GAM's annual net loss deepened, its client assets fell, and it pushed back financial targets. The Swiss asset manager's flagship investment arm stanched withdrawals to post the first inflows in three years.

Zurich-based GAM's net loss widened to 388.4 million Swiss francs ($433.4 million), from a loss of 3.5 million francs year-ago, the company said in a statement on Thursday. The loss was driven by writing down 373.7 million francs of goodwill, created from the acquisition of GAM by Julius Baer in 2005 and before that by UBS in 1999.

The battered asset manager had just begun attempting a recovery, under CEO Peter Sanderson following a massive scandal at a flagship bond fund, when the pandemic hit last spring. GAM said it would postpone its financial targets by two years, to 2024, as a result.

Withdrawals Stanched

Amid the dearth of bad news – a massive net loss, no shareholder payout, an eight percent fall in its assets to 122 billion francs – GAM said it had stanched as well as reversed withdrawals at its key investment management arm. 

The 300 million francs in fourth-quarter inflows at the unit represent the first net new money in three years. A supply chain fund co-produced with Greensill drove the inflows, as did other fixed income products and a European equity fund.  

Shift In And Out

The GAM-Greensill supply chain finance fund registered in Luxembourg was hit by a withdrawal of 264 million euros ($318.4 million) two days before the third quarter closed, according to Bloomberg data. It then won an inflow of almost exactly the same amount later that same week, two days into the fourth quarter. 

GAM has a long history of this type of adjustment towards the end of the quarter, primarily because some clients don’t want to disclose such holdings, according to experts. A spokesman for the asset manager didn't comment to finews.com. 

Stars Kept On Side

GAM's long-term targets are for an underlying pre-tax profit of 100 million francs, an operating margin of at least 30 percent, and a compensation ratio between 45 percent and 50 percent. For the full year, these stood at a loss of 14.9 million, -4.7 percent amid the loss, and 64.5 percent, respectively.

The company said its management will take no 2020 bonus and that bonuses across the firm would reflect GAM's net loss, but that the pay contracts for the portfolio managers who figurehead its various boutiques and specialties «remain unchanged».