Gam, the Swiss-based asset manager that is being targeted by an activist investors, is to maintain its dividend despite profits falling by more than a third in 2016 as performance fees plummeted.
The fund house, which is in the midst of an operational overhaul, said performance fees fell by more than 96 per cent to Sfr3m ($2.97m) last year, after the company struggled to cope with volatile markets.
Alexander Friedman, chief executive of Gam, which has assets under management of Sfr120.7bn, said:
Our 2016 earnings were disappointing on two fronts: we recorded net outflows for the year and realised very low performance fees. We are addressing both issues through our strategic initiatives, many of which have started to bear fruit, while our unrelenting focus on cost discipline is showing results.
The fund house plans to cut ties with Julius Baer, the Swiss private bank it was spun out of in 2010, in a bid to reduce costs. The company will no longer use the Julius Baer brand on its funds.
The company, which proposed a dividend of Sfr0.65 per share, also said it will put in place a new share buy-back programme after the current programme expires in April. It said the new programme would provide the group with “future flexibility to return excess capital to shareholders once capital buffers are rebuilt and in the absence of other opportunities for investment”.
Earlier this week, the company said it was being targeted by an activist investor following last year’s disappointing performance. RBR Strategic Value, which owns 2.1 per cent of Gam’s stocks, has pushed to shake up the Swiss asset manager’s board.
It has proposed the election of three people to Gam’s board, including a new chairman.
Haley Tam, an analyst at Citi, says:
We believe Gam’s CEO already has a clear recovery plan in place, and that the existing board understands the challenges facing the business: a need to improve investment performance, streamline costs and improve distribution, particularly in higher fee margin areas.
We see some risk that the involvement of RBR could lead to significant management distraction.
Gam said today that it was proposing Hugh Scott-Barrett, a current board director, as chairman to replace Johannes de Gier, who will retire. Mr de Gier has been chair since 2002.
Earnings per share fell by almost 39 per cent in 2016 to Sfr0.60. Gam’s share price has decreased by 35 per cent since the start of 2016.
Over the three-year period, only 60 per cent of assets in Gam’s funds outperformed as a number of strategies were affected by the difficult market environment.
Last summer the Swiss asset manager announced a structural overhaul of the business, after its first-half profits nearly halved amid disappointing performance.