IFRS profit / (loss) before taxes 1.2 (921.1) Income tax expense / (credit) 4.7 (4
Slide 17: Capital management
Capital management Continue to seek to enhance capital buffers Cash and adjusted tangible equity1 • Cash and capital levels remain robust (in CHF m) • No external debt 374 353 328 • Undrawn revolving credit facility of CHF 80m 328 316 • Simplification and restructuring measures 281 Cash 251 to provi
Slide 18: Strategy Update and Outlook
STRATEGY UPDATE AND OUTLOOK Peter Sanderson, Group CEO
Slide 19: GAM strategy
GAM strategy Three-year plan with frontloaded cost targets GAM: fit for the future Efficiency Transparency Growth Bold action to create synergies and Better reporting and processes Pursuing growth via core business adapt to the industry environment based on clarity, accountability and driving AuM an
Slide 20: Efficiency
Efficiency • Integrating businesses across centres and technology – addressing duplication and making it easier for clients to do business with GAM • Historically separated business model with three legacy businesses: Swiss & Global – Zurich ‘One GAM’ Private Label Funds – Zurich GAM investmen
Slide 21: Transparency
Transparency Alignment of performance and remuneration • Greater employee participation and deferral Focus on • No bonuses for GMB for FY 2019 accountability • New CEO foregoing one-off fixed cash award and trust Enhanced communications to drive trust – senior communications hires in London and Zuri
Slide 22: Growth
Growth • Building on strong foundations: Client-centric Good investment performance – FE fundinfo and Eurohedge awards approach Strong client relationships Great client servicing Momentum in • Strong pipeline core EU • Signs of renewed confidence from key distribution partners wholesale • Mult
Slide 23: Outlook
Outlook • The market environment is expected to remain volatile and investors are likely to remain cautious • GAM strongly positioned to continue to help clients actively navigate these markets and grow Outlook • December and January saw continued improvement in gross flows, 2020 with net flows bein
Slide 24: Appendix
APPENDIX
Slide 25: AuM development by capability
AuM development by capability Investment management (in CHF bn) AuM Net AuM Net AuM Capability Market FX Disposal Market FX 31.12.18 flows 30.06.19 flows 31.12.19 Fixed income 29.2 (3.3) 1.4 (0.2) 27.1 (1.8) - 0.7 (0.2) 25.8 Equity 8.7 (2.8) 1.3 (0.1) 7.1 (0.5) - 0.6 - 7.2 Multi asset 7.7 (0.4) 0.6
Slide 26: AuM and net flows by capability
AuM and net flows by capability Investment management AuM by capability (in CHF bn) 31.12.15 30.06.16 31.12.16 30.06.17 31.12.17 30.06.18 31.12.18 30.06.19 31.12.19 Fixed income 18.6 19.3 20.8 27.4 37.1 38.6 29.2 27.1 25.8 Equity 13.4 10.7 12.5 11.0 12.6 12.5 8.7 7.1 7.2 Multi asset 11.9 10.7 9.6 9.
Slide 27: AuM by product type
AuM by product type Investment management AuM by product type (in CHF bn) 31.12.15 30.06.16 31.12.16 30.06.17 31.12.17 30.06.18 31.12.18 30.06.19 31.12.19 Luxembourg SICAVs 23.9 20.5 19.0 20.5 23.5 22.8 14.6 14.1 12.4 Segregated accounts 17.4 15.6 17.4 15.3 15.7 15.2 10.1 9.1 8.1 Ireland UCITS 15.7
Slide 28: AuM and net flows by client segment
AuM and net flows by client segment Investment management AuM by client segment (in CHF bn) 31.12.15 30.06.16 31.12.16 30.06.17 31.12.17 30.06.18 31.12.18 30.06.19 31.12.19 Intermediaries 31.4 27.2 28.4 31.7 40.6 41.8 27.4 23.9 23.0 Institutional clients 33.7 32.0 34.0 35.4 38.5 37.6 24.7 24.5 21.8
Slide 29: Private labelling AuM breakdowns
Private labelling AuM breakdowns By fund domicile (in CHF, except where indicated) 31.12.15 30.06.16 31.12.16 30.06.17 31.12.17 30.06.18 31.12.18 30.06.19 31.12.19 Switzerland 31.4 31.7 31.7 33.1 33.6 34.2 33.3 36.4 34.5 Rest of Europe 15.3 16.3 20.8 26.0 40.7 45.2 42.8 47.6 49.8 Other - - - - - - -
Slide 30: Key figures
Key figures Investment management (in CHF, except where indicated) H1 2015 H2 2015 FY 2015 H1 2016 H2 2016 FY 2016 H1 2017 H2 2017 FY 2017 H1 2018 H2 2018 FY 2018 H1 2019 H2 2019 FY 2019 Net management fees and commissions (m) 236.9 239.3 476.2 214.1 220.3 434.4 218.7 245.1 463.8 261.6 192.0 453.6 1
Slide 31: Performance fee eligible assets and income
Performance fee eligible assets and income Performance fee eligible assets1 (in CHF bn) 31.12.14 30.06.15 31.12.15 30.06.16 31.12.16 30.06.17 31.12.17 30.06.18 31.12.18 30.06.19 31.12.19 Unconstrained fixed income 12.4 10.6 8.7 6.7 5.9 6.2 6.6 6.2 - - - Global macro/managed futures 3.0 3.4 3.9 3.2 2
Slide 32: Performance fee eligible assets analysis
Performance fee eligible assets analysis Global macro/ Other fixed Non-directional managed Systematic income Other 1 Total equity futures strategies Performance fee eligible AuM (CHF bn) 0.3 0.7 1.7 1.4 0.9 5.0 No. of PF eligible funds/mandates 2 8 10 8 18 46 Performance fees 2019 (CHF m) 0.0 0.4 7.
Slide 33: Key performance fee eligible strategies
Key performance fee eligible strategies As at 31.12.2019 AuM % (below)/ Crystallisation Last HWM Fund above Performance fee rate date date (CHF bn) HWM Quantitative Fund 0.20 4% Various 10% / 15% / 20% / 30% 2 30.09.2019 Core Macro 0.83 (1%) Quarterly 10% 30.09.2019 Discovery 0.01 4% 30.06 20% 31.10
Slide 34: General expenses
General expenses (in CHF m) 2019 2018 Change Comments Savings from UK office move and impact from new IFRS lease Occupancy 8.0 22.2 (64%) standard,1 shifting occupancy-related costs to D&A Technology and communication 19.0 14.1 35% Higher level of outsourced IT services Data and research 20.7 23.4 (
Slide 35: Operating margin and compensation ratio
Operating margin and compensation ratio (in CHF m) 2015 2016 2017 2018 2019 Net fee and commission income 600.6 473.5 547.7 499.9 329.9 Net other (expenses) / income 0.7 5.1 2.2 0.3 (3.7) Income 601.3 478.6 549.9 500.2 326.2 Personnel expenses 290.0 246.2 264.6 239.6 197.0 General expenses 104.9 102
Slide 36: Basic and diluted underlying EPS
Basic and diluted underlying EPS 2015 2016 2017 2018 2019 (in million shares, except where indicated) Weighted average number of shares in issue 165.1 162.0 160.0 159.7 159.7 Weighted average number of treasury shares held 5.2 4.3 3.0 4.3 4.2 Weighted average number of shares outstanding for basic E
Slide 37: Currency split – revenues, expenses and AuM
Currency split – revenues, expenses and AuM Group income1 Group expenses2 Investment management AuM3 FY 2019 FY 2019 as at 31.12.2019 4% 10% 11% 16% 14% 27% 17% 38% 39% 13% 7% 8% 30% 40% 26% USD EUR GBP CHF Other 1 Percentage splits are estimated based upon the currency exposure of the underlying Au
Slide 38: Group balance sheet
Group balance sheet 31.12.16 31.12.17 31.12.18 31.12.19 (in CHF m) restated restated restated Cash and cash equivalents 353 374 328 316 Seed capital investments 84 84 68 46 Other assets 205 271 207 260 Goodwill and other intangible assets 1,878 1,852 725 713 Assets 2,520 2,581 1,328 1,335 Current li
Slide 39: Net cash
Net cash (in CHF m) 4.9 (15.9) 25.2 (1.2) (25.4) 328.2 315.8 Net cash 2019 underlying net Acquisition-related Net seed capital FX impact Changes in net Net cash 31.12.2018 profit deferred sales assets and other 31.12.2019 consideration impacts 39
Slide 40: Adjusted tangible equity
Adjusted tangible equity1 (in CHF m) 17.5 (17.5) 12.3 (0.8) 4.6 (3.5) 197.2 184.6 Adjusted tangible IFRS Amortisation / Remeasurement Share- FX impact Other Adjusted tangible equity net loss impairment of pension based impacts equity 31.12.2018 FY 2019 IMCCs liabilities payment 31.12.2019 expense Ab
Slide 41: Strong product positioning
Strong product positioning Products1 well positioned for growth Non-traditional sources of return and genuinely • Asian income differentiated active investment approaches • Commodity trade finance • Emerging market debt • Bespoke solutions • Global rates • Multi asset segregated • Insurance linked a
Slide 42: SIX accounting matter
SIX accounting matter Technical accounting changes and restatement Balance sheet 2018 Published Restated ▲ Goodwill and other intangible assets 654.6 724.5 69.9 Goodwill 329.4 385.2 55.8 IMCCs 38.0 52.1 14.1 Financial liabilities (non-current) 28.7 56.6 27.9 Financial liability of 40% of uncrystalli
Slide 43: Absolute Return Bond Fund (ARBF)
Absolute Return Bond Fund (ARBF)1 Liquidation completed with over 100%2 of assets returned to clients Client distributions3 1st and 2nd 3rd 4th 5th Clients’ interests put first at all times distribution distribution distribution distribution Completion • Sought to maximise liquidity while protecting
Slide 44: Corporate calendar and contacts
Corporate calendar and contacts Forthcoming events 23 April 2020 Interim management statement Q1 2020 30 April 2020 Annual General Meeting 4 August 2020 Half-year results 2020 21 October 2020 Interim management statement Q3 2020 Group Communications and investor relations Charles Naylor Tobias Plang
Slide 45: Cautionary statement on forward-looking information
Cautionary statement on forward-looking information This presentation by GAM Holding AG (‘the Company’) does not constitute an invitation or offer to acquire, purchase or subscribe for securities. This presentation by the Company includes forward-looking statements that reflect the Company’s intenti