Slide 1: Results and Review Full Year 2018
Results and Review Full Year 2018 21 February 2019
Slide 2: Agenda
Agenda 2018 Review David Jacob, Group CEO 2018 Financial results Richard McNamara, Group CFO Strategy update and outlook David Jacob, Group CEO Q&A Appendix 2
Slide 3: 2018 Review
2018 REVIEW David Jacob, Group CEO
Slide 4: 2018 Summary
2018 Summary A challenging year for GAM given ARBF, and for the whole industry • AuM down CHF 28.3bn with ARBF liquidation contributing CHF 11.0bn1 • CHF 10.5bn of net outflows2 Investment management • 66% of AuM3 in funds outperforming benchmark over three years • Morningstar peer rankings show 77%
Slide 5: Update on Absolute Return Bond Fund (ARBF)
Update on Absolute Return Bond Fund (ARBF)1 CHF 9.5bn of ARBF assets returned to investors in three months Return of ARBF assets2 100% 1st distribution 2nd distribution 3rd distribution A complex and challenging situation impacting 90% 89% multiple stakeholders 82% 80% We did, and continue to do
Slide 6: Investment performance
Investment performance1 Three and five year track record remains strong % of AuM outperforming benchmark 3-year 5-year Capability 31.12.2018 31.12.2017 31.12.2018 31.12.2017 Fixed income 81% 82% 80% 51% Absolute return 49% 76% 53% 66% Equity 24% 67% 17% 68% Systematic 60% 100% 47% 40% Alternatives 2
Slide 7: Net flows, excluding ARBF
Net flows, excluding ARBF Contrasting halves with H2 2018 impacted by ARBF and challenging market conditions Cumulative net fund sales in Europe1 Industry picture: Flows “slowing then going”, (in EUR bn) especially in Europe 700 Strategies: Credit opportunities and LEBF gave 500 back 2017 flow g
Slide 8: A diverse set of distinctive strategies
A diverse set of distinctive strategies1 Taking market share and delivering performance Net flows AuM Net flows Rank Sector flows Indicative strategies 3 years as at 31.12.2018 3 years 3 years2 3 years CHF m CHF m % Quartile % Credit opportunities 5,614 7,669 231% 2 (14%) Local emerging bond 3,550 7
Slide 9: Early progress on restructuring
Early progress on restructuring Restructuring to drive reduced complexity and greater focus on GAM’s strengths CHF 40m+ of cost saving measures implemented by end-2019, carefully planned and underway Approximately one third of identified roles already removed or in consultation More efficient
Slide 10: FY 2018 Financial Results
FY 2018 FINANCIAL RESULTS Richard McNamara, Group CFO
Slide 11: FY 2018 Financial summary
FY 2018 Financial summary Lower profitability driven by revenue decline 2018 2017 Change1 (in CHF m, except where indicated) Net management fees and commissions 495.4 503.6 (2%) of which investment management 453.6 463.8 (2%) of which private labelling 41.8 39.8 5% Net performance fees 4.5 44.1 (90%
Slide 12: Management fee margin
Management fee margin Impacted by mix in AuM and some fee pressure Management fee margin1 (in bps) 64.6 63.6 62.1 59.1 2015 2016 2017 2018 Management fee margin by capability (in bps, except where indicated) Capability AuM as at 31.12.2018 Management fee margin (in bps) Decline mainly due to shift
Slide 13: Performance fees
Performance fees Performance fee eligible assets declined Performance fee eligible assets and Performance fee eligible funds by AuM performance fees (in CHF) 17.3bn AuM % >< Fund CHF bn HWM MBS 1.3 2% Quantitative Fund 0.8 (29%) Core Macro 0.8 (11%) GAM Star (Lux) - European Alpha 0.4 (13%) 6.7bn GA
Slide 14: Expenses
Expenses Operating leverage helping to support profitability but costs still weigh on profitability 2018 2017 Change in CHF m, except where indicated Market pressure and contractor costs for change Fixed personnel expenses1 153.9 150.1 3% projects Lower contractual and discretionary bonuses Variable
Slide 15: Restructuring plan
Restructuring plan CHF 40m+ of net cost savings by end-2019, with full benefit in 2020 Savings across the business (in CHF m) ~ 14% of general and fixed personnel expenses 18.9 7.6 12.2 1.3 282 <242 FY 2018 Consolidation of Optimising Streamlining Refined Expected fixed personnel investment distribu
Slide 16: Private labelling
Private labelling Tailored fund services leveraging existing infrastructure of IM business AuM, revenues and management fee margin Building scale 74 76 11% growth rate1 53 Capitalising on long-standing client relationships and 44 45 45 47 47 39 41 42 40 42 outsourcing trend of management company
Slide 17: 2018 IFRS Net profit
2018 IFRS Net profit Non-recurring items impacted IFRS net profit (in CHF m, except where indicated) 2018 2017 Change Underlying profit before taxes 126.7 172.5 (27%) 1 Acquisition-related items 18.4 (3.1) n/m Non-recurring items2 (1,078.5) (21.2) n/m IFRS (loss) / profit before taxes (933.4) 148.2
Slide 18: Non-recurring items
Non-recurring items Driven by impairment charges related to the Group’s goodwill and Cantab IMCCs Non-recurring items1 Goodwill impairment (in CHF m, except where indicated) Mainly created in 2005 when Julius Baer acquired GAM 2018 2017 from UBS Impairment of goodwill (883.4) - Driven by lower p
Slide 19: Acquisition-related items
Acquisition-related items Reduction of Cantab-related deferred consideration liability to CHF 33.1m Acquisition-related items1 Cantab deferred consideration liability (in CHF m, except where indicated) Liability decreased from CHF 92.3m at acquisition, 2018 2017 to CHF 33.1m as at 31 December 2018
Slide 20: Capital management
Capital management Prudent approach requires dividend pause for FY 2018 and new dividend policy Cash and tangible equity1 (in CHF m) No external debt 633 Cash and Revolving credit facility of CHF ~100m 481 capital No FY 2018 dividend proposed to accelerate 487 353 374 re-build of capital buffe
Slide 21: Strategy Update and Outlook
STRATEGY UPDATE AND OUTLOOK David Jacob, Group CEO
Slide 22: Reshaping the business around what sets us apart
Reshaping the business around what sets us apart Distinctive strategies1 playing into four key areas of structural demand Non-traditional sources of return and genuinely differentiated active investment approaches • Emerging market debt • Global rates • Multi asset • Mortgage-backed segregated accou
Slide 23: A world-class spectrum of innovative sources of yield
A world-class spectrum of innovative sources of yield Addressing deep and growing pools of investor demand globally 18 Commodity trade Junior commercial 16 finance real estate 14 Legend3 Mini: <$100m Yield to maturity (%)1 12 Cat bonds Small: $100m-500m Medium: $500m-1bn Local emerging EM opportunit
Slide 24: Targeted engagement with clients globally
Targeted engagement with clients globally A strong sales team with a clear strategy Sales strength Valuable set of solid, long-standing client relationships The right set-up to engage with clients globally • Deep, long-standing relationships e.g. key GFI relationships • Expertise in distinctive stra
Slide 25: Illustrative examples of GAM's sales dynamics
Illustrative examples of GAM’s sales dynamics Bringing on new offerings to sustain momentum Mortgage-backed securities (MBS) Emerging market equity (EM Equity) 2.0 16% 1.4 70% 1.8 14% 60% 1.2 1.6 50% 12% 1.4 1.0 40% 10% Fund performance in % Fund performance in % AuM in CHF bn AuM in CHF bn 1.2 30%
Slide 26: Priorities for 2019
Priorities for 2019 Further stabilising the business and rebuilding trust while performing for our clients Near-term priorities • Finalise the ARBF liquidation • Stabilise business and continue to rebuild Distinctive investment client trust Deliver investment strategies and services • Deliver strong
Slide 27: Outlook
Outlook Improved YTD market conditions compared to Q4 2018 Environment continues to be volatile and investors remain cautious and price sensitive, but GAM is well positioned to address their needs The daily flow position has improved in the first weeks of 2019 compared to December 2018, howeve
Slide 28: Appendix
APPENDIX
Slide 29: Absolute Return Bond Fund (ARBF) repayments
Absolute Return Bond Fund (ARBF1) repayments Distribution pattern per fund GAM Multibond – Absolute Return Bond GAM Multibond – Absolute Return Bond GAM Multibond – Absolute Return Bond Plus Defender 100% 100% 89% 100% 89% 90% 82% 92% 90% 82% 90% 86% 80% 74% 80% 80% 75% 70% 80% 70% 70% 60% 60% 60% 5
Slide 30: Assets under management
Assets under management Assets in IM declined to 56.1bn, PLF up at CHF 76.1bn Investment management (in CHF bn) (11.0) 1 (10.5) 84.4 (6.4) 2 2 (0.4) 3 56.1 56.1 31.12.2017 ARBF Net flows Market performance FX impact 31.12.2018 Private labelling (in CHF bn) 8.3 (5.1) (1.4) 74.3 76.1 31.12.2017 Net fl
Slide 31: AuM development by capability
AuM development by capability Investment management (in CHF bn) 1 AuM Net AuM Net ARBF AuM Capability Market FX Market FX 31.12.17 flows 30.06.18 flows impact 31.12.18 Absolute return 15.6 (0.8) (0.5) 0.1 14.4 (1.4) (11.0) (0.1) - 1.9 Fixed income 37.1 2.8 (1.6) 0.3 38.6 (8.2) - (0.6) (0.6) 29.2 Equ
Slide 32: AuM and net flows by capability
AuM and net flows by capability Investment management AuM by capability (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 1 Absolute return 22.2 21.5 23.1 19.2 16.3 16.1 15.6 14.4 1.9 Fixed income 19.5 19.0 18.6 19.3 20.8 27.4 37.1 38.6 29.2 Equity 13.8 13.
Slide 33: AuM by product type
AuM by product type Investment management AuM by product type (in CHF bn) 31.12.14 31.12.15 30.06.16 31.12.16 30.06.17 31.12.17 30.06.18 31.12.18 Luxembourg SICAVs 26.1 23.9 20.5 19.0 20.5 23.5 22.8 14.6 Segregated accounts 18.2 17.4 15.6 17.4 15.3 15.7 15.2 10.1 Ireland UCITS 14.4 15.7 14.7 14.3 18
Slide 34: AuM and net flows by client segment
AuM and net flows by client segment Investment management AuM by client segment (in CHF bn) 31.12.14 30.06.15 31.12.15 30.06.16 31.12.16 30.06.17 31.12.17 30.06.18 31.12.18 Intermediaries 32.8 31.6 31.4 27.2 28.4 31.7 40.6 41.8 27.4 Institutional clients 34.3 33.8 33.7 32.0 34.0 35.4 38.5 37.6 24.7
Slide 35: Private labelling AuM breakdowns
Private labelling AuM breakdowns By fund domicile (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 Switzerland 35.4 37.9 31.4 31.7 31.7 33.1 33.6 34.2 33.3 Rest of Europe 9.0 10.6 15.3 16.3 20.8 26.0 40.7 45.2 42.8 Other 2.7 2.2 - - - - - - - Total 47.1 50
Slide 36: 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 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 Net performance fees (m)
Slide 37: Performance fee eligible assets and income
Performance fee eligible assets and income Performance fee eligible assets1 (in CHF bn) 31.12.12 30.06.13 31.12.13 30.06.14 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 Unconstrained fixed income 13.0 16.0 14.1 14.1 12.4 10.6 8.7 6.7 5.9 6.2 6.6 6.2 - Global macro
Slide 38: Performance fee eligible assets analysis
Performance fee eligible assets analysis Global macro/ Other fixed Unconstrained Non-directional managed Systematic income Other 1 Total fixed income equity futures strategies Performance fee eligible AuM (CHF bn) - 0.6 1.1 2.1 1.5 1.4 6.7 No. of PF eligible funds/mandates 2 4 11 11 11 18 57 Perform
Slide 39: Key performance fee eligible strategies
Key performance fee eligible strategies As at 31.12.2018 AuM % (below)/ Crystallisation Performance fee Last HWM Fund above date rate date CHF bn HWM Quantitative Fund 0.8 (29%) quarterly 20% 31.12.2017 Core Macro 0.8 (11%) quarterly 10% 31.12.2017 Discovery 0.0 (11%) 30.06 20% 02.10.2017 GAM System
Slide 40: General expenses
General expenses 2018 2017 Change Comments (in CHF m) Occupancy 22.2 22.2 0% Telephone and video conferencing and other IT Technology and communication 14.1 12.7 11% expenses Data and research 23.4 17.9 31% External data providers driven by MiFID II Professional and consulting services 17.6 15.5 14%
Slide 41: Operating margin and compensation ratio
Operating margin and compensation ratio (in CHF m) 2012 2013 2014 2015 2016 2017 2018 Net fee and commission income 578.9 654.8 608.8 600.6 473.5 547.7 499.9 Net other income 16.0 15.4 14.7 0.7 5.1 2.2 0.3 Income 594.9 670.2 623.5 601.3 478.6 549.9 500.2 Personnel expenses 285.6 321.3 293.2 290.0 24
Slide 42: Basic and diluted underlying EPS
Basic and diluted underlying EPS (in million shares, except where indicated) 2012 2013 2014 2015 2016 2017 2018 Weighted average number of shares in issue 189.7 178.2 169.8 165.1 162.0 160.0 159.7 Weighted average number of treasury shares held 18.5 14.8 7.5 5.2 4.3 3.0 4.3 Weighted average number o
Slide 43: Underlying effective tax rate (ETR)
Underlying effective tax rate (ETR) 1.3% (0.1%) (2.2%) 2.3% 22.5% 21.2% Swiss statutory Country Holding company Share-based Other impacts FY 2018 ETR 1 2 tax rate mix costs payments 1 Holding company costs which are offset by non-taxable income and therefore do not represent a tax deduction. 43 2 No
Slide 44: Currency split – revenues, expenses and AuM
Currency split – revenues, expenses and AuM Group income1 Group expenses2 Investment management AuM3 FY 2018 FY 2018 as at 31.12.2018 9% 4% 7% 17% 7% 8% 40% 13% 36% 46% 14% 16% 31% 29% 23% USD EUR CHF GBP Other 1 Percentage splits are estimated based upon the currency exposure of the underlying AuM
Slide 45: Group balance sheet
Group balance sheet (in CHF m) 31.12.15 31.12.16 31.12.17 31.12.18 Cash and cash equivalents 633 353 374 328 Seed capital investments 67 84 84 68 Other assets 208 205 270 207 Goodwill and other intangible assets 1,389 1,737 1,717 655 Assets 2,297 2,379 2,445 1,258 Current liabilities 297 255 327 305
Slide 46: Net cash
Net cash (in CHF m) 98.2 (101.6) (28.9) 19.6 (8.6) (19.3) (5.0) 373.8 328.2 Net cash Underlying Dividend Share Acquisition- Net seed FX impact Changes in Net cash 31.12.2017 net profit 2017 buy-backs related capital sales net assets and 31.12.2018 FY 2018 for deferred other impacts share-based consi
Slide 47: Tangible equity
Tangible equity (in CHF m) (101.6) (28.9) 10.9 15.5 3.8 (6.6) 166.1 184.6 883.4 (929.1) 171.1 Tangible IFRS Amortisation / Impairment Dividend Share buy- Remeasurement Share- FX impact Other Tangible equity net profit impairment of 2017 backs for of pension based impacts equity 31.12.2017 FY 2018 IM
Slide 48: GAM equity capability
GAM equity capability Five clusters of investment expertise Global European Asian Specialist Absolute return equities equities equities equities equities Global equities Core Europe Japan Swiss equities Non-directional equities Global emerging UK equities Asia Pacific and US growth markets China (co
Slide 49: GAM fixed income capability
GAM fixed income capability Five clusters of investment expertise Strategic bond Global credit Emerging markets MBS/ABS Specialist Global strategic bond Credit opportunities Local currency MBS/ABS Cat bonds Total return bond Diversified income Hard currency Commodity trade finance Global high yield
Slide 50: GAM systematic capability
GAM systematic capability Scientific investing across asset classes and investment styles Equities Fixed income Multi-asset Multi-asset Alt risk premia unconstrained long-only Global equities Dynamic credit Core macro Dynamic multi asset1 Alternative risk (long only) premia Quantitative fund Global
Slide 51: GAM solutions
GAM solutions1 Model portfolio Long only Alternative Alternatives service multi asset investment solutions MPS fund range Target return Diversity Commodities Absolute return Trading II Flexible Multi-emerging markets Focus alternatives 1 Includes alternatives and multi asset. 51
Slide 52: Corporate calendar and contacts
Corporate calendar and contacts Forthcoming events 17 April 2019 Interim management statement Q1 2019 08 May 2019 Annual General Meeting 30 July 2019 Half-year results 2019 17 October 2019 Interim management statement Q3 2019 Contacts Investor relations: Patrick Zuppiger Jessica Grassi T +41 58 426
Slide 53: 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