Assets under management for the Group were CHF 113.5 billion as at 30 June 2011, a fall of CHF 4.3 billion or 4% from year-end 2010. This decrease was fully attributable to the appreciation of the Group's Swiss franc reporting currency against the currencies in which the majority of its asset base is denominated - the US dollar, the euro and, to a lesser extent, the British pound. In total, the effect from foreign exchange movements reduced the Group's asset base by CHF 4.9 billion.
At CHF 0.6 billion2, net new money inflows for the first six months of 2011 were lower than the significant inflows recorded last year (CHF 5.6 billion in the first half of 2010, CHF 2.4 billion in the second half). Turbulent market conditions and widespread macroeconomic and geopolitical concerns unsurprisingly led to extreme caution among investors, markedly reducing their activity levels.
Chairman and CEO Johannes A. de Gier commented: "Inevitably, a resumption of net new money inflows more in line with our mid-term targets will be dependent on a return to normalised levels of investor engagement and activity. While we don't anticipate such a turn-around in the short term, our operating businesses are well-prepared to take advantage of it when it comes, thanks to the diversification of their product ranges. We also expect their ongoing expansion in key markets to unlock further growth potential once conditions improve."
"The fact that our asset and revenue base is reported in the Swiss franc, which has continued to strengthen considerably against the US dollar and the euro since the beginning of July, creates a significant hurdle for the growth of our bottom-line profit despite the positive development of our underlying businesses."
GAM's net new money inflows for the first six months of 2011 totalled CHF 0.4 billion, compared to CHF 3.7 billion in the first half of 2010 and CHF 2.2 billion in the second half.
The ongoing shift in private client preferences away from traditional multi-strategy offshore funds of hedge funds and the related attrition from GAM's managed portfolios were counteracted by net inflows from a wide range of other distribution channels. In particular, they included successful mandate wins with institutions worldwide across a number of equity products, fixed income and multi-manager strategies, highlighting GAM's successful efforts to reduce its dependence on its historic private banking partners.
While the volume of inflows was generally muted compared to 2010, GAM's UCITS III range remained a key contributor to net new money, as private investors continued to show a preference for single-manager and tax-efficient onshore products. Net inflows into equity funds were driven by select demand for products that have strong long-term track records such as GAM's Asian and US equity strategies, and for thematic funds that convincingly address investors' current priorities. Inflows into GAM's global rates strategies, its absolute return fixed income range and emerging market strategies (including the funds GAM advises for Swiss & Global Asset Management) were robust, but did not reach the strong levels of 2010.
GAM's assets under management as at 30 June 2011 were CHF 50.7 billion, down 5% from CHF 53.6 billion at year-end 2010, reduced by a substantial negative impact from foreign exchange movements of CHF 3.7 billion.
Net new money inflows at Swiss & Global Asset Management for the first six months of 2011 were CHF 1.3 billion, compared to CHF 7.4 billion in the first half of 2010 and CHF 2.3 billion in the second half of 2010.
The range of Julius Baer fixed income funds experienced moderate inflows. Net new money inflows into the products advised by GAM were resilient, although not as high as in the first half of 2010. In addition, certain bond funds managed in-house by Swiss & Global Asset Management saw encouraging demand on the back of strong investment performance. The physical precious metal range continued to grow with solid net inflows particularly in the silver and platinum funds. In equities, higher inflows into funds focused on topical themes (energy transition, luxury) and specialty mandates (growth, absolute return) were offset by redemptions from regional products and from the Northern Africa fund following the temporary closure of the Egyptian stock exchange.
The institutional business recorded slight outflows, mainly from the closure of smaller, less profitable mandates. The contribution to growth from private label funds was solid, but smaller than in 2010.
At Swiss & Global Asset Management, assets under management as at 30 June 2011 were CHF 79.6 billion, CHF 0.8 billion or 1% lower than at year-end 2010, reflecting a significant negative currency impact of CHF 2.2 billion.
Adjusted for certain non-cash items, underlying net profit for the first half of 2011 fell 6% year-on-year to CHF 100.4 million. Reported on the same basis, earnings per sharewere CHF 0.54, unchanged from the previous year, and return on tangible equity rose to 24.4%, supported by the Group's active approach to managing its capital base.
The Group's operating income totalled CHF 324.9 million for the first half of 2011, down 12% year-on-year, reflecting the strengthening of the Swiss franc against the US dollar and the euro - the currencies in which both operating businesses generate the majority of their revenues.
Net fee and commission income was only marginally down (-1%) given the average asset base was practically unchanged from the first half of 2010.
Performance fees, mainly reported by GAM, were CHF 15.6 million, significantly lower than the CHF 57.7 million recorded in the first six months of 2010 when the fixed income range saw outstanding growth combined with strong investment performance. This fall in performance fees led to a decrease in the Group's annualised gross margin from 62.4 basis points in the first six months of 2010 to 55.2 basis points. Excluding performance fees, the gross margin remained unchanged from the first half of 2010.
The income from the retained 28% stake in Artio Global Investors Inc., held as a financial investment and reported as income from investment in associates, decreased by 24% to CHF 12.4 million. This income is derived from publicly available financial information and was particularly affected by the weakening of the US dollar against the Swiss franc.
Other operating income - which includes foreign exchange gains from hedging activities undertaken with respect to the Group's currency exposure - rose by CHF 5.4 million year-on-year to reach CHF 13.1 million.
Operating expenses fell to CHF 200.2 million, a 14% reduction from the first half of 2010. The decline in most cost categories was driven by cost discipline, aided by foreign exchange movements that reduced expenses incurred in currencies other than the Swiss franc, in particular the British pound.
Personnel expenses saw a 15% reduction, reflecting a fall in contractual-based compensation to investment professionals on the back of lower performance fees and a reduced accounting impact from the options awarded to all Group employees under the 2009 long-term incentive plan.
General expenses declined by 12%, driven by effective cost discipline and the one-off release of CHF 4 million in provisions. In the second half of the year, costs are expected to increase modestly following the relocation of Swiss & Global Asset Management to its new headquarters.
The Group's cost/income ratio for the first half of 2011 was 61.6%, down from 63.1% a year ago, reflecting cost control as well as the impact from non-recurring factors such as the release of provisions and gains on currency hedges for the current fiscal year. Absent a weakening of the Swiss franc, the cost/income ratio is expected to increase in future periods.
The Group's balance sheet remained strong, with total assets as at 30 June 2011 of CHF 2,575.8 million. The cash position was substantial at CHF 644.3 million, despite a dividend payment of CHF 94.1 million for 2010 and the buy-back of own shares both for the purposes of hedging the Group's economic exposure to the options granted under the 2009 long-term incentive plan and for cancellation as part of its buy-back programme.
The carrying value of the stake in Artio Global Investors Inc., reported as investment in associates, was reduced to CHF 194.3 million as at 30 June 2011, based on the outcome of an impairment test performed according to IFRS. The related non-cash charge of CHF 92.2 million is reflected in the Group's consolidated income statement for the first half of 2011, but excluded from underlying net profit. The unrealised impact of the US dollar depreciation on the value of the participation in Artio as at 30 June 2011, which amounted to CHF 30.4 million, was recorded through equity, in line with IFRS.
Total equity amounted to CHF 2,200.6 million. Excluding GAM goodwill, customer relationships and brand, tangible equity stood at CHF 821.6 million compared to CHF 1,066.8 million at year-end 2010. This decrease was mainly driven by the dividend payment, the reduction in the carrying value of Artio and the increase in the Group's treasury share position.
Tangible equity exceeded the Group's regulatory capital requirements, which amounted to approximately CHF 70 million as at 30 June 2011 (calculated by aggregating all the regulatory requirements of the operating businesses), highlighting the Group's strong capitalisation.
The Group's capital management strategy is based on a firm commitment to deploying its capital in a disciplined way so as to maximise shareholder value in the long term whilst retaining its balance sheet strength. Capital exceeding regulatory requirements and not required for the growth of its businesses - organic or through acquisitions - will be returned to shareholders.
In the 18 months between the beginning of 2010 and the end of June 2011, the Group distributed CHF 314 million to its shareholders, through dividends and share buy-backs.
In July 2011, following shareholder approval at the Annual General Meeting (AGM) held in April 2011, 10.3 million shares repurchased under the 2010 buy-back programme were cancelled.
At the same AGM, shareholders approved a new share buy-back programme, which allows for the repurchase of up to 41.3 million shares for cancellation and is scheduled to run for a maximum period of three years. The programme was launched on 9 May 2011 and, as of 22 August 2011, the Group had bought back 5.3 million shares for future cancellation.
Johannes A. de Gier said: "Our balance sheet strength is particularly important in challenging environments and gives us options - and we have no intention of giving up the flexibility to pursue attractive growth opportunities when they arise."
The presentation for media, analysts and investors on the results of GAM Holding AG for the first half of 2011 will be webcast on 23 August 2011 at 9:30am (CET). Materials relating to the results (presentation slides, Half-Year Report 2011 and press release) are available on www.gamholding.com.
For further information please contact:
Larissa Alghisi Rubner
T: +41 (0) 58 426 62 15
Bluechip Financial Communications
T: +41 (0) 44 256 88 33
Notes to editors
GAM Holding AG is an independent, well-diversified asset management group. Its operating businesses - GAM and Swiss & Global Asset Management - focus on the manufacturing and distribution of actively managed investment products and services.
GAM Holding AG is listed on the SIX Swiss Exchange and is a component of the Swiss Market Index Mid (SMIM) with the symbol "GAM". The Group has assets under management of CHF 113 billion (as at 30 June 2011) and employs over 1,000 staff with offices in Zurich (head office), Bermuda, Grand Cayman, Dubai, Dublin, Frankfurt, Geneva, Hong Kong, London, Luxembourg, Madrid, Milan, New York and Tokyo.
Disclaimer regarding forward-looking statements
This press release by GAM Holding AG ("the Company") includes forward-looking statements that reflect the Company's intentions, beliefs or current expectations and projections about the Company's future results of operations, financial condition, liquidity, performance, prospects, strategies, opportunities and the industry in which it operates. Forward-looking statements involve all matters that are not historical fact. The Company has tried to identify those forward-looking statements by using the words 'may', 'will', 'would', 'should', 'expect', 'intend', 'estimate', 'anticipate', 'project', 'believe', 'seek', 'plan', 'predict', 'continue' and similar expressions. Such statements are made on the basis of assumptions and expectations which, although the Company believes them to be reasonable at this time, may prove to be erroneous.
These forward-looking statements are subject to risks, uncertainties, assumptions and other factors that could cause the Company's actual results of operations, financial condition, liquidity, performance, prospects or opportunities, as well as those of the markets it serves or intends to serve, to differ materially from those expressed in, or suggested by, these forward-looking statements. Important factors that could cause those differences include, but are not limited to: changing business or other market conditions, legislative, fiscal and regulatory developments, general economic conditions, and the Company's ability to respond to trends in the financial services industry. Additional factors could cause actual results, performance or achievements to differ materially. The Company expressly disclaims any obligation or undertaking to release any update of or revisions to any forward-looking statements in this press release and any change in the Company's expectations or any change in events, conditions or circumstances on which these forward-looking statements are based, except as required by applicable law or regulation.
 The underlying net profit of CHF 100.4 million excludes the CHF 92.2 million non-cash reduction in the carrying value of Artio Global Investors Inc. and the amortisation of customer relationships of CHF 5.8 million. Including these items, the Group's net profit according to IFRS as shown in the Condensed Interim Consolidated Financial Statements amounted to CHF 2.4 million.
 Group assets under management and net new money totals exclude the funds advised by GAM and distributed by Swiss & Global Asset Management, which are reported in both businesses. Including these assets, Group assets under management totalled CHF 130.3 billion as at 30 June 2011 and net new money inflows CHF 1.8 billion for the first half of 2011.
 The net profit for the first half of 2011 has been adjusted to exclude the reduction in the carrying value of the investment in associates (Artio Global Investors Inc.) of CHF 92.2 million and the amortisation of customer relationships of CHF 5.8 million. Including those non-cash items, the Group's net profit for the first half of 2011 according to IFRS as shown in the Condensed Interim Consolidated Financial Statements amounted to CHF 2.4 million.
The net profit for 2010 was adjusted to exclude the reduction in the carrying value of the investment in associates (Artio Global Investors Inc.) of CHF 180.3 million (recognised in H2 2010) and the amortisation of customer relationships of CHF 11.7 million (CHF 5.8 million in H1 2010, CHF 5.9 million in H2 2010). The Group's net profit for 2010 according to IFRS as shown in the Condensed Interim Consolidated Financial Statements amounted to CHF 10.2 million (CHF 100.5 million in H1 2010, CHF -90.3 million in H2 2010).