GAM Conference Call Notes – USPs, Private Labeling, Client Locations, Sustainable Investing, Performance Fees

GAM Investments is a global asset management firm built by investors for investors. We operate in 15 countries and collectively manage CHF 126.0 billion in assets for our clients (as at 30 June 2021).

The following statements were made during the conf call of 4th August 2021.

GAM on Wealth Management, Client Locations

CEO: So your first question was around wealth management. We touched on that. Your question in terms of types of clients locations. So the current Book of Business is sort of split between ultra high net worth. So this is the book that we have today. And then you also have a segment across sort of charities and then moving into more family office type arrangements. I suspect that most of our growth will come either from the high end of the ultra high net worth, or as you go into the more institutional type offering into family offices, and certainly geographically we see Switzerland as a great base for that activity. Obviously we have a presence in Zurich, we're thinking about Geneva as a key hub as well and Singapore just as as a launchpad into the asian market. We do have history with wealth management and have historically serviced clients in Hong kong. We changed that a few years ago. But I think Singapore is really helpful in giving us just a center of gravity in that region that I think will be good in the long term, so we're pretty excited about all of that.

GAM on Private Labeling, PLF

CEO: The second question was about private labeling. And the question really being you know with the the large client loss that we've been notified of for the second half of this year, the question is is it still worth the effort to have this business. Absolutely it is. You know as we've spoken about before there is sometimes a mismatch in that business where it is possible to have an extremely large client by AuM, but they may be relatively smaller in terms of their revenue impact. So when I look at the type of clients that we'd like to service there and the risk we're all profile at different pricing points. Yeah the PLF business absolutely remains attractive. I don't love losing clients. I want to make sure that our proposition is really compelling and that we do keep clients for the long term. Unfortunately, occasionally, there are strategic drivers for a client, which may mean that it is in their interest to move, and we have to accept that. But absolutely, it doesn't change my conviction around the business or strategic use going forward.

GAM on Sustainable Investing

CEO: The third question is around sustainable investing. Your point being is, and everyone claims to do it. How do you differentiate. I think your point is really well made. And the one thing that we're not doing is, we're not approaching sustainability just to tick a box. That's tabsolutely not how we think about it. When you look at what we're doing at a corporate level and how GAMs employees respond very passionately it is something that is real for us. That's why we're taking a bit of time with this. I think it's been observed before that perhaps GAM is a bit late to launch some of these sustainable products and I think that's true, but it's really important to me that we launched this properly, and that our products really do stand up and we can articulate clearly what the value proposition is and what we're doing from a sustainability perspective. We've got fantastic talent in the firm leading on sustainability efforts. And so although I think we have to be realistic that GAM is at the start of its journey there I do believe that we can take at least a thought leadership position here. We do have really interesting views and I think different views internally. We're pretty proud about that. I think it also reflects the history on the investment management side. You know, we really encourage that thinking and thought leadership. So I think we will carve our niche here. We do see client demand and interest in the products. We will launch them thoughtfully. And I think we will be able to build build momentum. So again, you want to start off slowly properly, make sure it's very coherent. But I do think from there, we can really build momentum, so again, pretty, pretty excited about that.

GAM on Weath Management, USPs

CEO: Coming back to wealth management. Your question being: where do you see your USPs versus more established players, particularly since lending is is not part of your offering. Absolutely. I take that point, Daniel and I want to be clear that we're not looking to add things like lending into GAMs wealth management proposition. I reviewed how GAM operates in the market today and what we do very well is, we partner really well through the ecosystem of different providers that work in wealth management. So I don't see this as being a competitive shock in any way, to that existing value chain within wealth. What GAM does well is it offers interesting and we hope strongly performing investment products. That investment performance I think is largely what means we have these very long term happy clients in this book of business. So what we will seek to do is to do a better job um of positioning are offering uh with with more commercial energy and and that means um thoughtfully increasing our staffing uh and and commitment to growing that business segment um and to having more energy in our business plan around that Because I do think that the role of the active manager of the discretionary manager within these wealth relationships is important. I think clients don't necessarily want to have all of their assets with one provider or one underlying product. So that means that there is a market place for us to partner with other providers. And I think we have some really interesting good products that we can offer. So it is in some ways the same business that's always been there, but with a lot more focus and a lot more drive and confidence that we have something that's good and a heritage and particularly a swiss heritage that we can be proud of, and I think can resonate geographically, particularly through through Asia and maybe turning just to to richard on the gross margin question.
CFO: [...] the real driver around our average margins is around the asset mix, driven by flows, and also obviously market movements as well. So that's what has really driven the reduction in our average margin in the investment management business over the last number of years. Clearly the loss of the ARBF assets, which were above our average margin time brought down our margin, but also where we've seen some reduction in assets in higher margin strategies. Picking out the systematic strategies is one example. But what I would say is, we've clearly seen a stabilization in the AuM since the pandemic, and therefore have also seen a stabilization in that in the average margin.

GAM on Stumbling Blocks to People Buying GAM Assets and Products

CEO: [...] Your first question is that we are repeating our comment that we have high interest from clients and good good performance in our products. And your question is, so what then, is the biggest stumbling block to people investing in GAM assets? I think from the client perspective, I mean, stating the obvious, obviously we're in a very competitive environment. You have to work very hard to make your case for for any client that you have the best product for them. I think GAM is good at that. But as you know, we've been on a recovery path since 2018, 2019. And the timing, it takes both for clients to make as allocation moves in certain segments of the market, that takes a long time. Those decisions take time. So it takes time to make sure that GAM is positioned in a relevant way, in a compelling way for those clients. And once we've achieved that, it takes more time for the asset allocation moves to come and for us to, to seek to compete for for those assets. I've talked before in, in earlier years about some of the structural barriers that were historically in place, around buy lists and so on and we continue to make progress there. It takes a bit of time once you return to a buy list, it does take time to then work your way up into the line of sight for the clients and then the subsequent sales. But I'd say we're definitely seeing progress there. So I think time is an element, the other thing that we're doing we've touched a bit on the diversification of flows, that's not by accident, that's by virtue of a lot of internal education and thoughtful positioning across GAMs platform to make sure that clients know us for more of our products. Certainly, GAM has been known historically for probably a smaller number of products at any one time. We want to make sure that our shelf is more broadly understood. That takes time. Let's say we're starting to see the flow across the book, which is certainly encouraging.

GAM On Performance Fees

CEO: You're also making the points around the first half was certainly helped by positive performance fees. That's absolutely true. We don't tend to count on performance fees. As you say, they can be quite volatile financially, so we don't tend to count on those. What I would say though is it's taking time to build momentum, but once you get some momentum, it's really helpful. So when I'm looking at the flows quarter on quarter and trying to have a sense myself of what is the direction of travel and where do I think will land financially? It takes a lot of effort to get the ball moving. You know, it takes a lot of effort to get that initial momentum.
CEO: But do you think we're getting there in terms of planning for the absence of growth? As was pointed out earlier, the firm still does have a fairly significant cost base that gives us room for manoeuvre if we did need to alter the cost base for any reason. But I don't foresee that at this point, I think we've got a good balance of, as I say, protecting the good client servicing, keeping our distribution potential really high. You know, we have the right people in the right places. We have good products and good performance. So I do want to protect that avenue back to growth because I think that is key. I'd much rather have all the value that I see in the GSM platform operating well and an appropriate sized AuM. That is what I think we can achieve. But as I say, I think we do have options if we need them.

Using Python to transcribe Conf Calls, Webcasts

The above audio was uploaded to an S3 Amazon Bucket, then was fed via a Python script to Amazon Transcribe service which resulted in a raw transcript. That raw transcript was then used for the quotes above. By default Amazon Transcribe does not seperate speakers, has difficulty with abbreviations or names like “AuM”, which was transcribed incorrectly as “a uh em” or similar.

For more on transcription see this article: Link

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