GAM HOLDING AG ANNUAL REPORT
2020
CONTENTS
1
CHAIRMAN'S STATEMENT AND CHIEF EXECUTIVE'S LETTER
CONSOLIDATED FINANCIAL STATEMENTS
178
PARENT COMPANY FINANCIAL STATEMENTS
196
FINANCIAL SUMMARY AND SHARE INFORMATION
202
CONTACTS
KEY FIGURES
Underlying (loss)/profit before taxes (CHF m)IFRS net (loss)/profit (CHF m)
CHF (14.9) m
CHF (388.4) m
10.5
(14.9)
124.1
162.4
(916.8)
(3.5)
(388.4)
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Management fee margin - investment management (bps)Operating margin (%)
51.8 bps
(4.7) %
2016
4.3
(4.7)
2017
2018
2019
2020
2016
2017
2018
2019
2020
Assets under management (CHF bn) | Net flows (CHF bn) |
CHF 122.0 bn | CHF (11.0) bn |
158.7 | |
74.3 | 15.7 |
8.6 |
132.2 132.7 122.0
76.1 84.3
86.1
48.4 2
35.9
2016
2017
2018
2019
pp Investment management pp Private labelling
2020
1 Excluding CHF 1.45 billion ARBF-related assets under management in liquidation as at 31 December 2018.
2
Including CHF 0.3 billion of money market funds as at 31 December 2019, which GAM agreed to sell to ZKB as announced with the H1 2019 results and which were sold in Q4 2020.
(10.7)
2016
2017
2018
2019
pp Investment management pp Private labelling
2020
1 Including ARBF-related net inflows in H1 2018 of CHF 0.3 billion and excluding ARBF-related net flows in H2 2018 and FY 2019, and fund assets liquidated as at 31 December 2018 and 31 December 2019.
Net cash (CHF m)
Diluted underlying EPS (CHF)
CHF 270.9 m
2017
CHF (0.10)
0.03
(0.10)
2016
2018
2019
2020
2016
2017
2018
2019
2020
CHONAISROMLAIDNA'TSED FSITNAATNEMCIEANLT SATNADTECMHIENFTS EXECUTIVE'S LETTER
6
CHAIRMAN'S STATEMENT
8
CHIEF EXECUTIVE'S LETTER
Chairman's statement
Chairman's statement
David Jacob, Chairman of the Board of Directors
In February 2020 we announced a new strategy for GAM, which was well received. Little did we know at the time that we would be facing the extraordinary challenges of the Covid-19 pandemic. Despite these challenges, I am pleased to report that GAM has ended the year with our strategy still on track, and the firm well-positioned to continue to focus on protecting our clients' financial future.
The leadership of our CEO, Peter Sanderson, has been exemplary during this difficult period. He has made well-judged and swift decisions; for example moving to remote working early in the pandemic meant that the firm has been able to maintain resilient operations, while at the same time protecting the health and well-being of our people and our clients.
Strategy overview
Peter has attracted very experienced industry professionals to join the talented team at GAM, in particular new leadership for sales and distribution. These new senior hires clearly recognise the opportunity for GAM to realise our vision of building the most respected specialist active investment manager in the world.
Peter and his team have also led the implementation of a new firm-wide SimCorp operating platform, which will bring greater efficiency and a more seamless service for our clients. The speed with which this is being done is impressive, especially considering a virtual working environment. We accelerated our efficiency programme in response to the pandemic, while at the same time the engagement of our people as measured through our employee survey has remained good.
We have placed sustainability at the heart of our strategy, and in addition to strengthening our governance as a firm, we are also taking steps to ensure that we maintain and improve our positive social and environmental impact. Our aspiration is for GAM to be at the leading edge of best practice. We are also putting sustainability at the centre of our growth ambitions by responding to client demand and supplementing our existing range of sustainable investment strategies with a further suite of GAM sustainable products.
Performance overview
Our business performance was resilient during 2020 in the face of a very uncertain market. We ended the year with the first quarter of investment management net inflows since 2018, which is a fitting tribute to the efforts of Peter and the whole team at GAM in rebuilding trust and confidence in our firm. This trust has been repaid with some outstanding investment performance across many asset classes, with our equity strategies having had a particularly strong year.
Although our financial performance has been muted by the impact of the pandemic, we have made good progress in making the firm more efficient and reducing costs. The new operating platform will give us further operating leverage as we grow our assets under management.
We are also simplifying our legal structures to help achieve a more streamlined business model. This will bring opportunities to further build on the potential of our management company services business, one of the largest third-party management company services businesses in Europe.
We have continued to strengthen governance at GAM during 2020. Our Risk Committee, ably chaired by Monika Machon since May 2019, has now been in place for almost two years. We welcomed Thomas Schneider to the Board in April 2020, and he became Chair of the Audit Committee in September, succeeding Benjamin Meuli who had done an excellent job during a difficult period for the firm. Mr Meuli remains on the Board as Vice Chairman. It was very pleasing to see our efforts to strengthen our governance were also recognised externally. In September 2020, we were awarded the highest governance rating across all Swiss financial services firms by Inrate, an independent Swiss sustainability rating agency.
We made good progress during 2020 and the business is showing encouraging signs of growth momentum, but this is not yet reflected in the financial results. Despite these encouraging signs, the Board of Directors and the Group Management Board do not believe that it would be appropriate to award any variable compensation for 2020, except for the contractual compensation of portfolio managers which remained unchanged. Any bonus awards granted under the annual discretionary bonus plan for the non-Group Management Board employees will be fully deferred. In addition, the Board of Directors have decided to permanently maintain the reduced level of Board compensation announced last year. Our dividend policy remains unchanged with 50% of underlying net profit to be distributed to shareholders. However, recognising GAM's underlying loss in 2020, the Board of Directors proposes to shareholders that no dividend be paid for 2020.
Chairman's statement
Looking ahead
I am proud of what has been achieved by Peter Sanderson and his team during 2020, and the Board continues to have confidence in the strategy that was outlined last February. Our strategy remains unchanged and our financial targets remain the same, but in view of the impact of the pandemic, we have decided that it would be appropriate to adjust the timing for the achievement of those targets to the end of 2024.
The resilience and determination of everyone at GAM has been remarkable and the Board is very grateful for their efforts. I would also like to thank our shareholders for their patient support during a difficult period and hope that the achievements of 2020 are proof that GAM has a distinctive place in our industry which continues to be valued by our clients.
With best regards,
David Jacob Chairman
18 February 2021
Chief Executive's letter
Chief Executive's letter
Peter Sanderson, Group Chief Executive Officer
In my letter to you at the end of 2019, I set out a strategy to reset the firm and begin our journey to restore shareholder value. When the extent of the pandemic became clear only weeks afterwards, it was our strong purpose as a firm and our commitment to protect our clients that allowed the GAM team to continue to deliver in a highly professional, resilient and relevant way.
Flying back from client meetings in Australia last March seems like a lifetime ago; writing an e-mail from the plane to shift the entire firm to remote working feels surreal. Now, although our industry has used technology to adapt well, I note that we are still fundamentally a people business, that relationships are still critically important, and that we are still fortunate to have such excellent clients to serve.
I am proud of how the GAM team has served our clients during the pandemic and proud of the progress we have made together on our strategic pillars. We closed the year with positive investment management flows in the fourth quarter, our best quarter since 2018, but despite this and despite accelerating and outperforming on our cost targets, we could not fully offset the impact of the investment management AuM we lost during the first quarters. The net effect of this was an operating loss of approximately CHF 15 million.
We ended 2020 with the majority of our equity strategies outperforming their benchmarks and delivering top quartile or even top decile investment performance, our fixed income capabilities staged a strong recovery from their weaker performance earlier in the year, while our liquid alternative strategies in systematic also recovered and performed well relative to our peers.
Our people driving growth
Attracting and empowering the brightest minds is core to achieving our purpose. I am delighted that we have been able to support our growth plans with the addition of experienced professionals who are excited by the opportunity at GAM. We have invested in our client capabilities and appointed new heads of distribution and institutional solutions, a head of sustainable and impact investing and built out our investment specialist function across key asset classes.
Our culture is key for attracting and retaining talent, and this year we have worked hard to support our employees and create even stronger communication, promote greater collaboration and maintain energy levels throughout the year. We have also had to make some difficult decisions, as we have reduced our headcount as part of our efficiency programme, and I am grateful for the professionalism that everyone has shown. However, our employee survey shows that engagementremains strong, and maintaining this remains a critical focus for us all going forward.
Technology driving efficiency
We have continued to invest in technology to improve our client service and client experience, as well as to improve the efficiency and scalability of our business by unifying the organisation onto a single platform. This work continues during 2021 and will position GAM strongly at the forefront of technology capability and well placed as the industry evolves ever more rapidly towards the future state of asset management.
By leveraging technology and reducing duplication and complexity in our processes, we exceeded our cost reduction target as part of our efficiency pillar and delivered savings of more than CHF 71 million for the full year.
Transparency
We have continued to enhance our transparency with all stakeholders. While our priority this year was to ensure that our employees and clients received regular communication about our response to the impact of the pandemic, we have also maintained regular dialogue with our shareholders throughout the year to ensure that they remained fully informed about our strategic progress.
We are also bringing greater transparency to our management company solutions business. This provides the fund operating platform for all our private labelling clients and around three quarters of our management funds, servicing a total of approximately CHF 114 billion of assets under management. The business is also beginning to yield opportunities for collaboration and growth with our investment management expertise helping to provide solutions for private labelling clients.
Investing for a sustainable future
We have developed our product offering to meet client demand and position for growth by expanding our dedicated sustainable investment offerings, which includes the recently launched GAM Sustainable Local Emerging Bond Fund, with further new product launches in the pipeline for later in 2021.
I was pleased to see GAM improve its scoring on the six
UN Principles for Responsible Investment for the fifth consecutive year, alongside the good progress we have made deepening the integration of sustainability across our
9
Chief Executive's letter
portfolio management and risk processes at the firm. I am proud that we are also providing transparency and enhanced corporate reporting this year with the publication of our first Sustainability Report.
Entering 2021 with confidence
Despite this challenging year, our long-term strategy remains unchanged and we have continued to invest in our firm and execute our plans to ensure we are fit for the future. I am grateful to our shareholders and our board for their continuing support of our strategy.
With GAM's clear sense of purpose, our strong investment capabilities, now coupled with a renewed distribution strategy and focus on ESG, I believe we are well positioned to build sustainable value for all our stakeholders in the future.
clients' financial future, and I would like to thank them all for their steadfast efforts this year. I am honoured to be leading the team that is taking us forward with confidence on our journey to build the most respected specialist active investment manager in the world.
With best regards,Peter Sanderson
Group Chief Executive Officer
It's our people who can help provide the investment leadership, innovation and sustainable thinking needed to protect our
18 February 2021
THE BUSINESS REVIEW
12
OUR STRATEGY
17
OUR PURPOSE, VISION & STRATEGY
21
OUR BUSINESSES
31
FINANCIAL REVIEW
39
RISK MANAGEMENT
47
SUSTAINABILITY
Our strategy
OUR STRATEGY
MARKET CONTEXT
STRATEGIC OBJECTIVESGAM TODAY
Efficiency
SHIFT FROM ACTIVE TO PASSIVE
-
SLOWING GROWTH IN THE INDUSTRY
-
INCREASING REGULATORY OVERSIGHT AND CHANGE -
HIGHER LEVELS OF INVESTOR SCRUTINY
-
LOWER OPERATING MARGINS -
GROWTH IN ESG -
RAPID TECHNOLOGICAL CHANGE/ADOPTIONBold action to create synergies and adapt to the industry environment
Transparency
Better reporting and processes based on clarity, accountability and trust
Growth
Pursue growth via our core business, driving AuM growth
• Delivered CHF 71.6m of cost savings
• Continued investment in our platform
• Several equity portfolios migrated to SimCorp platform
• Published first Sustainability Report
• Enhanced transparency regarding management company service business
• Enhanced communication with all stakeholders throughout pandemic
• Strong performance in equities; good recovery in fixed income
• Q4 2020 saw first net inflows since mid-2018
• New leadership in distribution, sustainable investing and strengthened investment specialist team
Our strategy
BECOMING FIT FOR THE FUTURE
MEASURING PROGRESS
• In FY 2021, additional savings of CHF 15m in fixed personnel costs and general expenses
• All investment portfolios on SimCorp in 2021
• Capitalise on efficiency gains and start realising operating leverage
• Legal entity simplification and optimisation of capital utilisation
• Financial targets set for 2024
• Alignment of performance and remuneration across the business
• Increased focus on sustainability - aspire to be at leading edge of best practice
• Implement new distribution strategy and drive AuM growth
• Launch a range of sustainable investment strategies
• Invest in new investment specialist team
• Capture synergies and cross-selling opportunities between IM and PLF
• Continue to deliver strong investment performance
• Leverage new and empower existing talent
• Foster new leadership culture - bring all of GAM to our clients
• In 2021, additional savings of CHF 15 million in total fixed personnel costs and general expenses
• All investment teams operating on the single SimCorp platform (excluding GAM Systematic Cambridge)
• Further drive technology upgrade at GAM
• For financial year 2024:
- Underlying pre-tax profit of CHF 100 million
- Operating margin of 30%
- Compensation ratio between 45-50%
• Explore becoming a certified B Corporation
• Improve client relationships
• Drive AuM and revenue growth
• Diversification through higher % of AuM in high growth markets
• Further develop sustainable investment capabilities
Investment management assets by capability
2% 2%
p Absolute return p Fixed income p Equity p Systematic p Multi asset p Alternatives
Investment management assets by client segment
p Intermediaries p Institutional clients p Private clients
Investment management snapshot
Investment strategies, mandates and funds managed by in-house professionals and selected third-party specialists
85%
of our Group net management fees and commissions are generated in investment management
128
in-house investment professionals in Zurich, Lugano, Milan, London, Cambridge, New York and Hong Kong
62
relationship managers serving our global client base, supported by 43 employees in marketing, sales support and product specialist roles
23%
of assets in funds outperformed their benchmark over three years
Private labelling snapshot
Tailored solutions for banks, insurers, independent asset managers and institutional investors
15%
of our Group net management fees and commissions are generated in private labelling
10
client directors, supported by experts from legal and compliance, risk management, marketing and operations
Private labelling assets by asset class1
p Equity p Fixed income p Alternative p Money market
Private labelling assets by fund domicile1
4
fund domiciles on offer: Switzerland, Luxembourg, Ireland and Italy
213
third party funds operated for our clients
p Switzerland p Rest of Europe
1 Not including AUM managed for GAM funds (for further information seepage 28)
Our purpose, vision & strategy
Our vision is to build the most respected specialist active investment manager and trusted solutions and services platform in the world.
Peter Sanderson, Group Chief Executive Officer
GAM's purpose is to attract and empower the brightest minds to provide the investment leadership, innovation and sustainable thinking needed to protect our clients' financial future. By living our purpose every day, we believe that we will realise our vision of building the most respected specialist active investment manager and trusted solutions and services platform in the world.
In February 2020, we announced our strategy to make GAM fit for the future. This is based on three strategic pillars: efficiency, transparency and growth, which are designed to deliver on our vision.
trust with clients, employees and investors. Being transparent means keeping our promises and being accountable as well as acknowledging where we need to improve and do better. Enhancing our communication with all our stakeholders is a key element of our approach to becoming more transparent.
As part of this we are enhancing the transparency around our private labelling business. By doing this we believe that we will be able to demonstrate the opportunity to create value from aggregating the services delivered by our management company services business for both internal GAM and private labelling clients.
Our efficiency pillar aims to create synergies and enable us to adapt to the ever changing and challenging industry environment. We want to deliver for our clients quickly and effectively by making it easier to do business with GAM. We are removing unnecessary duplication by taking full advantage of technology. We are doing this by better integrating our business processes and converging on a simpler, 'One GAM' operating model. At the heart of this is our new cloud-based SimCorp platform. We have used SimCorp for years in our private labelling business (PLF) as well as in parts of our investment management business; we are now implementing it across the firm to help realise efficiencies and better serve our clients.
Our transparency pillar is designed to deliver better reporting and improved processes based on clarity, accountability and trust. Transparency is critical to building and maintaining
We are also bringing more transparency to our performance on environmental, social and governance (ESG) criteria, both from an investment product and corporate perspective. There is clear demand from our clients and other stakeholders to do this. This year we have significantly expanded our sustainability disclosures by the publication of our first Sustainability Report as a first step to achieving best in class standards on these matters.
Sustainable investment strategies will also be a key part of our third strategic pillar, which is growth. Efficiency and transparency are designed to be key enablers for GAM to grow and leverage our distinctive capabilities of specialist, actively managed investment strategies. Clients are looking for investment themes which can transcend the current global economic outlook, which we believe we are well positioned to deliver.
Our client centred approach is embedded across GAM, we seek to be a trusted partner for our clients enabling them to benefit from our investment performance whilst delivering excellent client service. We have invested in our client capabilities and appointed new heads of distribution and institutional solutions, since we believe that a structure focused around client types will ensure a deep understanding of our clients' investment objectives and service needs. We have also built out our investment specialist function across key asset classes and appointed a head of sustainable investment to ensure that we are aligned with our clients' needs and well positioned to capture growth.
We have also been very active in communicating with our clients during a challenging period, many of whom have had direct interactions with our CEO, as well as regular contact with our investment and distribution teams using a variety of digital tools to replace face-to-face meetings. The results of this active communication are beginning to bear fruit, with a number of longstanding clients increasing their allocation to GAM funds and others coming back to GAM.
We have maintained regular dialogue with our shareholders throughout the year and have ensured that the market has remained fully informed about our strategic progress.
Strategic progress in 2020
Despite living through an almost unprecedented period as the world grapples with the Covid-19 pandemic, GAM has made strong progress in implementing our strategy during 2020, and we believe that our purpose and vision have become even more relevant for clients.
Our response to the pandemic was swift and decisive, with the health and well-being of our employees and clients uppermost in our minds. Moving to remote working proved to be both operationally resilient and gave us food for thought about future ways of more productive working. The crisis gave additional impetus to our efficiency pillar but has not impacted our ability to progress the overall strategy.
Reassuringly, our interim 2020 employee survey in May, and the full survey carried out in September, showed that engagement levels had improved significantly since 2019 and remained high during 2020.
We delivered on our accelerated efficiency programme with the implementation of SimCorp progressing well and achieving cost savings of CHF 71.6 million, which exceeded our target of at least CHF 65 million for the full year 2020. We are also simplifying our legal structures in order to reduce complexity and to provide further opportunities for operational synergies. By the end of 2021, all our investment portfolios, except for GAM Systematic Cambridge, will be on the new SimCorp platform, providing a resilient backbone to our operations and the capability to deliver enhanced levels of service to our clients.
We have continued to enhance our transparency with all our stakeholders. Our first priority has been to ensure that our employees have received regular communication about our strategy and our response to the impact of Covid-19. The positive impact of this regular communication has been clear, our 2020 employee survey has shown that we have made significant progress on this since the 2019 survey.
As part of our drive for transparency we are enhancing our corporate reporting on sustainability as well as providing greater clarity on how we use environmental, societal and governance (ESG) criteria in our investment process. We appointed a new leader for our sustainability efforts which will be a key part of our growth plans during 2021. We aspire to be best in class in our approach to sustainability. On the operational side, we are strengthening our policies and disclosure as we continue to explore becoming a certified B Corporation, underlining our commitment to market-leading transparency and to generating a positive impact for our clients, colleagues, the environment and wider society. As part of this journey, and in response to client demand, we are launching a series of investment strategies with enhanced ESG criteria to complement our existing range, which includes the award-winning Swiss Sustainable Companies Fund. We believe our active approach to sustainability will also be an important contributor to the growth pillar of our strategy.
We are also bringing greater transparency to our management company services business, which provides solutions for both our private labelling funds business and our investment management funds. This business is one of the largest providers of third-party management company services in Europe and delivers the fund operating platform for all our private labelling clients and around 78% of our investment management funds with around CHF 114 billion of assets under management. We are streamlining this business so that by the end of 2021 we will have both a simplified legal structure and a single operating platform which will provide further synergies and at the same time make it easier for clients to do business with GAM.
GAM's strong investment performance across many of our strategies during 2020 has given real impetus to the growth pillar of our strategy. Our investment professionals have lived up to our purpose by continuing to provide the investment leadership, innovation and sustainable thinking needed to protect our clients' financial future. We have been working hard to re-build relationships with former clients and to attract new clients and, despite the pandemic, we built a strong pipeline
during 2020 which began to deliver a significant improvement in client flows by the end of the year.
We have also put in place a new distribution organisation with new leadership and an enhanced focus on specific client segments. This has been important in mobilising our business for growth and the encouraging asset flows in the fourth quarter are testament to the impact that this new leadership is beginning to have.
Looking ahead to 2021
In 2020, we managed to attract a number of senior, experienced industry professionals to join our talented team at GAM, and we put in place strong foundations for a more efficient and resilient operating platform. During 2021, the new focused approach of our distribution efforts together with the launch of several strategies responding to client demand for actively managed sustainable products will provide a further impetus for growth.
By the end of 2021 we will have completed a significant series of operational improvements, including a new SimCorp platform, a new Workday system for Finance and HR and simplifications to our legal structures. All these improvements will provide significant operational leverage as well as making it easier for clients to do business with GAM.
We remain focused on keeping levels of engagement among employees very high and on the strategic opportunity that we will likely see through further simplification and digitisation of our business. We believe that our talent, our differentiated product offering and our strong distribution footprint put GAM in a good position to realise our vision of building the most respected specialist active investment manager and trusted solutions and services platform in the world.
Our three strategic pillars remain relevant to GAM in 2021 as they did in 2020, but now with a greater focus on sustainable growth.
Our businesses
We believe that our talent, our differentiated product offering, and our strong distribution footprint put GAM in a good position to realise our vision of building the most respected specialist active investment manager and trusted solutions and services platform in the world.
Peter Sanderson, Group Chief Executive Officer
Investment management
Investment capabilities
Our investment management capabilities provide clients with differentiated directional and absolute return strategies across multiple asset classes. These are actively managed with discretionary, systematic and specialist approaches. Our product and solution capabilities are focused on scalable strategies with high growth prospects based on industry trends and client needs. Such strategies are able to sustain higher fees compared to passive and more traditional benchmark-oriented products given their active and differentiated nature.
We have 128 in-house investment professionals across our investment centres in Zurich, Lugano, Milan, London, Cambridge, New York and Hong Kong. Having pioneered the
open architecture approach by working with external managers in the early 1980s, we continue to work with a few distinguished third-party investment specialists in selected areas.
GAM does not have a 'house view', and autonomous investment management teams make their investment decisions according to their individual philosophies and styles as well as within GAM's centralised risk framework. Our discretionary investment management teams seek to generate attractive client returns through high-conviction investing. They are encouraged to be indifferent to short-term index comparisons and take controlled risks in order to deliver differentiated performance. The GAM Systematic teams utilise rigorous, world-class scientific research to create robust quantitative strategies that identify and harvest numerous sources of returns.
Investment management assets and management fee margins (CHF bn)
Management | ||||||
Opening AuM | Net flows | Disposals | Market/FX | Closing AuM | fee margin | |
Capability | 1 Jan 2020 | 2020 | 2020 2 | 2020 | 31 Dec 2020 | 2020 (bps) |
Fixed income | 25.8 1 | (6.6) | (0.9) | (1.2) | 17.1 | 58 |
Multi asset | 7.8 | (0.6) | - | 0.3 | 7.5 | 20 |
Equity | 7.2 | (1.0) | - | 0.7 | 6.9 | 67 |
Systematic | 4.4 | (0.9) | - | (0.6) | 2.9 | 50 |
Alternatives | 2.1 | (1.3) | - | (0.1) | 0.7 | 43 |
Absolute return | 1.1 | (0.2) | - | (0.1) | 0.8 | 94 |
Total | 48.4 1 | (10.6) | (0.9) | (1.0) | 35.9 | 51.8 |
1 Including CHF 0.3 billion of money market funds as at 1 January 2020, which GAM agreed to sell to ZKB as announced with the H1 2019 results.
2 Disposals include the sale of a mortgage loan fund of CHF 0.5 billion in Q2 2020 and the Renshaw Bay funds of CHF 0.2 billion as well as money market funds of CHF 0.2 billion, as announced with the H1 2019 results, in Q4 2020.
The breadth of our product range allows us to provide relevant products across different client segments. Our product development capabilities encompass a variety of structures - onshore and offshore funds, segregated mandates and customised solutions. A wide range of GAM's products are offered in the regulated form of Undertakings for the Collective Investment in Transferrable Securities (UCITS). We have placed sustainability at the heart of our strategy, and in addition to the strengthening of our governance as a firm, we are also putting sustainability at the centre of our growth ambitions by responding to client demand and supplementing our existing range of sustainable investment strategies, with a further suite of GAM sustainable products.
As at 31 December 2020, 48% of the CHF 35.9 billion investment management assets were invested in fixed income strategies. The share of investment solutions across multiasset and alternatives capabilities was 23%, while 19% was attributable to equities. Our systematic capability accounted for 8% and absolute return products for 2%.
Our fixed income products cover a breadth of specialist investing through a number of offerings that are differentiated from traditional core fixed income styles and are managed by teams with longstanding expertise across asset classes and styles as well as enviable track records. Our fixed income products encompass approaches seeking excess returns relative to a benchmark, credit, emerging market debt and specialist strategies including insurance-linked strategies, catastrophe bonds and mortgage-backed securities. This wide range of products positions us well to capture demand for substitutes to traditional bond allocations, as investors continue to search for yield in the current low-yield environment.
Spotlight on selected products
GAM Star Credit Opportunities
GAM Star Credit Opportunities seeks steady, high income from the bonds of quality companies, with a focus on junior or subordinated debt to capture higher yields. The suite of three long-only funds is managed by corporate bond specialist Atlanticomnium S.A., which has specialised in credit investing since 1976 and has managed assets for GAM since 1985, delivering strong, long-term performance. The team's extensive understanding of subordinated credit instruments and companies' capital structures enables them to access overlooked and often undervalued bonds in the market, while an unconstrained approach means they can focus on the areas of greatest opportunity and best reward-to-risk trade-offs, in order to generate performance across market environments.
GAM Local Emerging Bond
GAM Local Emerging Bond is a multi-award-winning, high-conviction strategy focused on local emerging markets (EM) sovereign bonds and currencies. The investment team's differentiated, conviction-driven approach to EM debt investing has been developed over 20 years and their extensive background in navigating economic cycles of crisis and recovery in EM debt forms the foundation of their process. The strategy has evolved into GAM's largest local EM debt UCITS fund and the team ranks among the largest managers of local EM debt solutions globally, managing approximately CHF 4.2 billion of assets under management as at 31 December 2020.
GAM Systematic Alternative Risk Premia
The GAM Systematic Alternative Risk Premia team seeks to identify, structure and invest in alternative return sources across global markets, using a systematic, rules-based approach. Alternative risk premia are the rewards for taking non-traditional risk, eg outside of simply long equities and bonds, often employing investment techniques such as relative value spread positions or long/short positions, with the resulting portfolio aiming for low correlation to traditional asset classes and therefore effective portfolio diversification over the investment cycle. The investment team has a strong reputation as pioneers in this field with the first GAM fund launched in 2012. As at 31 December 2020, the strategy had CHF 1.7 billion of assets under management. Fully customisable portfolios can be designed for clients' risk, return and correlation needs, while liquid and transparent holdings provide investors with clarity of return and risk sources.
GAM Star Disruptive Growth
GAM Star Disruptive Growth, managed by the Disruptive Growth and Technology team, seeks to capture opportunities in companies and areas of the market that are benefiting from technological change. The team focuses on active stock selection in order to identify growth opportunities and disruptive themes in areas such as software, cloud infrastructure, social media, advertising, retail and transportation and to position the portfolio to benefit from generational changes that are occurring globally. The team explores the most promising companies in each sector, combining in-depth fundamental analysis to determine what to buy, and technical analysis to determine when to do so, to form a global portfolio of 40-60 stocks diversified across three to five key themes. It maintains a strong focus on risk management and examines each risk factor at stock and portfolio level closely through real time monitoring of daily profit and loss metrics, supported by independent risk oversight.
GAM Swiss Sustainable Companies
GAM Swiss Sustainable Companies, managed by the Swiss Equity team, aims to achieve long-term capital growth by investing in small and medium-sized Swiss companies that are able to optimise their value added through comprehensively sustainable business development. Corporate sustainability plays an integral role in the team's investment decisions as a powerful differentiator and value creation opportunity for companies. Through its proprietary bionic approach, it assesses how well a company adapts to its ecological and social context as well as whether it has the organisational prerequisites to be able to evolve in a competitive environment as a viable entity. The team's investment style is based on the conviction that over time investment returns will reflect a firm's individual success. Therefore, the strategy is focused on companies that set themselves apart from the competition with a clear vision, customer oriented innovation, consistent execution and the determination to create a high value added business that drives growth.
Our regional and thematic equity strategies have an average active share1 of 76.2%. Each investment team, utilising their own and external research and distinct approaches, benefits from the collaborative and collegial culture across our investment groups, sharing insights, views and information. We provide a broad range of investment styles, including value, growth and GARP (growth at a reasonable price). Our longstanding strategies in European, Japanese, Swiss, UK and Chinese equities are complemented by emerging market equities as well as other regional and thematic strategies, all of which are highly scalable.
Strong product positioning
In a more volatile and uncertain environment, there is increasing demand for objective-oriented, holistic multi asset strategies that cater to the individual risk profiles of investors. Our Solutions capability combines teams across multi asset, alternatives and private clients, and targets exactly this opportunity. It is focused on delivering solutions consistent with client needs and preferences, spanning the range from unitised funds to bespoke portfolio offerings.
Products1 well positioned for growth
Non-traditional sources of return and genuinely differentiated active investment approachesBespoke solutions
Multi-asset segregated accounts
Unitised risk-weighted portfolio management
Asian equities
Emerging market equities
European equities
Global equities
Japanese equities Non-directional equities
Specialist equities UK equity income
poe
s
bgea
S
k
caP
H
i
g
h
a
c
ti
Source: GAM.
Abbreviation: LO = Long-only. * ILS = Insurance linked securities.
E
e
k
lu
q
s
t
u
r
o
i
o
e
n
s
l
2
u
t
i
Distinctive investing
o
n
s
1 The strategies listed are of indicative nature and do not represent a complete list of GAM products.
2 Includes alternatives and multi asset.
Asian income Asset backed
Emerging market debt
Global rates
ILS* Subordinated debt Supply chain finance
Total returnAlternative risk premia
Core macro
Dynamic credit Global equities (LO)
Multi asset (LO) Multi strategy
Our multi asset teams provide an active, top-down allocation tailored to the specific investment needs of their clients. Our investment philosophy and approach seeks to add value through active decision-making at three levels: long-term strategic asset allocation, short-term tactical asset allocation and instrument selection. We offer both an extensive range of multi asset funds as well as bespoke solutions for our larger clients.
Our alternatives capability comprises alternative investment solutions. Our expertise, gained over more than 26 years of managing portfolios of hedge funds for a broad global client base, is combined with a disciplined and structured investment and risk management process.
systematic product offering encompasses quantitative multi-strategy, core macro, global equities, equity market neutral, dynamic credit and alternative risk premia products as well as a strategy trading less liquid markets. Further, the systematic strategies vary across the volatility and pricing spectrum, offering our clients a differentiated set of solutions.
Our absolute return product range covers strategies across fixed income, macro/managed futures and equity long/short. The strategies share a common aim: to deliver positive, long-term absolute returns with controlled volatility and low correlation to traditional asset classes. We established a set of alternative global strategic bond strategies which we believe have the potential to grow.
Within our systematic capability, we are focused on managing and developing products and solutions across liquid alternatives and long-only asset classes, including equities, debt and multi asset solutions. Our investment philosophy and processes are based on rigorous scientific research to identify and harvest numerous sources of returns. The capability is strengthened by a world-class infrastructure and proprietary technology run by a team of experienced data scientists. Our
Investment management assets (CHF bn)
Total assets under management in investment management include all assets that generate a management fee for the Group. As at 31 December 2020, CHF 1.3 billion (2019: CHF 1.6 billion) of assets generated two levels of fees. They represent assets reinvested in our own funds, where we perform an additional level of investment management services for our clients, including advisory or discretionary management, and for which we earn an additional fee.
Opening AuM | Net flows | Disposals | Market/FX | Closing AuM | |
Client segment | 1 Jan 2020 | 2020 | 2020 2 | 2020 | 31 Dec 2020 |
Intermediaries | 23.0 1 | (4.7) | (0.3) | 0.3 | 18.3 |
Institutional clients | 21.8 | (5.4) | (0.6) | (1.1) | 14.7 |
Private clients | 3.6 | (0.5) | - | (0.2) | 2.9 |
Total | 48.4 1 | (10.6) | (0.9) | (1.0) | 35.9 |
1 Including CHF 0.3 billion of money market funds as at 1 January 2020, which GAM agreed to sell to ZKB as announced with the H1 2019 results.
2 Disposals include the sale of a mortgage loan fund of CHF 0.5 billion in Q2 2020 and the Renshaw Bay funds of CHF 0.2 billion as well as money market funds of CHF 0.2 billion, as announced with the H1 2019 results, in Q4 2020.
Our clients
We are committed to strong long-term relationships with our clients, spanning different geographies, channels and segments. Our goals are fully aligned with our clients', as we provide efficient access to high-performing investment opportunities, supported by our infrastructure and risk management.
Institutional clients, which represent 41% of our investment management assets, continue to demand distinctive active strategies across the market cycle. Our dedicated institutional client service teams convey the investment propositions and customised solutions we offer to investors such as family offices, public and corporate pensions, insurers, sovereign wealth funds, endowments, foundations and local authorities.
In addition to our strong long-term performance track record and an in-depth understanding of their needs, institutional clients also value our risk management capabilities, designed to address the stringent requirements they face from their stakeholders, including beneficiaries and supervisory bodies.
We maintain a strong network of distribution partners, including financial intermediaries and advisers, whose clients represent 51% of our investment management assets. These investors are typically more sensitive to investment trends and broader financial market developments than institutional clients, which can result in concentrated inflows into a smaller number of strongly-performing products and accelerated outflows during extended market downturns. We therefore offer a broad range of distinctive products across liquid asset classes and
investment styles in order to ensure a successful rotation of products through market cycles.
Our private clients business represents 8% of investment management assets. These clients value GAM's high
Investment performance1
standards of service, comprehensive investment expertise across many asset classes and bespoke solutions based on individual requirements.
Capability
3 years 2020
3 years 2019
5 years 2020
5 years 2019
Fixed income Equity Systematic Alternatives 2 Absolute return Total
6%
89%
67% 89%
61%
22%
85% 43%
32%
81%
89% 81%
58%
13%
12% 13%
39% 23%
77% 74%
48% 50%
70%
78%
1 % of AuM in funds outperforming their benchmark (excluding mandates and segregated accounts). Three and five-year investment performance based on applicable AuM of CHF 23.8 billion and CHF 21.6 billion respectively.
2 Reflects performance of products in alternative investment solutions.
Markets, flows and investment performance
The economic impact of the Covid-19 pandemic during 2020 was profound, reflecting the decline in demand as consumer activity was curtailed. Expected growth rates as at December 2020 fell to 3.8% according to Bloomberg and global unemployment rates increased, with the US rate reaching a peak of 14% in April 2020.
Despite all this economic volatility, global equities, as measured by the MSCI AC World Index in local currency terms, returned over 14% in 2020. The latter stages of this rally can partially be explained by the removal of political uncertainty in the US and the news of effective Covid vaccines. However, most of the large market moves are better explained by central bank policy responses, including the lowering of interest rates across all maturities, direct monetary policy easing and government bond purchases.
With the vaccine news leading to the hope of a return to a more normal environment in 2021, investors sold government bonds and returned to the cyclical sectors of the market thathad previously been sold. Value stocks such as leisure, energy, banks and industrials enjoyed a strong run from the autumn.
Over the three-year period to 31 December 2020, 23% of our assets under management in funds outperformed their respective benchmark, compared to 74% as at
31 December 2019. This decrease was primarily driven by slightly weaker performance in our largest fixed income strategies, which were hit by market movements related to Covid-19 in March, but have since rebounded. Over the five-year period to 31 December 2020, 70% of our assets under management in funds outperformed their respective benchmark, compared with 78% that outperformed over five years to 31 December 2019.
As at 31 December 2020, 56% and 61% of GAM's assets under management tracked by Morningstar2 outperformed their respective peer groups over three and five years compared to 27% and 86% as at 31 December 2019 respectively. Our equities strategies enjoyed strong performance in 2020, with many in the top quartile or even top decile relative to their peer groups across time periods.
Spotlight on selected products
GAM Systematic Core Macro
GAM Systematic Core Macro, managed by the GAM Systematic Cambridge team, seeks to generate returns uncorrelated to traditional asset classes by identifying persistent and recurring sources of return across over 100 markets in currencies, fixed income, equity indices and commodities. The fund combines two uncorrelated investment strategy clusters - trend and value - to create a robust multi asset macro portfolio with 10-12% target volatility. The Cambridge-based team uses a purely model-driven, rules-based process that allows for a highly structured, repeatable approach. The model excludes human bias otherwise inherent in discretionary investment strategies, while investing in liquid instruments across asset classes allows for a high level of transparency, liquidity, scalability and cost efficiency. The strategy is offered in UCITS form and as a Cayman-domiciled fund and segregated accounts.
GAM Star European Equity
GAM Star European Equity seeks to achieve capital growth and deliver attractive, risk-adjusted returns by investing in pan European equities. GAM's European Equity team employs a high conviction approach to invest in a concentrated portfolio of 30-40 companies that it believes will generate superior long-term returns and allocate shareholders' capital intelligently. The team is highly selective, meaning that it only focuses on the very best opportunities from a potential universe of more than 1,100 stocks and approximately 450 companies in the MSCI Europe Index. Positions are explicitly sized in a bid to maximise stock-specific alpha, minimise factor risk and avoid unintended risk concentrations, and each stock is expected to contribute significantly to returns.
GAM Asian Income Bond
GAM Asian Income Bond aims to deliver a high, steady income stream from the hard currency bonds of companies based predominantly in Asia. The investment team builds a concentrated portfolio comprised mainly of corporate bonds, with additional quasi-government and government bond. The team seeks to profit from Asian bond market inefficiencies and exploit opportunities for both capital gain and carry, by combining bottom-up bond selection with a detailed understanding of the geopolitical and macroeconomic environment. The high-conviction, concentrated portfolio holds approximately 60-80 securities with an average BBB to BB credit rating.
GAM Star Japan Leaders
GAM Star Japan Leaders seeks sustainable, long-term capital appreciation by actively investing in a concentrated portfolio of Japanese companies that have a leading position in their sector. The investment team is renowned for their in-depth knowledge of the Japanese corporate sector, equity market and economy, based on many years of continuous analysis, company visits and meetings with senior management. The team applies a disciplined bottom-up approach to select 20-30 high-quality stocks that are considered undervalued at the entry point and generates returns based on value creation by these carefully selected businesses. Positions are equal weighted and rebalanced on a yearly basis.
Overall, driven by the Covid pandemic, net outflows in investment management totalled CHF 10.6 billion. Intermediary clients redeemed CHF 4.7 billion, institutional clients CHF 5.4 billion and private clients CHF 0.5 billion in 2020.
and have since then designed and launched several hundred funds domiciled in Switzerland and Luxembourg. Our private labelling business operates 213 third-party funds, including 19 funds launched in 2020, ranking it within the largest non-bank fund solution providers in Europe.
In fixed income, net outflows totalled CHF 6.6 billion, primarily driven by the GAM Star Credit Opportunities and GAM Local Emerging Bond funds, which were only slightly offset by inflows into the GAM Greensill Supply Chain Finance and GAM Star Cat Bond funds.
In equity, GAM saw net outflows of CHF 1.0 billion with net inflows in the GAM Star European Equity, GAM Star Disruptive Growth and GAM Swiss Sustainable Companies funds which were more than offset by withdrawals from primarily the GAM Japan Equity and GAM Global Eclectic Equity funds.
Multi asset strategies experienced net outflows of
CHF 0.6 billion in 2020, driven by redemptions primarily from institutional and private clients.
In alternatives, GAM saw net outflows of CHF 1.3 billion, driven by redemptions from institutional mandates.
Growth in our private labelling business has been underpinned by the increasing trend within the asset management industry to outsource fund solution services due to increased regulation and cost pressures. Demand for such services is growing particularly in large international fund centres such as Luxembourg and Ireland, as asset managers seek to expand their product offering available for cross-border distribution. Additionally, asset managers of all sizes are seeking assistance with the increased complexity of new products, such as illiquid alternative investment funds.
Our management company services business provides solutions for both our private labelling funds and our own GAM investment management funds. We are streamlining this business so that by the end of 2021 we will have both a simplified legal structure and a single operating platform which will provide further synergies and at the same time make it easier for clients to do business with GAM.
In systematic, net outflows of CHF 0.9 billion were driven by outflows from the GAM Systematic Core Macro and GAM Systematic Alternative Risk Premia funds.
The absolute return category recorded net outflows of CHF 0.2 billion, with inflows into the GAM Star Emerging Market Rates and GAM Star Alpha Technology funds being more than offset by outflows primarily from the GAM Star (Lux) - Merger Arbitrage and GAM Star (Lux) - European Alpha funds.
Private labelling
Our private label funds are tailored products designed for banks, insurers, independent asset managers and institutional investors. This business is one the largest providers of third-party management company services in Europe. It delivers the fund operating platform for all our private labelling clients with AuM of CHF 86.1 billion and in parallel for 78% of our GAM funds corresponding to CHF 28.0 billion. In summary, as at 31 December 2020, the business is servicing a total of CHF 114.1 billion of combined assets.
Private labelling funds and clients
215
217
213
206
185
170
53
57
43
45
52
51
2015
2016
2017
2018
2019
p Number of funds p Number of clients
2020
Private labelling provides fund solutions focused on structuring, legal set-up, fund administration arrangements and ongoing management company services. These services allow our clients to focus fully on asset management and fund distribution. We launched our first private label fund in 1992
Private labelling accounts for 14.7% of our total net management fees and commissions. While this business has a relatively low fee margin, it gives us effective operating leverage for the infrastructure that also services our own investment management activities.
Clients can choose from a modular service offering including risk management, compliance and fund governance for newly-created or already existing client funds. The fund engineering module provides legal and operational engineering of our clients' investment ideas into fund structures as well as accompanying project and lifecycle management. We also support our clients' efforts by providing access to global distribution networks and international registration and documentation such as fund factsheets. Our private labelling clients benefit from our strategic business relationships by gaining access to a world-class fund administration and custody service provider.
Our Luxembourg-based fund management company was ranked in the top three in terms of third-party assets under management according to the latest edition of PwC's Observatory for Management Companies - 2020 Barometer.3
Assets under management rose to CHF 86.1 billion as at 31 December 2020, from CHF 84.3 billion in 2019. This was driven by net outflows of CHF 0.4 billion, primarily due to one client with existing capabilities, who decided to bring the services provided by GAM in-house as well as positive market performance of CHF 3.9 billion, partly offset by negative foreign exchange movements of CHF 1.7 billion.
1 Active share is a measure of the percentage of stock holdings in a portfolio that differs from the benchmark index.
2 The peer group comparison is based on 'industry-standard' Morningstar Direct Sector Classification. The share class preferences in Morningstar have been set to capture the oldest institutional accumulation share class for each and every fund in a given peer group.
3 Published in 2020.
Financial review
How we report results
Our key performance indicators (KPIs) and business metrics reflect our internal approach to analysing our results and are disclosed externally. They guide us in managing the Group, making investment decisions and helping us gauge how successful we have been in the implementation of our strategy.
income, the source of revenues that drives most of the compensation at GAM.
Underlying profit before taxes and the underlying effective tax rate give emphasis to our pre-tax profitability and transparency on the bottom-line impact of the underlying effective tax rate, which is driven by a number of factors that are not immediately tied to our business performance.
Our results are reported in accordance with International Financial Reporting Standards (IFRS), but as in previous years, our internal analysis and external disclosure of our financial performance focuses on underlying profitability. The adjustments we make from IFRS to underlying results are always related to specific non-recurring events or items related to acquisition activities that are neither indicative of the underlying performance of our business nor of its future potential. Where applicable, our KPIs are disclosed and discussed on the same adjusted basis.
Our Group KPIs:
Diluted underlying earnings per share (EPS) is calculated as the underlying net profit or loss attributable to ordinary equity holders, divided by the weighted average number of ordinary shares outstanding and adjusted for the potential dilution impact from any outstanding share or option plans. It is important that the use of equity-linked instruments and share-based awards in our compensation structure is reflected in this earnings measure (please refer to the 'Compensation report' section onpages 88-111).
Operating margin is calculated as net fee and commission income less expenses, divided by net fee and commission income. It excludes the impact of 'net other (expenses)/ income' - such as gains and losses from foreign exchange movements, seed capital investments and hedging, or net interest income and expenses - and therefore gives a good representation of the operating performance in our business.
Compensation ratio is calculated as total personnel expenses divided by net fee and commission income. It tracks our ability to manage our largest expense category - personnel expenses - in line with net fee and commission
Net cash is defined as cash and cash equivalents minus interest bearing liabilities.
Adjusted tangible equity is defined as equity excluding goodwill and intangible assets as well as the financial liability relating to 40% of future GAM Systematic performance fees which only materialises when a corresponding asset is recognised.
Business metrics for investment management and private labelling:
Net fee and commission income is defined as fee and commission income minus distribution, fee and commission expenses. It includes performance fees, but excludes net other (expenses)/income.
Management fee margin is calculated as net management fees and commissions divided by average assets under management. For investment management, we additionally report a total fee margin that includes performance fees
(ie net fee and commission income divided by average assets under management).
Assets under management in investment management are broken down by capability, client segment and currency. In private labelling, assets are disclosed by fund domicile and asset class.
Net flows represent the net asset additions or redemptions by clients. For our investment management business, we additionally disclose the net flows by individual capability and client segment. These developments are discussed in the 'Our businesses' section onpages 21-29.
Assets under management and net flows
Group assets under management as at 31 December 2020 amounted to CHF 122.0 billion, compared with CHF 132.7 billion a year earlier.
Investment management assets decreased by CHF 12.5 billion to CHF 35.9 billion from CHF 48.4 billion1 at the end of 2019. This decrease was driven by net outflows of CHF 10.6 billion, the sale of the mortgage loan fund of CHF 0.5 billion to
VZ Depotbank in Q2 2020, the sale of the real estate business of CHF 0.2 billion in Q4 2020, the sale of money market funds amounting to CHF 0.2 billion to ZKB in Q4 2020, net positive market movements of CHF 0.9 billion as well as net negative foreign exchange movements of CHF 1.9 billion.
Private labelling assets were CHF 86.1 billion, an increase of CHF 1.8 billion compared to CHF 84.3 billion at the end of 2019, driven by net outflows of CHF 0.4 billion, net positive market movements of CHF 3.9 billion and net negative foreign exchange movements of CHF 1.7 billion.
Investment management AuM movements (CHF bn)
48.4 1
Dec 2019
(8.5)
(0.5)
(2.9)
(1.0)
Net flowsDis-MarketFXposal perfor- impact mance
3.8 (0.9)
(2.1)
(0.4)
35.5 1
35.9
Jun 2020
Net flowsDis-MarketFXposal perfor- impact mance
Dec 2020
1 Including CHF 0.3 billion of money market funds as at 31 December 2019 and 30 June 2020, which GAM agreed to sell to ZKB as announced with the H1 2019 results.
Income drivers and developments
Management fee margins
The management fee margin earned on investment management assets during 2020 was 51.8 basis points, compared to 54.2 basis points in 2019. The fee margin reduction is primarily attributable to the mix of client inflows and outflows at different margins compared to the average margin.
Private labelling
AuM movements (CHF bn)
2.6
(1.7)
(1.3)
5.6
(0.4)
(3.0)
86.1 | |
84.3 | 83.9 |
Market perfor-mance
Dec 2019
Net flows
Market perfor-mance
FX impact
Jun 2020
Net flowsFX impact
Dec 2020
In private labelling, the management fee margin was 4.1 basis points, compared with 3.9 basis points in 2019, with the increase primarily reflecting the asset mix at different margins compared to the average margin.
Management fees
Net management fees and commissions in 2020 totalled CHF 230.4 million, down 27% from the previous year. This was primarily driven by lower average assets under management in investment management.
Performance fees
Net performance fees decreased to CHF 2.8 million from
CHF 12.8 million, main contributors were non-directional equity and other fixed income strategies.
Net other expenses
Net other expenses, which includes net interest income and expenses, the impact of foreign exchange movements, gains and losses on seed capital investments and hedging as well as fund-related fees and service charges, was a net expense of CHF 4.0 million, which is broadly in line with the net expense of CHF 3.7 million in 2019.
Expense drivers and developments
Personnel expenses
Personnel expenses decreased by 24% to CHF 150.5 million in 2020. Variable compensation was 44% lower compared to 2019, mainly due to a decrease in discretionary bonuses as a result of business performance and lower revenues. Fixed personnel costs decreased 15%, mainly driven by lower headcount as a result of voluntary and involuntary redundancy programmes in 2020. Headcount stood at 701 FTEs as at 31 December 2020 compared with 817 FTEs as at the end of 2019.
Compensation ratio
The compensation ratio increased to 64.5% from 59.7% in 2019 as the percentage decline in personnel expenses could only partly offset the percentage decline in net fee and commission income.
General expenses
General expenses for 2020 amounted to CHF 75.0 million, down 25% from CHF 99.6 million in the previous year. The reduction was driven mainly by lower consulting services, technology, travel and marketing costs.
Depreciation and amortisation
Depreciation and amortisation decreased slightly to
CHF 18.6 million, from CHF 19.1 million in 2019, mainly driven by the reduction of leased office space leading to lower right-of-use asset depreciation.
Operating margin
The operating margin for 2020 was minus 4.7% compared with 4.3% in 2019. The decrease in net fee and commission income could not be offset by lower expenses.
Management fee margin - investment management (bps)Management fee margin - private labelling (bps)
63.6
62.1
7.4
59.1
54.2
51.8
6.3
5.4
4.1
3.9
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Underlying profitability and earnings per share
Underlying profit/loss before taxes
The underlying pre-tax loss was CHF 14.9 million, compared with a CHF 10.5 million profit in 2019, driven by lower net fee and commission income, only partly offset by lower expenses, which continued to be managed tightly.
Effective tax rate
The underlying income taxes for 2020 were zero, representing an underlying effective tax rate of 0.0% compared to 53.3% in 2019. The decline in the effective tax rate was primarily driven by the underlying loss before tax.
Earnings per share
Diluted underlying earnings per share for 2020 were negative CHF 0.10, down from CHF 0.03 in 2019, resulting from the underlying net loss.
IFRS net loss
Our net loss according to IFRS in 2020 was CHF 388.4 million compared to a net loss of CHF 3.5 million in 2019. The IFRS net loss was primarily driven by the impairment charge in the first half of 2020, mainly related to the impairment on the Group's goodwill of CHF 373.7 million along with investment management and client contract impairment charges of CHF 25.1 million (net of taxes), partly offset by a CHF 28.9 million reduction in the financial liability relating to 40% of future GAM Systematic performance fees.
InvestmentGroup income1
Group expenses2
management AuM
4%
p USD p GBP p Other | p USD p GBP p Other | p USD p GBP p Other |
p EUR p CHF | p EUR p CHF | p EUR p CHF |
1 Percentage splits are estimated based upon the currency exposure of the underlying AuM on which the revenues are earned.
2
Percentage splits are estimated based upon the transactional currency, except for contractual bonuses which follow the same basis as revenue.
Non-recurring and acquisition-related items excluded from underlying profits
The following items, all net of taxes, reflected in our results according to IFRS, are excluded from our underlying profits:
Non-recurring items, resulting in a net loss of
CHF 393.9 million (all items net of taxes). This includes the impairment charge on the Group's goodwill of
CHF 373.7 million in the first half of 2020, investment management and client contract impairment charges primarily related to the acquisition of GAM Systematic of CHF 25.1 million, reorganisation charges of CHF 6.3 million related to the Group's restructuring programme, partly offset by a deferred tax asset credit of CHF 6.4 million, a pension plan adjustment of CHF 3.5 million resulting from the Group's redundancy programme and gains from the sale of the mortgage loan fund to VZ Depotbank of CHF 1.2 million. In 2019, the non-recurring items resulted in a net gain of CHF 2.8 million, mainly related to the gain from the sale of the precious metal funds to ZKB and insurance recoveries, offset by an impairment charge on the investment management and client contracts mainly related to GAM Systematic.
Acquisition-related items, resulting in a net gain of CHF 20.4 million (all items net of taxes). This includes adjustments to the deferred consideration liabilities mainly related to the acquisition of GAM Systematic of CHF 2.9 million. These liabilities represent the part of the purchase price which was deferred over multiple years and linked to future revenues or profitability of relevant businesses. It further includes the adjustment to the financial liability relating to 40% of future GAM Systematic performance fees following the acquisition of GAM Systematic. These gains of CHF 28.9 million from the net reduction in these liabilities were partly offset by the amortisation of investment management and client contracts of CHF 3.7 million from businesses acquired in 2016 and in prior years, and finance charges on the deferred consideration liability of CHF 7.8 million. In 2019, the acquisition-related items resulted in a net loss of CHF 11.2 million, mainly driven by finance charges on the deferred consideration liability and the 40% future performance fee payment financial liability as well as the amortisation of investment management and client contracts.
Group income statement
2020 | 2019 | Change | |
CHF m | CHF m | in % | |
Net management fees and commissions | 230.4 | 317.1 | (27) |
Net performance fees | 2.8 | 12.8 | (78) |
Net fee and commission income | 233.2 | 329.9 | (29) |
Net other expenses | (4.0) | (3.7) | - |
Income | 229.2 | 326.2 | (30) |
Personnel expenses | 150.5 | 197.0 | (24) |
Fixed personnel expenses | 118.3 | 139.9 | (15) |
Variable personnel expenses | 32.2 | 57.1 | (44) |
General expenses | 75.0 | 99.6 | (25) |
Occupancy | 5.6 | 8.0 | (30) |
Technology and communication | 15.2 | 19.0 | (20) |
Data and research | 20.6 | 20.7 | 0 |
Professional and consulting services | 8.3 | 18.1 | (54) |
Marketing and travel | 7.0 | 13.9 | (50) |
Administration | 5.5 | 7.0 | (21) |
Other general expenses | 12.8 | 12.9 | (1) |
Depreciation and amortisation | 18.6 | 19.1 | (3) |
Expenses | 244.1 | 315.7 | (23) |
Underlying (loss)/profit before taxes | (14.9) | 10.5 | - |
Underlying income tax expense | - | 5.6 | (100) |
Underlying net (loss)/profit | (14.9) | 4.9 | - |
Acquisition-related items | 19.8 | (12.5) | - |
Non-recurring items | (402.4) | 3.2 | - |
Tax on acquisition-related items | 0.6 | 1.3 | - |
Tax on non-recurring items | 1.7 | 0.3 | - |
Non-recurring tax item | 6.8 | (0.7) | - |
IFRS net loss | (388.4) | (3.5) | - |
Balance sheet2 and capital management
Assets and net cash
Total assets as at 31 December 2020 were CHF 820.2 million, compared to CHF 1,335.1 million a year earlier. This includes goodwill and intangible assets of CHF 295.6 million, which decreased CHF 417.5 million compared to 2019, primarily due to the impairment of goodwill in the first half of 2020.
Cash and cash equivalents at the end of 2020 amounted to CHF 270.9 million, down from CHF 315.8 million one year earlier, reflecting the net redemptions of investments in seed capital and cash flows generated from operating activities being more than offset by acquisition-related deferred consideration payments primarily related to GAM Systematic, payments associated with redundancies in connection with the restructuring programme and expenditure capitalised relating to the SimCorp project.
Liabilities and adjusted tangible equity
Total liabilities as at 31 December 2020 were CHF 346.3 million, down from CHF 460.1 million at the end of 2019. The decrease mainly reflects the impact of lower accrued expenses and deferred income as well as the reduction of other non-current liabilities related to the write down of the deferred consideration liabilities related to GAM Systematic.
As at 31 December 2020 the Group had no financial debt, as in previous years.
Treasury shares
IFRS requires a company that holds its own shares for trading and non-trading purposes to record those shares as treasury shares and deduct them from shareholders' equity. As at
31 December 2020, the holding of own shares of 3.7 million was equivalent to 2.3% of shares in issue. All of these shares were bought back over the regular trading line at the SIX Swiss Exchange (first trading line) and held to cover the obligations under share-based compensation plans. This position decreased by 0.4 million shares, reflecting shares delivered to settle obligations under share-based compensation plans.
Share buy-back programme 2020-2023
The Group's share buy-back programme, which is designed to purchase shares on the ordinary trading line to cover share-based payments and to purchase shares on the second trading line designated for cancellation, started on 5 May 2020, following the expiration of its predecessor programme (2017-2020). It allows for the repurchase of up to 16.0 million shares over a maximum period of three years. When shares are purchased over the second trading line at the SIX Swiss Exchange, GAM Holding AG acts as sole buyer. During 2020, a total of 1.8 million shares were repurchased over the first trading line to cover share-based payments. No shares were repurchased for cancellation in 2020.
Adjusted tangible equity at the end of 2020 was
CHF 188.7 million, compared with CHF 197.2 million a year earlier. The main contributor to this decrease was the IFRS net loss and expenditure capitalised relating to the SimCorp project, but excluding items related to intangibles and the movement in the financial liability related to GAM Systematic.
Dividend for the 2020 financial year
The Board of Directors proposes to shareholders that, in line with our long-term dividend policy that remains unchanged, no dividend will be paid for 2020 given a negative underlying net profit in 2020. The Board continues to target a minimum dividend pay-out of 50% of underlying net profit to shareholders.
2 The consolidated balance sheet can be found on page 115.
Risk management
Risk management is not the responsibility of one single individual or department, but is the duty of all employees within the Group.
Peter Sanderson, Group Chief Executive Officer
GAM recognises that the management of risk as part of our everyday activities is essential to support the achievement of our business and strategic objectives. Effective risk management is fundamental to all stakeholders of GAM, including our clients, shareholders, employees, regulators and business partners, and is of interest to the wider financial services sector. The Board of Directors of GAM Holding AG (the 'Board') is ultimately responsible for the stewardship of the Group's systems of risk management, governance and controls.
Our risk management framework
The Group's approach to risk management, governance and controls (the risk management framework ('RMF')) is a structured set of arrangements and processes that seek to identify, assess, mitigate, monitor and report risks acrossthe Group. GAM maintains and continuously advances our employees' understanding of the standards and principles of conduct we expect as well as the various components of the RMF to ensure that they are aligned with evolving regulatory requirements and good industry and discipline practices. The various components of our RMF are outlined below.
Employees' well-being and mental health have high priority, and we have established a number of initiatives geared to providing support to our colleagues facing challenging times.
Peter Sanderson, Group Chief Executive Officer
Risk strategy
Risk appetite
Communication and stakeholder management
Governance, organisation (structures and processes)
and policies
Risk universe
Accountabilities and responsibilities
Risk strategy and appetite
Our risk strategy is based on the belief that risk management is the responsibility of every employee and that it must be integrated into the Group's strategy, capital allocation, decision-making and day-to-day operations. Risk awareness is at the heart of our strategic planning process, supporting decision-making, and the formulation and delivery of plans for the achievement of business and strategic objectives. Our RMF includes risk appetite statements (focusing on franchise value, capital, liquidity and profitability) and associated limits that define the level of risk GAM is willing to accept in pursuit of the achievement of our business and strategic objectives.
Communication and stakeholder management
Our stakeholders (clients, shareholders, employees, regulators and business partners) have an active interest in our performance and how we manage our risks. We communicate information that seeks to provide our stakeholders with confidence in our management of risk.
Governance, organisation (structures and processes) and policies
One of the key elements of effective risk management is a risk governance structure that provides appropriate oversight, segregation of duties and adequate, effective and independent controls within a risk-conscious culture. Organisational structures and processes are in place with delegated authorities from a function and legal entity perspective. A policy management framework consisting of a set of Group policies supports the delivery of the Group's business and strategic objectives by establishing operating standards and principles for managing GAM's risks across the organisation. Our RMF is underpinned by a three lines of defence model with defined accountabilities and responsibilities for risk management which are designed to deliver the standards of conduct that our stakeholders expect.
First line of defence
The overall management of risk is delegated by the Board to the Group CEO, the Group Management Board (GMB) and senior leadership team (SLT) members and their functions/
teams who define the structures and processes to manage the risks for which they are responsible across the Group. The GMB is responsible for implementing the Group's RMF, as determined by the Board. The first line's functional management owns all the risks assumed through their day-to-day activity and decision-making. They are responsible for establishing and maintaining an appropriate management of risk and active management of all their risk exposures, as well as for ensuring that we are organised in a manner that provides appropriate segregation of duties and adequate, effective controls and we comply with all applicable contracts, laws and regulations. Each employee is charged with protecting our clients' interests by upholding GAM's standards of conduct and maintaining an effective control environment.
Second line of defence
Risk challenge and oversight is undertaken, among others, by the Group's risk, legal and compliance functions. These functions, who have direct reporting lines to the Group CEO, seek to provide objective oversight of the efficiency and effectiveness of how risks are managed across the organisation, and consist of:
• Investment risk analytics and oversight teams, who produce, review, analyse and challenge investment risk and performance. They produce a range of investment risk information for internal and external stakeholders as required.
• Investment controlling teams, who monitor our investment teams' adherence to applicable legal and regulatory, prospectus, contractual and internal investment guidelines. They escalate any guideline breaches, oversee their timely remedy and report the details to the relevant management committees and legal entities' boards and, as required, applicable external auditors and regulators.
• Operational risk teams, who perform reviews of business processes and risk and control self-assessments, monitor the performance of business processes using defined key risk and performance indicators, test controls and analyse operational incidents. They maintain an active dialogue with first line business process owners.
• Local risk teams, who oversee and monitor both financial and non-financial risks, from both an agency and proprietary perspective. They challenge risks within their geographic region and the controls in place, providing support to the business in designing solutions to mitigate key risks.
• Legal and compliance teams, who monitor a range of legal and regulatory risks, including anti-money laundering, financial crime, best execution, fair trade allocation, data protection, conflicts of interest and employee dealings. They interact with the risk teams and first line business areas to oversee and monitor the regulatory risk landscape.
In addition to the controls performed by the first line of defence, independent controls commensurate with the nature and size of the risks are performed by the second line of defence. Furthermore, the second line of defence independently monitors the effectiveness of the first line of defence's risk management and oversees their risk taking activities.
Third line of defence
The internal audit function provides independent, objective assurance and advisory services to the Board, the Audit Committee of the Board and the GMB. It carries out operational and system audits in accordance with a risk-based internal audit plan. The internal audit function uses a systematic and disciplined approach to evaluate the effectiveness of risk management, governance and control processes.
GAM's three lines of defence model
Functional/line management
Identify, assess, own and manage risksDesign and operate effective controlsSupervise and monitor corrective actions
Risk, compliance and other functions
Set minimum standards for effective risk management (eg through policies)Establish and oversee operation of the risk management frameworkChallenge, monitor risk and provide reporting
Business performance and capital management Business performance is regularly reported to the GMB and Board against the objectives in the annual plan (budget).
A Group capital management policy is in place to support the allocation of the Group's capital, also in line with local regulatory capital requirements.
Risk and control assessment
Our risk assessment process considers the potential impact (both direct and indirect) that internal and external events might have on the Group. This process starts with the identification of significant inherent (gross) risks and is followed by an assessment of the effectiveness of existing controls and/ or other mitigating measures that could be taken, resulting in an assessment of residual risk. Relevant assessments are also reviewed and agreed by the SLT, the GMB and/or one of its applicable Group oversight committees, and, as applicable, the Board's committees and/or the Board, and are also used for our risk-based internal audit planning and for strategic planning purposes. Within the first line of defence, a risk and control self-assessment process is used by management to identify and assess the different risks GAM faces and the controls in place to mitigate them.
People and reward
Expectations on the importance of sound risk management are driven by a clear tone-from-the-top. Our management seek to operate a risk-managed culture, through measurement and management of individual and collective performance
Internal audit
Provide independent assurance of the risk management frameworkPerform objective evaluations of the control environment
Recommend control improvements
Externalauditors
and appropriate remuneration and reward. A Group code of conduct supported by policies and procedures exist and training is provided to support the conduct and behaviours expected of our employees.
Management information
Regulators
Monitoring and reporting of risk across the business takes place within the first and second lines of defence. Management information is provided to management committees, legal entities' boards, Group oversight committees, the SLT, the GMB, the Board's committees and the Board. Regular and ad hoc risk reporting is provided detailing the risks GAM is facing and how they are managed.
Technology and infrastructure
Systems are employed to support the identification, assessment, mitigation, monitoring and reporting of risk across our three lines of defence. Management is required to document their key risks and controls and evidence their assessment on a regular basis as part of the risk and control self-assessment process.
Risk universe
The Group's risk universe is dynamic and evolves as the business and market environment changes. The identification of existing and potentially newly emerging risks is an ongoing activity, involving all management levels within the Group, as well as legal entities' boards, the SLT, the GMB, the Board's committees and the Board.
Key risks
We define risk as any potential event that may have an adverse effect on the Group's ability to achieve its business objectives or execute its strategy successfully, consequently preventing value creation or eroding existing value. In common with many businesses, GAM is exposed to a range of risks across many of its activities. We classify risks according to our risk universe, which comprises a range of strategic and business, operational and financial risks as described on the following page. Further, the Group's ability to conduct its business is critically dependent on its reputation. A good reputation is vitally important for the Group and requires that every employee, in particular those involved in decision-making, makes the Group's reputation an overriding concern. Responsibility for the risk of damage to the Group's reputation cannot be delegated.
Strategic and business risks
Strategic and business risks represent those external or internal events that could lead to an erosion in our market position, compromise the future profitability of the Group, or impair the sustainability of our business.
from clients. We continually develop our product offering to generate new investment opportunities so that we can ensure the breadth of our product range is differentiated and attractive to existing and potential clients.
Change in client appetite
Events in financial markets can cause gradual or rapid shifts in asset allocations and a change in client appetite for our products and services. Reduced client demand for our products and services could lead to lower inflows and/ or higher outflows. We have a targeted set of products that offer clients a range of risk/return profiles, depending on their risk appetite.
Loss of key staff
The departure of key staff, in particular, but not limited to, investment professionals, could result in a loss of knowledge or expertise and, in certain cases may lead to a fall in assets under management and potentially impact our revenues and profitability. Incentive packages are designed to be competitive and to recognise and reward good performance and expected standards of conduct. Scale and product diversification also serve to mitigate potential loss of investment professionals.
Operational risks
Operational risks comprise the risk of losses resulting from inadequate or failed internal processes or procedures, people and systems or from external events. They also include conduct, legal, regulatory, compliance and tax risks resulting from failure to comply with relevant laws and regulations as well as contractual obligations.
Financial risks
Financial risks comprise the risk of losses arising from market, credit and liquidity risks that could impair the Group's ability to conduct its business and consequently lead to the erosion of our market position, compromise the future profitability of the Group, or compromise the sustainability of our business. A description of the Group's financial risk disclosures in accordance with International Financial Reporting Standards (IFRS) 7 is included in note 19 of the consolidated financial statements.
The key risks identified in light of the current environment, market conditions and changes within the business include:
Revenues and product profitability
We operate in a competitive environment and therefore are subject to the changing dynamics in the asset management industry that could lead to a reduction in revenue margins on certain products. Additionally, a significant loss of assets under management could substantially impact our management fee revenues. Our focus remains on delivering investment outperformance so that our products remain in demand
Employees' well-being
Due to the ongoing Covid-19 pandemic, home office working has been implemented across the Group. Working remotely for prolonged periods of time can impact individuals' well-being, including mental health, and compromise their ability to perform. Employees' well-being has been given high priority, with a number of initiatives geared to providing support to employees facing challenging times.
Poor investment performance
Poor investment performance within our product offerings could lead to a decline in their value and result in lower assets under management and lower management fee revenues. Additionally, a portion of our revenues are derived from performance fees under certain investment management contracts. Poor investment performance could result in a significant drop in performance fees or no performance fees at all, increased outflows and lower future inflows, thereby reducing assets under management as well as management and performance fee revenues. We maintain oversight of the performance of our investment professionals and compare performance against appropriate benchmarks and peers, and take active steps to address underperformance where required.
Client concentration
We have four broad client groups: institutional investors, who are often advised by consultants; retail investors, who are typically intermediated through banks, brokers and independent advisers; private clients and charities; and
professional money managers, who typically purchase GAM's fund management company services allowing them to focus solely on the management of private label structures. The loss of a large institutional investor or an important wholesale intermediary relationship could have an adverse effect on the Group's assets under management. We seek to mitigate client concentration risk through the continued growth and diversification of our distribution network across multiple geographic regions.
Foreign exchange
The Group reports its results in Swiss francs. It is exposed to foreign exchange risk as a large proportion of its revenues and expenses are in currencies other than Swiss francs. Fluctuations in exchange rates against the Swiss franc can impact the results of the Group. We may engage, from time to time, in foreign exchange hedging transactions in an effort to mitigate the impact of exchange rate movements on our results. Refer also to the currency risk description included in note 19.2 of the consolidated financial statements.
Legal and regulatory change
The environment in which we operate is highly regulated and subject to frequent changes as particularly witnessed over recent years, and such a trend is likely to continue. Changes in and the evolving interpretation of applicable laws and regulations affecting areas of our business can result in previously unanticipated costs or expenses. Our legal and compliance functions support the Group's activities with individuals with experience across a range of legal and regulatory topics.
Implications of the UK having left the EU
Access to the EU and UK markets for a fund product depends on the regulation of the investment manager and the distributor as well as the fund product itself. The majority of the fund products we manage have the EU as their legal domicile (Luxembourg or Ireland) and we have offices in several EU countries as well as in the UK and Switzerland, with staff in a diverse set of roles - from investment management to distribution and support - in most of the locations. We continue to monitor the situation between the UK and the EU in order to be prepared for any potential fundamental change in the current regulatory or operating environment.
Fiscal changes
The Group has business operations spread across many countries, with varying effective corporate tax rates. Fiscal changes in any of these jurisdictions could either increase our effective corporate tax rate or adversely affect our investment funds compared to other forms of investment products. We monitor fiscal developments and, in particular, periodically review our transfer pricing policies in order to ensurealignment with applicable international and local tax transfer pricing regulations.
Financial accounting
Accounting risk is the risk that our financial statements and other statutory and regulatory reporting do not accord with IFRS and/or other relevant statutory requirements, are not based on appropriate accounting policies and/or do not incorporate the required disclosures. As the IFRS rules applied by the Group are subject to continued revisions and amendments by the standard setter, such changes can affect the way we present our results (see notes 29.2 to 29.3 of the consolidated financial statements). We maintain a Group accounting and reporting manual, which is regularly reviewed to ensure consistent application of IFRS standards across the Group. We have regular dialogue with our external auditors to support their annual audit.
Pension fund accounting
The asset/liability mismatch inherent in defined benefit pension plans can give rise to pension fund deficits as determined in accordance with IAS 19 rules. Deficits calculated according to these IAS 19 rules are subject to volatility, depending on underlying changes in the input parameters, such as asset performance, inflation and discount rates (see note 16 of the consolidated financial statements). Independent and qualified external resources are retained to evaluate current and future funding requirements of GAM's defined benefit plans.
Third-party supplier management
The Group depends, to varying degrees, on a number of key suppliers for various operational services, such as fund administration, accounting, custody, transfer agency, portfolio management, risk analytics and market data services. The failure of any key supplier to fulfil their obligations could lead to operational and/or regulatory issues for the Group, which could result in reputational harm and/or financial loss. In order to manage key supplier risk, we impose quality requirements in the supplier selection process and ensure service levels are sufficiently documented in our contractual agreements. Our key supplier relationships are subject to initial and regular ongoing due diligence, risk assessment and service quality monitoring.
Organisational change
Organisational changes are determined, in most cases, to increase the overall operational efficiency of the Group and benefit of key functions such as portfolio management and client servicing. Organisational changes are supported by dedicated project teams with the aim to transition services and ensure undisrupted daily activities. Oversight of GAM's organisational change activities is maintained through dedicated project steering committees and the GMB.
Client servicing errors
The Group operates a range of operational systems which support the delivery of services to our clients. A significant error, such as client reporting errors, client fee errors, errors in fund prospectuses, trading errors, fund valuation and pricing errors, could materially impact our reputation, revenues and/ or overall profitability. The Group operates a combination of automated and manual checking processes. Procedures are thoroughly reviewed following any reported errors/near misses. We operate systems and processes that seek to ensure compliance with applicable investment guidelines.
Conduct
We face a range of conduct-related risks, some of which could result in us failing to meet our clients' needs or interests and/or in client detriment. These risks include the risk of market abuse, money laundering or bribery, fines and/or censure associated with failing to identify or meet regulatory requirements. A Group code of conduct exists and training is provided to support the delivery of the conduct and behaviours expected of our employees. We seek to promote a risk-managed culture and provide compliance and ethics training to establish expectations of the conduct required from our employees. We review and, if required, update our internal policies and related training such as in relation to trade execution and allocation, conflicts of interest and gifts and entertainment. We maintain client on-boarding policies and procedures to manage the risk of money laundering.
Information security and technology
The Group relies on technology and use of data to achieve our clients' objectives. Factors such as unauthorised access, theft by third parties, failure to keep technology systems up to date, adaption to suit the changing requirements and data being held or transported insecurely, can potentially put our technology and information at risk. In the ongoing Covid-19 pandemic environment in which employees are required to work remotely, working from home set-ups become a gateway to new forms of potential data theft, and companies face increased cyber security risk. Resources are devoted
to protecting the resilience of the Group's IT systems and we conduct information security awareness training for all employees. We operate business continuity/disaster recovery plans to mitigate a loss of facilities/infrastructure. Regular information technology updates are undertaken and technical standards are in place to manage information security risk.
Effective risk management requires an in-depth understanding of the risks GAM faces and clear accountability and responsibility for their management.
Elmar Zumbuehl, Group Chief Risk Officer
Effectiveness of controls and risk management
Although we have adopted standardised risk management and control processes and continue to further enhance on an ongoing basis our controls, procedures, policies and systems to monitor and manage risks, it cannot be guaranteed that such controls, procedures, policies and systems will successfully identify and manage each and every internal and external risk to our businesses. We are subject to the potential risk that our employees, contractors or other third parties may deliberately seek to circumvent established controls to commit fraud or act in ways that are inconsistent with our standards, policies and procedures.
An insurance programme provided by a syndicate of third-party insurers is tailored to the Group's risk profile and designed to increase the breadth of cover and certainty of response in respect of certain potential material liabilities arising.
Sustainability
We recognise that complying with the highest sustainability standards is no longer an option; it is becoming the new norm.
Peter Sanderson, Group Chief Executive Officer
In a world increasingly shaped by global sustainability issues from climate to Covid-19, diversity to biodiversity, we recognise that GAM must act responsibly to protect the environment and society while delivering for our clients.
sustainability considerations. We believe our active approach to sustainability and intention to develop a compelling range of sustainable strategies will be an important contribution to the growth pillar of our corporate strategy.
As an asset manager, we want both our investment strategies and our corporate operations to reflect our aspiration for GAM to be at the leading edge of best practice on sustainability.
This is not only good for society, it is good for business. The continued growth of the global sustainable investment market - which stood at USD 30.7 trillion in 2018, a 34% increase in just two years - creates a clear opportunity for GAM to enhance its specialist offering of strategies and respond to growing client demand for investments that embed
That is why in 2020, GAM made sustainability a priority, strengthening our governance structure to oversee and drive forward specific improvements to our levels of ESG integration, to our stewardship activities and to the sustainability of our corporate operations.
Our aim is to deliver a sustainable commercial strategy that reduces our impact on society and the planet and enhances our ability to safeguard our clients' capital.
2020 snapshot of highlights and expectations
Achievements in 2020 include: | Aspirations for 2021 include: | |
Governance | GAM ranked top-rated Swiss financial services | Become a supporter of the Task Force on Climate-related |
firm for corporate governance by InRate, an | Financial Disclosures (TCFD) and report against TCFD | |
independent Swiss sustainability rating agency | recommendations in 2022 | |
Embedding ESG | Awarded an A+ ranking for our responsible | Roll out our proprietary ESG dashboard - providing |
investment strategy and governance by the UN- | ESG data, trends and research - to all active managers | |
supported Principles for Responsible Investment | to support deeper integration and active stewardship | |
Sustainable funds | Sustainable Swiss Equities team won | Launch a range of new sustainable strategies |
"2020 Best Swiss Equities" award | ||
Corporate sustainability | GAM certified as a CarbonNeutral® company | Continue to explore becoming a certified B Corporation |
Improve our corporate ESG ratings across key ratings providers - | ||
targeting an A rating from MSCI by year end |
Governance for sustainability
We aim for the highest standards of governance and have taken steps to strengthen our governance and leadership in the area of sustainability.
We created a new global role reporting directly to Group Chief Executive Officer Peter Sanderson. As Global Head of Sustainable and Impact Investment, Stephanie Maier is responsible for leading GAM's sustainable investment strategy, leading our Governance and Responsible Investment (GRI) team, strengthening GAM's range of sustainable investment strategies for clients and driving our efforts to be at the leading edge of best practice.
In Q1 2020, we created a new Sustainability Committee, now chaired by Stephanie Maier, which reports on our progress to the Group Management Board and Board of Directors on a quarterly basis. We also have a nominated non-executive director, Katia Coudray, who is responsible for championing sustainability at the Board level.
company adapts to its environmental and social context and uses this in its valuations and investment decisions. This strategy was launched in May 2010 and this year won the "2020 Best Swiss Equities" award. Another example is our recently launched GAM sustainable Local Emerging Bond Fund (LEBF), which builds on our original LEBF but is managed against an established ESG benchmark.
Our ESG integration methods include a quantitative assessment using multiple sources of third-party ESG data, our own materiality overlay, and a qualitative review by investment teams. Our investment teams work closely with our governance and responsible investment (GRI) team on stewardship and ESG research. The GRI team also supports investment teams by monitoring ESG issues across our whole portfolio.
In Q4 2020, the GRI team conducted an internal review of GAM's strategies across all asset classes. The results will inform both how we drive ESG integration and how we implement the appropriate requirements under the EU Sustainable Finance Disclosure Regulation.
Our commitment to improving transparency and disclosure means we are publishing our first stand-alone Sustainability Report in 2021 and are publicly committing to disclose our management of climate risk using the TCFD framework in 2022.
Sustainable investment
Integrating ESG into our investment process
We see the inclusion of ESG analysis and research in the investment process as integral to fundamental financial analysis. It helps us identify incidents from gross misconduct to poor risk management and provides us with a more complete value creation picture for corporate business models and management.
We were delighted that last year we were awarded an A+ ranking for our responsible investment strategy and governance, and an A for ESG integration in equities, by the UN-supported Principles for Responsible Investment.
GAM does not have a one-size-fits-all approach to how ESG factors can best be incorporated into individual strategies. We take an idiosyncratic approach with such decisions devolved to the individual investment team's own assessment. For example, our Sustainable Swiss Equities team uses its proprietary 'bionic approach' that assesses how well a
In 2021, we plan to roll out our proprietary ESG dashboard - providing ESG data, trends and research - to all investment managers to support deeper integration and active stewardship. We successfully piloted this dashboard in 2020 and will work with each team to continue to evolve ESG integration in a way that adds the most value for each strategy.
The importance of active engagement
Stewardship and the principles of good governance are central to our approach to sustainable investment. To ensure our clients' investments deliver the returns they expect in a responsible and sustainable manner, we actively vote and engage with management to influence companies we are invested in.
We engage directly with companies, encouraging them to build robust and responsible operational processes and policies, and give due consideration to the ESG issues that might affect them.
We view engagement as key to fulfilling our duty to be a good steward for our clients' assets. The engagement process gives us valuable insights that help improve our understanding of an organisation, business or country. Our portfolio managers and analysts meet regularly with company management and, where appropriate, the non-executive directors. Frequent topics of discussion include corporate strategy, business planning and delivery of objectives, capital structure, mergers, acquisitions
and disposals, and the governance of environmental and social factors. We engage in policy advocacy through groups such as the PRI Global Policy Reference Group.
In the event of an unsuccessful engagement we will consider divestment. In the case of one holding in a South-East Asian transportation company, we engaged with the firm to discuss their treatment of workers during the Covid-19 pandemic. However, following reports of continued poor human capital standards and limited response to our engagement, we sold our position.
Where relevant we also collaborate with like-minded investors to improve the overall standards of a particular market or sector, or to amplify our voice. In 2020, our collaborative engagements included those with Access to Medicine and Access to Nutrition initiatives, as well as the Church of England-led engagement on dam safety following the Brumadinho dam disaster in Brazil. Through our new Global Head of Sustainable and Impact Investment we also sit on the Steering Committee of Climate Action 100+, the world's largest shareholder engagement, which urges the world's largest corporate greenhouse gas emitters to take necessary action on climate change.
Proxy voting
Voting is a fundamental part of active asset management and at GAM we have four core proxy voting principles: Accountability, Stewardship, Independence, and Transparency. In 2020, GAM voted at 1,136 company meetings representing 97.7% of meetings across all markets, up from 96.6% in 2019. In total, we voted on 13,551 resolutions.
Meetings voted by geography
Asia Pacific ex JapanContinental EuropeNorth AmericaUnited KingdomJapan
Other emerging markets
0%
Shareholder resolutions
Other governance mattersSocial
Remuneration
Political contributions and lobbying transparency
Environment
Board-related
0%
20%
40%Against
For
Corporate sustainability
60%
80%
100%
GAM's greatest asset is our talent. We want to attract and empower the brightest minds to provide the investment leadership, innovation and sustainable thinking needed to protect our clients' financial future and at the same time make a positive contribution to our planet and our society.
Peter Sanderson, Group Chief Executive Officer
10%
Our people
At GAM, our ability to drive excellence and achieve outstanding business results hinges on our talent and the use of robust processes to drive high performance.
Culture, talent and training
We continuously invest in and develop our talent and promote an open culture based on mutual respect, regardless of function or rank. We monitor employee satisfaction and pursue a zero-tolerance culture for any conduct that could harm our clients, reputation, employees or other stakeholders.
20%2019
30%
40%
2020
In 2020, Monika Machon, a member of the GAM Holding AG Board took on the role of Culture Champion with our Chief Executive Officer, Peter Sanderson, as our senior sponsor
for culture. We have a Flexible Working Group and a Culture Working Group who focus on continuously improving the inclusive culture at GAM. We also launched a series of employee engagement initiatives such as regular town halls, micro-seminars and the use of the Idea Drop platform, which allows all employees to suggest improvements, take part in various discussions and respond to challenges throughout the company. These initiatives are key to fostering an open and transparent culture, where ideas and diversity of thought are encouraged.
We conduct an annual employee engagement survey, and periodic pulse surveys, to help us understand employee experience and set areas of focus. The 2021 survey identified support for career progression and training as priorities.
Personal development is encouraged through training, conducted either by GAM's in-house Learning and Development department, Lunch and Learn sessions for all staff, or at external courses and seminars.
GAM has a group-wide learning management system (GAM Learn) that provides a centralised repository for all learning and development needs, and this year, following feedback from employees, we also launched LinkedIn Learning, a new e-learning resource for all employees with a digital library of more than 6,000 courses covering a wide range of technical, business, software and creative topics. We support professional qualifications and in 2020 a number of our investment teams enrolled in the new CFA UK Certificate in ESG Investing. We will continue to encourage uptake in 2021.
Employee satisfaction survey
Full details of our talent management can be found in our stand-alone Sustainability Report.www.gam.com/resultscentre.
Teamwork & collaborationExcellence & innovationEmployee engagement
Well-being, personal development & growthPsychological safetyDiversity & inclusionIntegrity & respectSenior leadershipMy line managerClient centricityOur values
0% | 20% | 40% |
2020 | 2019 |
60%
80%
100%
People indicators
Permanent employee metrics
Average tenure of employees Average age
Average experience of investment professionals Part-time employees
Training
Sustainability | |
2020 | 2019 |
7.7 years | 7.8 years |
41 years | 41 years |
13.4 Years | 13.9 years |
8% | 8% |
12.1 hours | 8.4 hours |
Diversity, inclusion and equal opportunity
GAM offers equal employment and advancement opportunities for all individuals regardless of age, race, ethnicity, gender, sexuality, disability, religion or other characteristics.
At GAM, diversity, inclusion and equal opportunity are critical to our success. By encouraging an environment that embraces diverse perspectives, we become better investors and improved problem solvers. Creativity and collaboration are nurtured through embracing diversity. All employees are responsible for fostering an environment that creates a diverse and inclusive workplace, where we all feel valued, listened to, treated fairly and respected. By developing a diverse and inclusive environment, we become better listeners and it makes us empathetic to the needs and aspirations of our clients. Diversity and inclusion are values that attract, develop and retain exceptional colleagues and strengthen our talent.
GAM has created an employee network called Equals, which is open to all employees and actively champions equality, diversity and inclusion initiatives throughout our business. In 2020, Equals has driven initiatives that include unconscious bias e-learning, holding Support & Share virtual coffee sessions in multiple languages, promoting LGBT+ rights and establishing an Ethnic Minority Network.
GAM is an active member of several industry-level diversity and inclusion initiatives including the 30% Club to increase gender diversity at board and senior management levels and The Diversity Project to accelerate progress towards a more inclusive financial sector.
As part of our commitment to diversity and inclusion, GAM has also joined the #100blackinterns programme. The programme was established in response to a lack of black portfolio managers in the UK - where just 12 currently manage money. The objective of the initiative is to offer 100 internships to black students across the UK to help kick-start their career in investment management and to tackle the poor representation of black people in the industry.
Looking forward we also plan to review all family-friendly and agile working policies group-wide and report diversity statistics to the Group Management Board.
Total headcount
Headcount by region (in FTEs) | 2020 | 2019 |
175 | ||
219 | ||
Switzerland | ||
346 | ||
399 | ||
United Kingdom | ||
133 | ||
141 | ||
Rest of Europe | ||
47 | ||
58 | ||
Rest of the world | ||
701 | ||
817 | ||
Total |
Permanent employees - split between allowance of two days a year to volunteer in the communities
women and men
34% | 35% | 35% |
66% | 65% | 65% |
2020
Male
Our communities
where they live and work.
Our environment
To play our part in meeting the global climate challenge, GAM has a longstanding corporate commitment to lower the environmental impact of our business operations.
As a financial services firm, GAM's main source of operational greenhouse gas emissions is from heating and powering our global offices, and business travel. Although the risks to our corporate operations presented by climate change are not material, we work hard to reduce our impact and have set a commitment to become a climate positive organisation. This means going beyond being carbon neutral by removing more carbon from the environment than we emit.
2019
Female
2018
Significant progress has been achieved in reducing our corporate environmental impact in recent years. The relocation of GAM's London office to a building with excellent environmental credentials in 2019, and switching our largest global offices to renewable electricity, has significantly reduced our scope 1 and 2 greenhouse gas emissions.
Our use of conventional (non-renewable) electricity has fallen by 84% between 2017 and 2020.
We want deep and innovative thinking on sustainability to be captured in GAM's corporate culture. In practical terms this translates into a community strategy centred on education and well-being, and drives our work to support communities through educational programmes, recruitment and well-being programmes.
Every year GAM allocates a global budget to match staff donations to international charities for specific causes and in 2020 we established a charities policy to set out how we support organisations and causes that are aligned with our own culture and values, in particular those that focus on education and sustainability.
Total charitable donations
Year | Amount (CHF) |
2019 | 26,819 |
2020 | 78,043 |
Last year we also introduced our new Community Volunteering Guidelines. All employees are now provided with an annual
Investments in videoconferencing technology have further reduced the need for business travel; a trend that has been accelerated by the Covid-19 pandemic. Given the increase in home working brought about by the pandemic, we also introduced a scheme aligned to Big Energy Saving Week, which encourages employees to switch their domestic energy supply to a provider using only renewable energy sources.
We have looked to carbon offsetting projects to compensate for those emissions we have been unable to avoid. We are pleased that GAM has now been certified as a CarbonNeutral® company, through to the end of 2021. GAM has gone a step further by voluntarily committing to offset 200% of the emissions generated by our business operations and travel by supporting projects across the developing world that build renewable energy infrastructure, prevent deforestation, and reduce, avoid or remove greenhouse gas emissions. More details of these projects are published in our Sustainability Reportwww.gam.com/resultscentre.
In 2020, we re-evaluated and accelerated our environmental goals for renewable electricity usage and business travel, as these are our two largest sources of greenhouse gas emissions.
Renewable electricity: In order to reduce our greenhouse gas emissions further, we have set the target for all our GAM-managed global offices to be using 100% renewable electricity resources by the end of 2022. Currently, 78% of our staff are based in office buildings which source only renewable electricity.
Environmental indicators
Transport: Another key area where we are determined to reduce our greenhouse gas emissions is through reducing business travel. We are committed to challenging the need to travel and promoting alternatives such as videoconferencing. Our aim is to maintain our total distanced travelled by air at a level at least 25% below our 2018 figures. We still consider this to be a stretching target given our growth plans.
Energy | 2020 | 2019 1 | 2018 | Change in % |
Electricity consumption (MWh) | 1,704 | 3,206 | 5,606 | (69.6)% |
of which renewable electricity | 1,023 | 2,088 | 4,436 | (76.9)% |
of which non-renewable | 681 | 1,118 | 1,170 | (41.8)% |
Heating natural gas | 564 | 1,148 | 972 | (42.0)% |
Total energy consumption (MWh) | 2,268 | 4,354 | 6,578 | (65.5)% |
Business travel - flights (km) | 845,190 | 5,177,042 | 8,040,372 | (89.5)% |
Net carbon emissions (tCO2e) | 624 | 1,908 | ||
Scope 1 & 2 | 452 | 576 | ||
Scope 3 | 172 | 1,332 | ||
Total activities (tCO2e) | 624 | 1,908 | 3,260 | (80.9)% |
Total per FTE | 0.87 | 2.28 | 3.43 | (74.6)% |
Double carbon offsetting commitment (tCO2e) | 1,248 | 3,816 |
1 2019 data has been updated using actual figures rather than estimates which were disclosed in the 2019 Annual Report. Similarly, the 2020 Annual Report includes some estimated data and will be independently verified when actual data becomes available.
We ensure that all service providers operating at our London
Our suppliers
GAM has a wide and diverse supply chain and is committed to ensuring its suppliers uphold fair working practices and minimise their impact on the environment.
Wherever possible, GAM aims to work with and support local suppliers, helping to grow the local economy as well as reducing emissions released while transporting goods. In 2020, our total procurement spend with local vendors in London and Cambridge was over 85%, while in Dublin and Zurich it was over 60%.
office pay the London Living Wage, and during the Covid-19 pandemic we have made sure that the salary of any furloughed contractors does not drop below the level set by the London Living Wage.
GAM also conducts due diligence in its procurement process to determine the extent of its exposure to the risk of negative environmental or social impacts.
For further details, please see our Sustainability Reportwww.gam.com/resultscentre.
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
57
1. GROUP STRUCTURE AND SHAREHOLDERS
60
2. CAPITAL STRUCTURE
62
3. BOARD OF DIRECTORS
77
4. GROUP MANAGEMENT BOARD
80
5. SHAREHOLDERS' PARTICIPATION RIGHTS
81
6. CHANGE OF CONTROL AND DEFENCE MEASURES
82
7. AUDITORS
84
8. INFORMATION POLICY
BACKGROUND
References in this Annual Report to 'the Company' shall be taken as references to GAM Holding AG. References to 'the Group' shall be taken as references to GAM Holding AG and all its subsidiaries. References to 'the Board of Directors' and 'the Group Management Board' shall each mean such bodies of GAM Holding AG.
Consistent and long-term relationships with our shareholders and all other stakeholders are fundamental for the sustained success of our business. We consider good corporate governance to be a decisive factor in achieving these objectives, and we recognise that transparent disclosure of our governance helps stakeholders assess the quality of our Group and assists investors in their decision-making.
Corporate governance defines the structures, rules and processes required for the proper organisation and conduct of business as it establishes the powers and responsibilities of our corporate bodies and employees. Our governance framework is designed to provide the appropriate checks and balances between the Board of Directors, the Group Management Board and the local management of our business, with the goal of balancing and safeguarding the interests of the Company, its shareholders, clients, employees and other stakeholders.
The Company is subject to the laws of Switzerland, in particular the Swiss Code of Obligations. In addition, the Company is subject to the rules of the SIX Swiss Exchange, including the Directive on Information Relating to Corporate Governance (the 'Corporate Governance Directive'), and until 30 November 2020 was under consolidated supervision and regulation of the Swiss Financial Market Supervisory Authority FINMA.
The principles and rules on corporate governance are incorporated or defined in a number of documents, including the articles of incorporation, the charters of the Board of Directors and its committees and our organisational rules. The Board of Directors' Governance and Nomination Committee reviews these principles and rules on a regular basis in order to assess them in light of prevailing best practices and proposes any improvements to the Board of Directors for their consideration and approval.
The corporate governance information in this Annual Report is presented in accordance with the Corporate Governance Directive of the SIX Swiss Exchange and takes into account the guidelines and recommendations of the 'Swiss Code of Best Practice for Corporate Governance' of the Swiss business association economiesuisse. For the compensation paid to, and shareholdings of, the members of the Board of Directors and the Group Management Board, including the basic principles and elements of compensation and equity participation programmes and a description of the authorities and procedure for determining the same, as well as loans granted to those individuals, see our 'Compensation report', beginning onpage 88, and article 11 of the articles of incorporation which can be found atwww.gam.com/aoi2020.
The following information corresponds to the situation as at 31 December 2020 unless indicated otherwise.
1. GROUP STRUCTURE AND SHAREHOLDERS
1.1 Operational Group structure of GAM Holding AG
Our operating businesses are conducted through GAM Holding AG's subsidiaries (operating legal entities).
The consolidated companies are disclosed in note 24 of the 'Consolidated financial statements'.
GAM Holding AG
The composition of the Board of Directors and the Group Management Board of GAM Holding AG is reflected below.
Board of Directors
David Jacob - Chairman Benjamin Meuli - Vice Chairman
Katia Coudray
Jacqui Irvine
Monika Machon Nancy Mistretta Thomas Schneider1
Group Management Board
Peter Sanderson - Group Chief Executive Officer Richard McNamara - Group Chief Financial Officer
Elmar Zumbuehl - Group Chief Risk Officer Steve Rafferty - Group Chief Operating Officer2
Core activities
Investment management
1 New member of the Board of Directors since 30 April 2020.
2 Joined the Group Management Board on 1 April 2020.
Private labelling
1.2 Significant shareholders/participants
Based on notifications received by GAM Holding AG, each of the following shareholders/participants held more than 3% of the voting rights in GAM Holding AG as at 31 December 2020.1
Voting rights conferred by | Resulting total percentage | ||
conversion rights, share purchase | holding of voting rights | ||
Voting rights conferred by | rights and granted share sale | at time of creation of | |
shares/equity securities | rights and financial instruments | the obligation to notify | |
Shareholder/participant 2 | |||
Silchester International Investors LLP 3 | 15.01% | - | 15.01% |
Jörg Bantleon 4 | 10.08% | - | 10.08% |
Schroders plc 5 | 5.067% | - | 5.07% |
Mario J. Gabelli 6 | 1.65% | 1.38% | 3.02% |
Dimensional Holdings Inc. 7 | 3.00% | - | 3.00% |
GAM Holding AG 8 | 2.31% 9 | - | 2.31% |
1 The percentage holding of voting rights as well as the other terms used in this section bear the meaning ascribed to them and should be read in the context of the applicable stock exchange rules.
2 Any change in the holding of voting rights between reportable thresholds does not trigger any notification duty.
3 Silchester International Investors LLP, London, UK (as at 10 February 2014).
4 Jörg Bantleon, D-80799 Munich. Bantleon Bank AG, Bahnhofstrasse 2, 6300 Zug, Switzerland (as at 24 July 2020).
5 Schroders plc, London, UK (as at 11 November 2020).
6 Mario J. Gabelli, New York, USA (as at 14 November 2018).
7 Dimensional Holdings Inc., c/o Corporation Service Comp, Wilmington, Delaware, USA (as at 8 March 2017).
8 GAM Holding AG, Zurich, Switzerland.
9 As at 31 December 2020 GAM Holding AG also had a sale position (representing obligations to deliver shares to employees under share-based payment awards) of GAM Holding AG shares of 6.34% of shares in issue. For further details, please refer to note 22 of the consolidated financial statements.
Notifications of significant shareholdings in GAM Holding AG, or disposal of such, that were disclosed during 2020 can be found under the following link by inserting 'GAM Holding AG' as the company name:https://www.six-exchange-regulation.com/en/home/publications/significant-shareholders.html
Based on notifications received by GAM Holding AG, each of the following shareholders/participants held more than 3% of the voting rights in GAM Holding AG as at 31 December 2019.1
Voting rights conferred by shares/equity securitiesVoting rights conferred by conversion rights, share purchase rights and granted share sale rights and financial instruments
Resulting total percentage holding of voting rights at time of creation of the obligation to notify
Shareholder/participant 2
Silchester International Investors LLP 3
Credit Suisse Funds AG 4
Schroders plc 5
T. Rowe Price Associates Inc. 6
Kiltearn Partners LLP 7
Norges Bank (the Central Bank of Norway) 8
Mario J. Gabelli 9
Dimensional Holdings Inc. 10
GAM Holding AG 11
15.01% - 15.01%
5.07% - 5.07%
5.07% - 5.07%
4.96% - 4.96%
4.92% - 4.92%
3.02% - 3.02%
1.65%
1.38% 3.02%
3.00% - 3.00%
2.56% 12 - 2.56%
1 The percentage holding of voting rights as well as the other terms used in this section bear the meaning ascribed to them and should be read in the context of the applicable stock exchange rules.
2 Any change in the holding of voting rights between reportable thresholds does not trigger any notification duty.
3 Silchester International Investors LLP, London, UK (as at 10 February 2014).
4 Credit Suisse Funds AG, Zurich, Switzerland (as at 15 November 2019).
5 Schroders plc, London, UK (as at 13 December 2019).
6 T. Rowe Price Associates Inc., Baltimore, USA (as at 8 November 2017).
7 Kiltearn Partners LLP, Edinburgh, UK (as at 1 March 2018).
8 Norges Bank (the Central Bank of Norway), Oslo, Norway (as at 27 June 2019).
9 Mario J. Gabelli, New York, USA (as at 14 November 2018).
10 Dimensional Holdings Inc., c/o Corporation Service Comp, Wilmington, Delaware, USA (as at 8 March 2017).
11 GAM Holding AG, Zurich, Switzerland (as at 31 December 2018).
12 As at 31 December 2019, GAM Holding AG also had a sale position (representing obligations to deliver shares to employees under share-based payment awards) of GAM Holding AG shares of 6.87% of shares in issue. For further details, please refer to note 22 of the consolidated financial statements.
1.3 Cross-shareholdings
There are no cross-shareholdings between GAM Holding AG or its subsidiaries and any other company that exceed 5% of capital or voting rights.
2. CAPITAL STRUCTURE
2.1 Capital
As at 31 December 2020, the ordinary share capital amounted to CHF 7,984,126.55.
The ordinary share capital, which is fully paid, consists of 159,682,531 registered shares with a par value of CHF 0.05 each. The registered shares (security no. 10265962; ISIN CH0102659627) are listed on the SIX Swiss Exchange.
Furthermore, as at 31 December 2020, the Company held authorised capital amounting to CHF 798,412.00.
2.2 Authorised capital
The Board of Directors is authorised to increase the Company's share capital at any time until 30 April 2021, by a maximum amount of CHF 798,412.00 by issuing a maximum of 15,968,240 fully paid registered shares with a par value of CHF 0.05 each. Increases in partial amounts are permissible.
The subscription and acquisition of the new shares as well as any subsequent transfer of the shares is subject to the restrictions pursuant to articles 4.3 to 4.5 of the articles of incorporation, which can be found atwww.gam.com/aoi2020.
The Board of Directors determines the issue price, the type of contribution, the date of issue, the conditions for the exercise of the pre-emptive rights and the beginning date for dividend entitlement. In this regard, the Board of Directors may issue new shares by means of a firm underwriting through a financial institution, a syndicate of financial institutions or another third party and a subsequent offer of these shares to the existing shareholders or third parties (if the pre-emptive rights of the existing shareholders have been denied or not been duly exercised). The Board of Directors is entitled to permit, to restrict or to exclude the trade with pre-emptive rights. It may permit pre-emptive rights that have not been exercised to expire, or it may place such rights or shares as to which pre-emptive rights have been granted, but not exercised, at market conditions or may use them otherwise in the interest of the Company.
The Board of Directors is further authorised to restrict or withdraw the pre-emptive rights of the existing shareholders with respect to a maximum of 7,984,120 registered shares and allocate such rights to third parties:
a) if the issue price of the new shares is determined by reference to the market price; or
b) for the acquisition of companies, part(s) of companies or participations, for the acquisition of products, intellectual property or licenses or for investment projects, or for the financing or refinancing of any of such transactions through a placement of shares; or
c) for purposes of broadening the shareholder constituency of the Company in certain financial or investor markets, for purposes of the participation of strategic partners, or in connection with the listing of new shares on domestic or foreign stock exchanges.
2.3 Changes of capital
The description of the changes of capital in the last three years is disclosed in note 17 of the 'Consolidated financial statements'.
2.4 Share buy-back programme
The Group's share buy-back programme, that is designed to purchase shares on the ordinary trading line to cover share-based payments and to purchase shares on the second trading line designated for cancellation, started on 5 May 2020, following the expiration of its predecessor programme (2017-2020). It allows for the repurchase of up to 16.0 million shares over a maximum period of three years. During 2020, a total of 1,820,000 shares were repurchased over the first trading line to cover share-based payments. No shares were repurchased for cancellation in 2020. The aggregate consideration paid by the Company for shares repurchased during 2020 was CHF 3.5 million.
61 | Annual Report 2020 | |
2.5 Shares and participation certificates | ||
2020 | 2019 | |
Number of shares as at 31 December | ||
Registered shares with par value of CHF 0.05 each (all entitled to dividends) | 159,682,531 | 159,682,531 |
There are no preferential or similar rights. Each share entitles the holder to one vote. There are no participation certificates.
2.6 Bonus certificates
There are no bonus certificates.
2.7 Limitations on transferability and nominee registrations
The Company maintains a share register in which owners (acting in their own name or in their capacity as nominees) of the registered shares are entered with their name, address, nationality and place of incorporation in the case of legal entities. In relation to the Company, any person entered in the share register shall be deemed to be a shareholder. Nimbus AG, Ziegelbrueckstrasse 82, 8866 Ziegelbruecke, Switzerland, administers the Company's share register.
The registered shares of the Company are issued as uncertificated securities and registered as intermediated securities. They are included in the SIS clearing system for transferred shares (SIS registered share system) for booking purposes. The Company may withdraw shares registered as intermediated securities from the custodian system. Each shareholder may at any time request from the Company a certification about the shares owned by them. However, the shareholders have no right to request the printing and delivery of certificates for their registered shares. At any time, the Company may print and deliver share certificates (individual certificates, certificates or global certificates) or convert uncertificated securities and share certificates into any other form, and may cancel issued share certificates once they have been returned to the Company. The transfer of intermediated securities, including the granting of security interests, is subject to the Swiss Intermediated Securities Act. In order to be valid vis-à-vis the Company, a transfer of uncertificated shares by assignment requires a notification of such transfer to the Company.
A person who acquires registered shares shall, upon application, be entered into the share register as a shareholder with voting rights, provided that such person expressly acknowledges that they have acquired the shares in their own name and for their own account. If the person acquiring registered shares does not provide such acknowledgement, the Board of Directors may, and would likely, refuse the entry of such person as a shareholder with voting rights in the share register.
The Board of Directors may issue rules for the entry in the share register of fiduciaries/nominees. It may enter in the share register fiduciaries/nominees with voting rights of up to 2% of the share capital. Furthermore, the Board of Directors may enter fiduciaries/ nominees with voting rights in excess of 2%, if such fiduciaries/nominees disclose the name, address, nationality or registered office, and shareholding of all persons for whose account they hold at least 0.5% of the share capital. Fiduciaries/nominees that are affiliated with other fiduciaries/nominees by means of ownership structure or voting rights, or which have a common management, or are otherwise affiliated, shall be deemed one fiduciary/nominee as regards the application of these entry limitations. As at 31 December 2020, there were no entries in the share register of fiduciaries/nominees with voting rights.
The Board of Directors may cancel the entry in the share register of a shareholder or fiduciary/nominee with voting rights, upon a hearing of such shareholder or fiduciary/nominee, if the entry in the share register is based on false information. The affected shareholder or fiduciary/nominee shall be notified of the cancellation immediately.
2.8 Convertible bonds and options
There are no outstanding convertible or warrant bonds. Information on employee options is disclosed in the 'Compensation report' and in note 22 of the 'Consolidated financial statements'.
3. BOARD OF DIRECTORS
3.1 Members of the Board of Directors
All the members of the Board of Directors of GAM Holding AG are independent non-executive members.
In applying the Corporate Governance Directive of the SIX Swiss Exchange and as set forth in article 13 of the articles of incorporation, which can be found athttps://www.gam.com/en/our-company/investor-relations/articles-of-incorporation, we disclose mandates and interests of the members of the Board of Directors outside the Group. In accordance with article 13, mandates in legal entities that are under joint control are deemed one mandate and are not set out independently.
David Jacob (56)
Group Chairman. Independent non-executive Appointed to the Board: 27 April 2017
Group Chairman Since: 1 October 2019
Skills and experience:
David has been a member of the Board of Directors of GAM Holding AG since 2017 and was appointed Interim Group Chief Executive Officer and a member of the Group Management Board in November 2018 until August 2019. He served as a member of the Audit Committee and the Compensation Committee from 2017 until November 2018. Prior to joining GAM, he was the Chief Executive Officer of Rogge Global Partners Ltd, a position he held from 2014 until 2017. Between 2004 and 2013, David was with Henderson Global Investors where he held a number of senior roles including Member of the Board of Directors and Chief Investment Officer. Prior to joining Henderson, David held a variety of senior roles at UBS Global Asset Management, Merrill Lynch Investment Managers and JPMorgan Asset Management. David is a chartered financial analyst and holds a BSc in economics from The Wharton School, University of Pennsylvania. He is a US and UK citizen.
Committee memberships:
David is a member of the Governance & Nomination Committee.
External appointments:
• Advisor to the Investment Committee of the National Trust Pension Fund, England (non-listed entity)
• Vice Chair of the Investment Committee of the Worshipful Company of Stationers and Newspaper Makers, England (non-listed entity)
• Member of the Board of Trustees of the Science Museum Foundation, England (non-listed entity) (non-profit organisation)
• Member of the Board of Directors of Carlisle Mansions West Ltd., England (non-listed entity) (non-profit organisation)
• Member of the Board of Directors of Carlisle Mansions West (Freehold) Ltd., England (non-listed entity) (non-profit organisation).
Katia Coudray (51)
Independent non-executive director Appointed to the Board: 8 May 2019
Skills and experience:
Katia Coudray is currently the CEO of Asteria Investment Managers and was formerly the CEO of Syz Asset Management, a position she held from 2015 to 2018. Prior to that, she was Head of Investment and Head of Product Development at Syz Group. Before joining Syz in 2011, Katia was Head of Multi-Management and Innovation Platform at Union Bancaire Privée (UBP) for 10 years. From 1998 to 2001 she was Lead Equity Fund Manager as well as Head of the Fund Division at Banque Edouard Constant SA. Katia holds a BA in Economics, Finance and Accounting from the School of Management in Fribourg, Switzerland, and is a Certified International Investment Analyst (CIIA) holder. She is a Swiss citizen.
Committee memberships:
Katia is a member of the Audit Committee and the Compensation Committee.
External appointments:
• Member of the Board of Directors of CA Indosuez (Switzerland) SA, Switzerland (non-listed entity)
• CEO of Asteria Investment Managers, an affiliate of the Reyl Group, a Geneva-based independent banking group.
Jacqui Irvine (48)
Independent non-executive director Appointed to the Board: 8 May 2019
Skills and experience:
Jacqui Irvine is the former Group General Counsel and Company Secretary of Janus Henderson Group plc. Before the merger of Janus Capital Group and Henderson Group in 2017 she was General Counsel and Company Secretary at Henderson Group plc. Prior to that, she was Head of Legal at Henderson Global Investors between 2009 and 2011, having joined the company in 1996 and qualifying as a solicitor in 2000. Jacqui holds a BA in Law and Psychology from the University of the Witwatersrand in Johannesburg, South Africa, as well as a Postgraduate Diploma in Law from the University of the West of England in Bristol, UK, and a Postgraduate Diploma in Legal Practice from the College of Law in London, UK. She is a UK citizen.
Committee memberships:
Jacqui is Chair of the Governance and Nomination Committee, and a member of the Compensation Committee and the Risk Committee.
External appointments: None.
Monika Machon (60)
Independent non-executive director Appointed to the Board: 8 May 2019
Skills and experience:
Monika Machon was formerly a Senior Vice President at AIG (2009 to 2016), serving as Treasurer (2013 to 2016) and Chief Investment Officer/Global Head of Asset Management (2009 to 2013). Monika joined AIG from Barclays Capital in 1998, and held various investment roles, including CEO (2005 to 2008) and Chair (2008 to 2010) at AIG Investments Europe Limited. She holds a BSBA (Management) from Rockhurst College, as well as an MBA (Finance) and a Juris Doctor from Indiana University. Monika is a CFA Charterholder. She is a German and UK citizen.
Committee memberships:
Monika is Chair of the Risk Committee and a member of the Audit Committee.
External appointments:
• Chair of the Board of Directors of Embark Investments Ltd, a UK Authorised Corporate Director (non-listed entity)
• Member of the Board of Directors, member of the Audit Committee and Chair of the Investment Committee of the Tanenbaum Center for Interreligious Understanding (non-profit organisation).
Benjamin Meuli (64)
Independent non-executive director Appointed to the Board: 27 April 2016
Skills and experience:
Benjamin Meuli has been a member of the Board of Directors of GAM Holding AG since 2016. Benjamin is an Executive Board Member and the Chief Financial Officer of Convex Group Ltd, a Bermuda-based specialty property casualty insurance and reinsurance company, which began operations in May 2019. Prior to that, he was the Chief Investment Officer at XL Group, a position he held from 2015 to 2016. Between 2009 and 2015, he was Chief Financial Officer and Member of the Group Executive Committee and the Board of Directors of Catlin Group Ltd., where he was also responsible for the company's investment portfolio. Benjamin was the Chief Investment Officer and a member of the Executive Board at Swiss Re between 2004 and 2008. Prior to joining Swiss Re, he was a managing director at Morgan Stanley with responsibility for coverage of large multinational insurance groups with a particular focus on asset and liability management. He started his career at JPMorgan, where he spent 20 years in a variety of roles, mostly in capital markets and investment banking. Benjamin holds an MA in politics, philosophy and economics from Worcester College, Oxford, and an MSc in agricultural economics from Oxford University. He is a Swiss and UK citizen.
Committee memberships:
Benjamin is a member of the Audit Committee and Risk Committee. He formerly chaired the Audit Committee from May 2017 to October 2020.
External appointments:
• Member of the Partnership Council at Clifford Chance, England (non-listed entity)
• Président du conseil de surveillance of SAS Ampelidae, France (non-listed entity)
• Member of the Board of Directors of Convex Group Ltd., Bermuda (non-listed entity)
• Member of the Board of Directors of Gamrays Company Ltd., Gambia (non-listed entity).
Nancy Mistretta (66)
Independent non-executive director Appointed to the Board: 27 April 2016
Skills and experience:
Nancy Mistretta has been a member of the Board of Directors of GAM Holding AG since 2016. She has served as a member of the Governance and Nomination Committee and the Compensation Committee, the latter being under her chair since 2017. Nancy is a former partner of Russell Reynolds Associates, an executive search firm, where she worked from 2005 until 2009. Prior to joining Russell Reynolds, Nancy was with JPMorgan Chase and its heritage institutions for 29 years and served as a managing director in investment banking from 1991 to 2005. Nancy is a director of Scotts Miracle-Gro, where she currently chairs the Audit Committee and is a member of the Compensation Committee. She is also a director of the North American Holding Company of HSBC, where she chairs the Nomination and Governance Committee and serves on the Audit Committee and the Risk Committee. Nancy holds a BA in psychology from the Smith College. She is a US citizen.
Committee memberships:
Nancy is Chair of the Compensation Committee and a member of the Governance and Nomination Committee.
External appointments:
• Member of the Board of Directors, Chair of the Audit Committee and member of the Compensation Committee of the Board of Directors of Scotts Miracle-Gro, USA (listed entity)
• Member of the Board of Directors, Chair of the Nomination and Governance Committee, member of the Audit Committee and Risk Committee of the Board of Directors of HSBC North American Holding Inc., USA (non-listed entity).
Thomas Schneider (56)
Independent non-executive director Appointed to the Board: 30 April 2020
Skills and experience:
Thomas has extensive experience in auditing and advisory and brings in-depth knowledge of the Swiss market, having spent 27 years with Ernst & Young working with a variety of Swiss and financial services companies, including asset management institutions. After joining Credit Suisse in 2014, he was Chief Auditor for the International Wealth Management division and, most recently, Head of Internal Audit for Credit Suisse Switzerland AG, positions he held between 2014 and 2018. He is a Certified Swiss Accountant and holds an MSc in Business Administration from the University of Wales & GSBA Zurich. He is a Swiss citizen.
Committee memberships:
Thomas is Chair of the Audit Committee (effective 1 October 2020) and a member of the Risk Committee.
External appointments:
• Chairman of the Board of Directors of BLKB Basellandschaftliche Kantonalbank, Switzerland (listed entity)
• Member of the Board of Directors of Swisscleantech, Zurich (non-listed entity).
Changes in the Board of Directors
At the Annual General Meeting held on 30 April 2020, all members of the Board of Directors who ran for re-election were re-elected for a one-year term of office.
The Board of Directors proposed at the Annual General Meeting held on 30 April 2020 one new candidate for election as a member of the Board of Directors. Thomas Schneider was elected as a new member of the Board of Directors for a one-year term of office. Thomas became a member of the Risk Committee and of the Audit Committee and took Chair of the latter from 1 October 2020. Hugh Scott-Barrett stepped down from his role as non-executive director at the conclusion of the AGM on 30 April 2020.
3.2 Elections and terms of office
The members of the Board of Directors are elected on an individual basis by the General Meeting for a one-year term of office expiring after the completion of the next Annual General Meeting. Members whose term of office has expired are immediately eligible for re-election.
Except for the election of the Chairman of the Board of Directors and the members of the Compensation Committee by the Annual General Meeting, the Board of Directors constitutes itself. If the office of the Chairman of the Board of Directors is vacant, the Board of Directors appoints a new Chairman from among its members for the remaining term of office. If there are vacancies on the Compensation Committee, the Board of Directors fills the vacancies from among its members for the remaining term of office.
The maximum cumulative term of office for members of the Board of Directors is, as a general rule, 12 years. Individuals will, as a general rule, not be nominated by the Board of Directors for election after they have reached the age of 70. In exceptional cases, the Board of Directors can extend these terms and age limits.
3.3 The operation of the Board of Directors and its committees
The Board of Directors
The Board of Directors operates according to Swiss company law, the Company's articles of incorporation and organisational rules as well the Board of Directors' charter.
According to Swiss company law and the articles of incorporation of GAM Holding AG, the Board of Directors has the following inalienable and non-delegable duties:
a) to supervise the Company and issue any necessary instructions;
b) to determine the organisation of the Company;
c) to arrange the accounting, financial control and financial planning as necessary for the management of the Company;
d) to appoint and remove the persons entrusted with the Company's management;
e) to control those persons entrusted with the management of the Company, including in relation to compliance with applicable laws and regulations as well as instructions;
f) to draw up the annual report and the compensation report of the Company, and to prepare the General Meeting and implement its resolutions; and
g) to make any necessary notifications in the event of insolvency.
In line with these duties, the Board of Directors assumes responsibility for the overall strategy and direction, management supervision and control of the Company and the Group. The Board of Directors has established three committees and additionally, the articles of incorporation of GAM Holding AG provide for the establishment of a compensation committee (see below), to assist it in discharging its non-delegable duties, and has delegated the management of the Company and its oversight and control of the business to the Group Management Board under the leadership of the Group Chief Executive Officer.
In addition to the inalienable and non-delegable duties, the full Board of Directors has retained responsibility, in particular, for:
a) preparing all topics that fall within the competence of the General Meeting (receiving support and advice from its committees, such as the Audit Committee in matters of financial reporting, dividend proposals and other capital management matters);
b) deciding, based upon a recommendation from the Audit Committee, which external auditors to recommend for appointment by shareholders at the Annual General Meeting;
c) overall risk oversight (based on support and advice from the Risk Committee) and determining the risk management framework, the risk management and control principles and the risk capacity and capital management frameworks of the Group as well as policies for accounting, financial controlling and strategic financial planning;
d) approving any compensation plan within the Company which is linked to the shares of the Company;
e) succession planning relating to, and the appointment of, members of the Group Management Board, including the Group Chief Executive Officer; and
f) the appointment of the Head of Internal Audit.
The Board of Directors consists of seven members, all of whom are independent non-executive members. The members and the Chairman of the Board of Directors and the members of the Compensation Committee are individually elected by the Annual General Meeting. In all other cases and instances where the office of the Chairman of the Board of Directors is vacant, or if there are vacancies on the Compensation Committee, the Board of Directors constitutes itself and elects from among its members the Chair and the members of the Compensation Committee. From among its members, the Board of Directors elects the Chair and members of the Audit Committee, of the Governance and Nomination Committee and the Risk Committee.
The Board of Directors meets as often as business requires, but at least once per quarter, for on average approximately half a day. The presence of a majority of its members is necessary for resolutions to be passed, with the exception of decisions confirming and amending resolutions relating to capital increases where no such quorum is required. Resolutions are passed by an absolute majority of votes of members present. The members of the Board of Directors may also be present by telephone or electronic means. Resolutions of the Board of Directors may also be passed by way of written consent including by email, provided that no member requests oral deliberation. In such cases, the text of written resolutions must be sent to all members and requires the consent of all members of the Board of Directors to be valid. In the case of a tied vote at meetings, the Chairman has the casting vote. The Board of Directors may assign the preparation and implementation of its resolutions or the supervision of business transactions to committees or individual members. It must make sure its members are suitably informed.
The Group Chief Executive Officer, Group Chief Financial Officer, Group General Counsel, Group Chief Risk Officer, Group Chief Operating Officer and the Group Head of Compliance are regularly invited to participate in meetings of the full Board of Directors. The Board of Directors occasionally also invites other senior employees to attend meetings of the Board of Directors to present and discuss specific topics relating to, or affecting, the business of the Group. The Board of Directors regularly discusses the strategic direction of the Group. The purpose of these discussions is to analyse the positioning of the Group as well as to review and, if necessary, redefine the Company and the Group's strategic direction in light of the prevailing macroeconomic and Group-specific circumstances.
In order to gauge the effectiveness of its activities, the Board of Directors as a whole, as well as its committees, carries out an annual self-assessment exercise. The aim is to review and assess what has been achieved relative to the objectives formulated at the beginning of the year. The results of the self-assessments carried out by the Board of Directors' committees are brought to the attention of the Governance and Nomination Committee.
The Board of Directors acknowledges that recent events have resulted in a challenging environment for the Company and together with the management team has considered many avenues to optimise shareholder value. The Board of Directors has met regularly throughout the year and has held intensive discussions in relation to how it should move the Company forward. During the year under review the full Board of Directors held 16 meetings, including a full Strategy Day.
Attendance of the members of the Board of Directors at the meetings of the Board of Directors was as follows:
January to June 2020
January to June 2020 | Jan | Feb 4 | Mar | Apr | May 4 | Jun |
David Jacob | 3 | 4 | 3 | 3 | 4 | 3 |
Benjamin Meuli | 3 | 4 | 3 | 3 | 4 | 3 |
Nancy Mistretta | 3 | 4 | 3 | 3 | 4 | 3 |
Jacqui Irvine | 3 | 4 | 3 | 3 | 4 | 3 |
Monika Machon | 3 | 4 | 3 | 3 | 4 | 3 |
Katia Coudray | 3 | 4 | 3 | 3 | 4 | 3 |
Hugh Scott-Barrett 1, 3 | 3 | 4 | 3 | 3 | n/a | n/a |
Thomas Schneider 2, 3 | n/a | n/a | n/a | n/a | 4 | 3 |
Oct | Nov | Dec 4 | ||||
3 | 3 | 4 | ||||
3 | 3 | 4 | ||||
3 | 3 | 4 | ||||
3 | 3 | 4 | ||||
3 | 3 | 4 | ||||
3 | 3 | 4 | ||||
3 | 3 | 4 |
3 3 3 3 3 3 3
1 Hugh Scott-Barrett did not stand for re-election at the 2020 AGM.
2 Thomas Schneider was appointed to the Board on 30 April 2020.
3 For the months where 'n/a' has been indicated, the relevant individual was not a member of the Board of Directors.
4 Scheduled quarterly meetings.
July to December 2020
July to December 2020
Jul
Aug
Sep 4
David Jacob Benjamin Meuli Nancy Mistretta Jacqui Irvine Monika Machon Katia Coudray Thomas Schneider
3 4
3 4
3 4
3 4
3 4
3 4
3 4
4 Scheduled quarterly meetings.
The committees of the Board of Directors
The responsibilities and members of the current committees of the Board of Directors are as follows:
Audit Committee
The Audit Committee operates in accordance with the Audit Committee charter and the organisational rules of the Company.
The Audit Committee bases its work on recognised best practice standards for good corporate governance.
Its primary responsibilities comprise the following:
a) reviewing and approving the internal audit plan on an annual basis and ensuring its harmonisation with the audit plan of the external auditors;
b) directing and monitoring the activities of the internal audit function including the approval of its budget and staffing;
c) evaluating the performance of the Head of Internal Audit. The Chair of the Audit Committee determines the total compensation paid to the Head of Internal Audit in consultation with the Chairman of the Board of Directors and the members of the
Audit Committee;
d) representing the Board of Directors in its relationship with the external auditors including by monitoring their performance and independence, their cooperation with the internal audit function, reviewing their reports (including any comprehensive reports of the external auditors) and providing a recommendation to the full Board of Directors regarding election of the external auditors at the Annual General Meeting;
e) ensuring the integrity of controls for financial reporting and for the review of financial statements, including the annual financial statements and any interim statements, before they are presented to the full Board of Directors for approval;
f) ensuring compliance with the principles of fair and transparent public communication of financial information;
g) regular examination of the appropriateness and effectiveness of the internal control systems, taking into account the risk profile of the Group; and
h) monitoring compliance with applicable laws and regulations as well as internal policies and procedures, including via the receipt of regular reporting.
The Audit Committee consists of four non-executive members. It convenes at least once per quarter, for on average approximately two to three hours. During the year under review the Audit Committee held 10 meetings, as well as two joint meetings with the Compensation Committee. All members of the Audit Committee participated at all the meetings. Additionally, the Audit Committee spent time outside these meetings with external auditors and advisers in order to ensure it is ahead of the latest regulatory and accounting developments. The Head of Internal Audit and representatives of the external auditors, as well as the Group Chief Financial Officer, the Group General Counsel, Group Head of Compliance and the Group Chief Risk Officer, participate at every quarterly meeting. The Audit Committee may seek independent advice as deemed necessary. The members of the Audit Committee are expected to have knowledge in the fields of finance and accounting. The Audit Committee reports back to the full Board of Directors on its current activities and on any significant issues of which it becomes aware. The Audit Committee reviews its performance and objectives every year.
Members: Thomas Schneider (Chair), Benjamin Meuli, Monika Machon and Katia Coudray.
Changes in the Audit Committee
Benjamin Meuli stepped down as Chair of the Audit Committee, with Thomas Schneider as successor effective 1 October 2020. Prior to this date Thomas was a member of the Audit Committee from 30 April 2020.
Risk Committee
The Risk Committee operates in accordance with the Risk Committee charter and the organisational rules of the Company.
The Risk Committee bases its work on recognised best practice standards for good corporate governance. The Risk Committee's primary responsibilities comprise the following:
a) overseeing the maintenance of the Group's risk management framework, reviewing the effectiveness of its operation and recommending for approval to the Board of Directors the Group's overall risk management strategy, risk appetite framework and associated limits;
b) reviewing the Group's risk profile and monitoring against the Group's risk universe, including, adherence to the Group's risk appetite, risk trends, risk concentrations and key performance indicators;
c) providing oversight over any breaches of risk appetite and associated rectification plans;
d) overseeing and challenging material changes to the design and execution of the Group's capital management policy setting processes (covering both regulatory and non-regulatory capital requirements) and methodologies used;
e) approving the Group's principal risk policies and monitoring compliance with / providing oversight of any breaches and rectification plans;
f) overseeing emerging risks that could impact the Group and risk function's principal activities and resources;
g) providing oversight and challenge in relation to significant risk issues relating to material acquisitions, disposals and strategic proposals; considering the potential consequences of any such transactions;
h) overseeing legal and regulatory risk;
i) providing input to the Compensation Committee regarding the management of the Group's material risks to support their consideration of the annual bonus determination and providing input to the Audit Committee regarding its review of the adequacy and effectiveness of the Group's internal control system in respect of financial reporting and financial controls.
The Risk Committee consists of four non-executive members. The Committee was established in May 2019. The Committee convenes at least once per quarter, for on average approximately two to three hours. During the year under review the Risk Committee held six meetings as well as one joint meeting with the Audit Committee. All members of the Risk Committee participated at all the meetings. The Group Chief Risk Officer, Group Chief Financial Officer, Group General Counsel, Group Head of Compliance as well as the Head of Internal Audit and representatives of the external auditors participate at every quarterly meeting. The Risk Committee may seek independent advice as deemed necessary. The members of the Risk Committee are expected to have knowledge in the fields of risk and regulation. The Risk Committee reports back to the full Board of Directors on its current activities and on any significant issues of which it becomes aware. The Risk Committee reviews its performance and objectives every year.
Members: Monika Machon (Chair), Benjamin Meuli, Thomas Schneider and Jacqui Irvine.
Changes in the Risk Committee
Thomas Schneider became a member of the Risk Committee on appointment effective 30 April 2020.
Compensation Committee
The Compensation Committee operates in accordance with the articles of incorporation, the Compensation Committee charter and the organisational rules of the Company.
The Compensation Committee supports the Board of Directors in establishing and reviewing the compensation strategy and guidelines and in preparing the proposals to the Annual General Meeting of shareholders of GAM Holding AG regarding the compensation of the Board of Directors and the Group Management Board. Its primary responsibilities comprise the following:
a) reviewing and proposing for approval to the Board of Directors any change to the Group compensation policy;
b) reviewing and implementing any compensation plan applicable to the Group that is linked to the shares of, or options over shares of, the Company;
c) preparing the compensation report and the proposals of the Board of Directors to the Annual General Meeting regarding the maximum aggregate amounts of compensation of the Board of Directors and the Group Management Board;
d) determining the total compensation of the Chairman of the Board of Directors, any full-time members of the Board of Directors and the Group Management Board, including its Group Chief Executive Officer (in the event the Chairman of the Board of Directors or any full-time member of the Board of Directors is a member of the Compensation Committee, he/she shall abstain from participating in deliberations and from exercising his/her voting right with regard to the determination of his/her total compensation);
e) preparing and providing to the Board of Directors compensation proposals relating to the members of the Board of Directors (other than its Chairman);
f) approving the aggregate variable compensation expenditure of the Group and reviewing individual compensation levels of members of the Group receiving variable annual bonus with a total compensation in excess of CHF 1 million;
g) approving contracts of employment and any non-standard termination agreements for members of the Board of Directors and the Group Management Board;
h) overseeing and advising the Board of Directors with respect to the compensation reporting to shareholders; and
i) evaluating the performance of the Chairman of the Board of Directors as well as the performance evaluation conducted by the Chairman of the Board of Directors of the Group Chief Executive Officer, including reviewing the performance evaluation conducted by the Group Chief Executive Officer of members of the Group Management Board, in meeting agreed goals and objectives.
The Compensation Committee consists of three non-executive members. The Compensation Committee convenes as often as necessary, at least once in each half-year, for about two hours on average. During the year under review the Compensation Committee held six meetings, as well as two joint meetings with the Audit Committee. All members of the Compensation Committee participated at all the meetings. The Group Head of Human Resources regularly participates at the Committee's meetings. The Compensation Committee can seek independent advice as deemed necessary. The Compensation Committee reports back to the full Board of Directors on its current activities and on any significant issues of which it becomes aware. The Compensation Committee reviews its performance and objectives every year.
Members: Nancy Mistretta (Chair), Katia Coudray and Jacqui Irvine.
Changes in the Compensation Committee
At the Annual General Meeting held on 30 April 2020, all members of the Compensation Committee who ran for re-election were re-elected for a one-year term of office. Jacqui Irvine was newly elected for a one-year term of office as member of the Compensation Committee after Benjamin Meuli stood down from the Compensation Committee at the Annual General Meeting on 30 April 2020.
Governance and Nomination Committee
The Governance and Nomination Committee operates in accordance with the Governance and Nomination Committee charter and the organisational rules of the Company.
The Governance and Nomination Committee's primary responsibilities comprise the following:
a) assisting in the long-term succession planning for the Board of Directors and the Group Chief Executive Officer;
b) assessing and making preliminary selections of candidates as potential new members of the Board of Directors, as well as preparing election recommendations of the Board of Directors for the General Meeting;
c) reviewing the appropriateness of continued service on the Board of Directors by members whose circumstances have changed;
d) overseeing the orientation process for newly elected members of the Board of Directors and assessing the adequacy of, and need for, continuing director education programmes;
e) coordinating the regular evaluation of the Board of Directors and its committees to determine whether they are functioning effectively and meeting their objectives;
f) reviewing proposals by the Group Chief Executive Officer for appointments and any changes to the membership of the Group Management Board and making recommendations to the Board of Directors regarding such appointments;
g) overseeing the number of Board mandates outside the Group held by members of the Board of Directors and Group Management Board;
h) making recommendations to the Board of Directors regarding the adequacy of the Group's policies governing employee conduct and business practices, as well as the implementation and monitoring of compliance with such policies; and
i) overseeing that the Group has adequate processes and systems to foster the Group's human capital (e.g. identifying key talent, education, development, performance review and orderly succession planning of senior executives).
The Governance and Nomination Committee consists of three non-executive members. The Governance and Nomination Committee convenes as often as necessary, at least once in each half-year, for one hour per meeting on average. During the year under review the Governance and Nomination Committee held five meetings. All members of the Governance and Nomination Committee participated at all the meetings. The Group General Counsel participates at every meeting. The Governance and Nomination Committee can seek independent advice as deemed necessary. The Governance and Nomination Committee reports back to the full Board of Directors on its current activities and on any significant issues of which it becomes aware. The Governance and Nomination Committee reviews its performance and objectives every year.
Members: Jacqui Irvine (Chair), Nancy Mistretta and David Jacob.
Changes in the Governance and Nomination Committee
David Jacob became a member of the Governance and Nomination Committee after Hugh Scott Barrett's decision not to stand for re-election at the Annual General Meeting on 30 April 2020.
3.4 Group Management Board
The Group Management Board is chaired by the Group Chief Executive Officer, who is responsible, in particular, for formulating, developing and implementing the overall strategy for the Group, as approved by the Board of Directors, for establishing the organisation of the Group Management Board itself, for overseeing the management of the Group, for representing the Group Management Board in its relationship with the Board of Directors and third parties, and for succession planning at the level of the Group Management Board.
Except where delegated by the Board of Directors to the Group Chief Executive Officer, and under the leadership of the Group Chief Executive Officer, the Group Management Board is delegated with ultimate responsibility for all of the day-to-day activities of the Group, including such activities which have been assigned or delegated by the Group Management Board. The Group Chief Executive Officer has an overriding right to information concerning, and the right to examine, all business issues within the Group. The Group Chief Executive Officer has the power to override any decisions taken by the Group Management Board, notifying the Chairman of the Board of Directors of any exercise of such power.
3.5 Information and control instruments regarding the Group Management Board
The Board of Directors supervises and controls the Group Management Board through various control tools and processes. The Group Chief Executive Officer is responsible for ensuring an appropriate information flow to the Board of Directors and its Chairman, including by the provision of regular management reports. The Group Chief Executive Officer, Group Chief Financial Officer, Group General Counsel, Group Chief Risk Officer, Group Chief Operating Officer and Group Head of Compliance report to the Board of Directors on a regular basis on their current activities, business performance, financial data, major risks and/ or other material and significant issues or developments as they arise. Furthermore, the Group Chief Executive Officer, Group Chief Financial Officer, Group General Counsel, Group Chief Risk Officer, Group Chief Operating Officer and Group Head of Compliance are regularly invited to participate at meetings of the full Board of Directors, the Group Chief Financial Officer, Group General Counsel, Group Chief Risk Officer and Group Head of Compliance at meetings of the Audit Committee and Risk Committee, the Group General Counsel participates at every regular meeting of the Governance and Nomination Committee, and the Group Head of Human Resources regularly participates at the meetings of the Compensation Committee and the Governance and Nomination Committee, in order to support those bodies in their decision-making processes and provide regular reporting on the day-to-day activities and risks facing the Company, and on their oversight of the operating businesses.
The Board of Directors is responsible for the appointment and removal of, and its Compensation Committee for the performance evaluation/review and compensation of, the members of the Group Management Board.
Internal Audit supports the Board of Directors and its committees in discharging their governance responsibilities. For more information on Internal Audit, see section 7.4.
3.6 Board Compensation
For the compensation paid to, and shareholdings of, the members of the Board of Directors, including the basic principles and elements of compensation and equity participation programmes and a description of the authorities and procedure for determining the same, as well as loans granted to those individuals, see our 'Compensation report', beginning onpage 88, and article 11 of the articles of incorporation which can be found atwww.gam.com/aoi2020.
4. GROUP MANAGEMENT BOARD
4.1 Members of the Group Management Board
Peter Sanderson, Group Chief Executive Officer
Peter Sanderson was appointed Group Chief Executive Officer and became a member of GAM Holding AG's Group Management Board in September 2019. Before joining GAM as Group Chief Executive Officer, he was a Managing Director at BlackRock, most recently as Head of Financial Services Consulting in EMEA and a member of BlackRock's EMEA Executive Committee, positions he held from 2012 and 2014 respectively. Peter joined BlackRock in 2006 where he held a number of senior roles, including Co-Head of the Multi Asset Investment Solutions business and Chief Operating Officer for BlackRock Solutions in EMEA. Before working for BlackRock, he worked for Mondrian Investment Partners and KPMG. Peter holds a Bachelor of Law from the University of Leicester and is a member of the Bar of England and Wales. He was born in 1978 and is a UK citizen.
Richard McNamara, Group Chief Financial Officer
Richard McNamara was appointed Group Chief Financial Officer and became a member of GAM Holding AG's Group Management Board in 2015. Before joining the Group, Richard was Managing Director, Finance, at Henderson Global Investors, a role he had held since 2013. He joined Henderson in 2009 as Head of Group Finance, focusing on finance and financial operations, including M&A activity. In 2013, he took on new responsibilities for tax, investor relations, facilities and procurement. Prior to his roles at Henderson, Richard held senior finance roles at Western Asset Management, Legg Mason and Citigroup Asset Management. Richard is a chartered accountant and holds a BA (Hons) in finance and accounting from Brighton University. He started his career at PricewaterhouseCoopers where he was a senior manager in the Investment Management Industry Group. Richard was born in 1968 and is a UK citizen.
Elmar Zumbuehl, Group Chief Risk Officer
Elmar Zumbuehl was appointed Group Chief Risk Officer and Member of the Group Management Board of GAM Holding AG in 2017. Prior to that he was Group Head of Risk & Governance and a permanent guest member of the Group Management Board. He joined GAM in March 2010 as Senior Legal Counsel and Risk Manager. In 2011, Elmar also assumed the role of General Counsel and Corporate Secretary of GAM Holding AG. Prior to that, he worked at Julius Baer for 10 years in different roles, latterly from 2006 to 2010 as Head of Legal Risk Controlling & Governance. Elmar, who was admitted to the bar in Switzerland in 2000, is a graduate of the University of St. Gallen (HSG). He holds master's degrees in business administration (lic. oec. HSG), specialising in finance and accounting as well as operations research, and law (lic. iur. HSG). Elmar was born in 1970 and is a Swiss citizen.
Steve Rafferty, Group Chief Operating Officer
Steve Rafferty was appointed Group Chief Operating Officer in 2019 and became a member of GAM Holding AG's Group Management Board in April 2020. Before joining GAM, Steve was a Managing Director at BlackRock for sixteen years, most recently as Global Chief Operating Officer for the fixed income business. Steve joined BlackRock (formerly Barclays Global Investors) in 2003, within the fund oversight team before joining the fixed income business in 2006, where he held product strategy, investment process and regional chief operating roles. Prior to this, he worked in financial services audit at KPMG. Steve holds a BEng in Civil Engineering from Loughborough University. He is also a qualified chartered accountant and is a CFA charterholder. Steve was born in 1973 and is a UK citizen.
Changes in the Group Management Board
Effective 1 April 2020, Rachel Wheeler - Group General Counsel, Tim Rainsford - former Group Head of Sales and Distribution and Martin Jufer - Group Head of Private Labelling, stepped down from the Group Management Board. On the same date, Steve Rafferty, Group Chief Operating Officer, was appointed to the Group Management Board.
4.2 Activities and functions of Board members outside the Group
In applying the Corporate Governance Directive of the SIX Swiss Exchange and as set forth in article 13 of the articles of incorporation, which can be found atwww.gam.com/aoi2020, we disclose mandates and interest ties of the members of the Group Management Board outside the Group:
Peter Sanderson
None
Richard McNamara None
Elmar Zumbuehl None
Steve Rafferty None
4.3 Management contracts
There are no management contracts between GAM Holding AG and companies (or individuals) outside the Group.
4.4 Group Management Board Compensation
For the compensation paid to, and shareholdings of, the members of the Group Management Board, including the basic principles and elements of compensation and equity participation programmes and a description of the authorities and procedure for determining the same, as well as loans granted to those individuals, see our 'Compensation report', beginning onpage 88, and article 11 of the articles of incorporation which can be found atwww.gam.com/aoi2020.
5. SHAREHOLDERS' PARTICIPATION RIGHTS
5.1 Voting-rights restrictions and representation
In relation to the Company, any person entered in the share register shall be deemed to be a shareholder. Shareholders may represent their shares themselves or have them represented by a third party or the independent representative at the General Meeting. Due to the Covid-19 pandemic, and under the Covid-19 Ordinance 2 of March 2020, shareholders were unable to attend the Annual General Meeting held on 30 April 2020, and all shares were exclusively represented by the independent representative appointed at the meeting. The independent representative is elected by the General Meeting for a term of office until the next Annual General Meeting. Their term of office expires after completion of the Annual General Meeting. Re-election is possible. If the Company does not have an independent representative, the Board of Directors appoints the independent representative for the next General Meeting.
The Board of Directors offers shareholders the possibility to authorise and give their instructions to the independent representative electronically. Shareholders may do so by accessing the website stated in the invitation to, and the registration form for, the General Meeting, and then following the guidance that is displayed on their computer screen. In addition to internet access, an email address and a mobile telephone that can receive a code by text message are required. Shareholders receive their personal data for accessing this website with the registration form. The invitation to, and the registration form for, a General Meeting state the deadline until which time instructions can be electronically given to the independent representative.
The 2020 Annual General Meeting elected Tobias Rohner, Attorney-at-Law, Holbeinstrasse 30, 8034 Zurich, Switzerland, as Independent Representative for a term of office until the end of the 2021 Annual General Meeting.
There are no voting-rights restrictions. Each share entitles its holder to one vote.
5.2 Statutory quorums
Except where otherwise required by mandatory law and/or by article 8.14 of the articles of incorporation (which can be found atwww.gam.com/aoi2020), all resolutions of the General Meeting are passed by an absolute majority of the votes cast, excluding blank or invalid ballots.
5.3 Convocation of the General Meeting
The convocation of the General Meeting complies with applicable legal regulations. The convocation of a General Meeting may also be requested by one or more shareholders who together represent at least 10% of the share capital. The Board of Directors must convene the requested General Meeting within six weeks of receiving the request.
5.4 Agenda
Shareholders who represent shares of a nominal value of CHF 100,000 may demand that matters be put on the agenda. Such requests must be submitted to the Company at least six weeks before the date of the respective General Meeting. The request to convene a meeting and to put a matter on the agenda must be in writing, and include full details of the proposals.
5.5 Registrations in the share register
In the invitation to a General Meeting, the Board of Directors states the applicable record date by which shareholders must be registered in the share register in order to be eligible to participate and vote at the meeting. Nimbus AG, Ziegelbrueckstrasse 82, 8866 Ziegelbruecke, Switzerland, administers the Company's share register.
6. CHANGE OF CONTROL AND DEFENCE MEASURES
6.1 Duty to make an offer
According to the Swiss Financial Market Infrastructure Act, an investor who acquires more than 33 1/3% of all voting rights, either directly, indirectly or in concert with a third party, and whether the rights are exercisable or not, has to submit a take-over offer for all shares outstanding. GAM Holding AG has not applied to opt out of, or to increase, the percentage threshold applicable to this obligation.
6.2 Clauses on change of control
There are no provisions on change of control benefitting the members of the Board of Directors and/or the Group Management Board under their mandates or contracts of employment.
7. AUDITORS
7.1 Duration of mandate and term of office of lead auditor
In accordance with the articles of incorporation, the external auditor must be elected at each Annual General Meeting for a term of office of one year. KPMG AG has been the statutory auditor of the Company since the Annual General Meeting on 12 April 2006. Thomas Dorst assumed the role of lead auditor for the financial years 2019 and 2020. The lead auditor may hold this engagement for a maximum of seven consecutive years, but may resume the engagement after a break of three years.
7.2 External auditing and additional fees
Services provided by KPMG AG to the Group comprise auditing and non-auditing services, the latter consisting of audit-related services, tax services and other services.
Auditing services include work performed to issue opinions on the Group's consolidated financial statements, the effectiveness of the Group's internal control system over the financial reporting, and the statutory financial statements of GAM Holding AG and its subsidiaries. Also included is work that generally can only be performed by the statutory auditor.
Audit-related services include those other assurance services provided by the independent auditor but not restricted to those that can only be provided by the statutory auditor. Tax services represent tax compliance and other tax-related services. Other services include mainly services in connection with human resources-related matters.
The Group paid KPMG AG fees for auditing services totalling CHF 1.9 million in the 2020 financial year (CHF 1.6 million in the 2019 financial year). For non-auditing services, the Group paid KPMG AG fees totalling CHF 0.06 million in the 2020 financial year (CHF 0.06 million in the 2019 financial year), whereof CHF 0.05 million for audit-related services (CHF 0.05 million in the 2019 financial year) and CHF 0.01 million for tax services (CHF 0.01 million in the 2019 financial year).
In addition, KPMG AG received CHF 1.7 million (all of which for auditing services) in the 2020 financial year (CHF 2.2 million in the 2019 financial year) for services performed on behalf of, and for, investment funds managed by subsidiaries of GAM Holding AG. According to the Swiss collective investment scheme law, fund management companies and the investment funds managed by them must appoint the same statutory auditor.
7.3 Supervisory and control instruments regarding the external auditor
The Audit Committee of the Board of Directors pre-approves the fee amounts for services rendered by KPMG AG to the Group in order to ensure their independence. As to non-audit work related services rendered by KPMG AG to the Group, such pre-approval is granted by means of an annual budget approved by the Audit Committee to the Group Chief Financial Officer. The Audit Committee then receives regular updates from the Group Chief Financial Officer on KPMG AG's activities for the Group and the related incurred year-to-date fees. Any use of KPMG AG by the Group for non-audit work is overseen by the Audit Committee and coordinated by the Group Chief Financial Officer.
Furthermore, the Audit Committee confers regularly with the lead auditor of KPMG AG about the effectiveness of the internal control systems in view of the risk profile of the Group. In addition, it reviews the scope of the auditing work, the quality of the work and the independence of the external auditors. The external auditors have direct access to the Audit Committee at all times and participate at every regular quarterly meeting of the Audit Committee.
7.4 Internal Audit
The Internal Audit function provides independent, objective assurance and advisory services to the Board of Directors, the Audit Committee and the Group Management Board. It carries out operational and system audits in accordance with a risk-based Internal Audit plan and assists the organisation in accomplishing its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes. The Internal Audit plan, which consists of a work schedule as well as budget and resource requirements for the next audit cycle (1 January to 31 December of each calendar year), is submitted at least annually by the Head of Internal Audit to the Group Management Board (for its review) and to the Audit Committee (for its approval), and is developed based on a prioritisation of the audit universe using a risk-based methodology, including input from senior executives within the Group, the Group Management Board, the Board of Directors and the external auditors. In addition to the approved Internal Audit plan, the Chairman of the Board of Directors or the Chair of the Audit Committee may instruct Internal Audit to carry out special assignments. Furthermore, members of the Group Management Board may ask Internal Audit for assistance in carrying out special assignments after consultation with the Chairman of the Board of Directors or the Chair of the Audit Committee.
The Head of Internal Audit reports to the Chair of the Audit Committee but is expected to have regular and unrestricted access to the Chairman of the Board of Directors. In addition, the Head of Internal Audit provides regular reporting on the activities of the Internal Audit function to the Audit Committee and is a participant at the regular quarterly meetings of the Audit Committee. The Audit Committee regularly reviews the independence, activities and results of Internal Audit. The Audit Committee also evaluates the performance of the Head of Internal Audit. The Chair of the Audit Committee determines the total compensation paid to the Head of Internal Audit in consultation with the Chairman of the Board of Directors and the members of the Audit Committee.
8. INFORMATION POLICY
GAM Holding AG provides regular information to its shareholders and the public each year by means of the Annual Report as well as a half-year report. Its current policy is to additionally provide voluntary interim management statements twice each year, covering material developments between the publication of the annual and half-year results and the date of such statements. Additional ad-hoc publications will be made where they are considered appropriate or where required under applicable law or regulation. Published materials are available to the public in electronic form (subscription to GAM Holding AG's news alert for corporate information and ad-hoc publications is possible underwww.gam.com/en/our-company/investor-relations/gam-news-alert) as well as in print form from the address mentioned in section 8.2 below.
8.1 Corporate calendar
21 April 2021 | Q1 Interim management statement |
29 April 2021 | Annual General Meeting 2021 |
4 August 2021 | Half-year results 2020 |
21 October 2021 | Q3 Interim management statement |
8.2 Contacts
GAM Holding AG Hardstrasse 201 P.O. Box CH-8037 Zurich Switzerland
T +41 (0) 58 426 30 30gamholding@gam.com
Group Communications and Investor Relations Charles Naylor
Head of Group Communications and Investor Relations T +44 (0) 20 7917 2241charles.naylor@gam.com
Jessica Grassi
Group Investor Relations Officer T +41 (0) 58 426 3137jessica.grassi@gam.com
Kathryn Jacques
Senior Communications Manager T +41 (0) 20 7393 8699kathryn.jaques@gam.com
Ute Dehn
Senior Communications Manager T +41 (0) 58 426 3136ute.dehn@gam.com
Further information
Our website provides further information on GAM Holding AG, including share price data, details of our share buy-back programme, media releases, historical annual reports and an events calendar.
www.gam.com
COMPENSATION REPORT
COMPENSATION REPORT
90
1. COMPENSATION PRINCIPLES
91
2. AT A GLANCE
92
3. COMPENSATION FRAMEWORK
95
4. GROUP MANAGEMENT BOARD COMPENSATION FINANCIAL YEAR 2020
99
5. FEE STRUCTURE FOR BOARD OF DIRECTORS
100
6. BOARD OF DIRECTORS COMPENSATION FOR FINANCIAL YEAR 2020
102
7. SHAREHOLDINGS
104
8. COMPENSATION GOVERNANCE
108
9. AGM RESOLUTIONS
Dear Shareholder
On behalf of the Board of Directors and the Compensation Committee, we are pleased to present the Compensation Report for the financial year ended 31 December 2020. At the Annual General Meeting in April 2020, shareholders approved the remuneration proposals by a large majority, and on behalf of the Board, we would like to thank you for your support.
Changes to the Compensation Committee and Group Management Board in 2020
The Compensation Committee welcomed Jacqui Irvine as a new member of the Committee following last year's Annual General Meeting.
In order to streamline decision-making and to provide a clearer allocation of responsibilities, the membership of the Group Management Board changed with effect from 1 April 2020. The revised membership includes: Peter Sanderson, Group Chief Executive Officer, Richard McNamara, Group Chief Financial Officer, Elmar Zumbuehl, Group Chief Risk Officer and Steve Rafferty, Group Chief Operating Officer.
Compensation for 2020
While we are making good progress on our strategy to make GAM 'fit for the future', the Group has not been immune to some of the toughest market conditions the industry has seen, and we saw our assets under management decline, and the associated impact on our revenues, as a result of the Covid-19 pandemic. We saw strong investment performance up until the end of February but this was subsequently impacted by the market environment during March. This market environment and the impact on the Group's assets under management required an immediate response to accelerate our efficiency goals with a focus on materially reducing the timelines for achieving these efficiencies. As a result, we reduced our total expenses including variable and fixed costs, in excess of CHF 71 million for the full year 2020, ahead of the CHF 65 million target announced in April 2020. Our investment strategies continue to deliver performance for clients, and we are seeing high levels of positive client interaction with a strong focus on growth opportunities. Our strategy remains on track, and we have strong leadership in place across the firm to deliver on the opportunity for GAM to grow.
At the same time, due to the Covid crisis, we saw a decline in assets under management and related revenues in investment management resulting in our financial targets not being met.
In line with our compensation framework, which provides a strong foundation for aligning our remuneration with the overall expectations of our shareholders, and based on the financial performance of the Group for 2020, there will again be no variable compensation (neither annual bonus nor long-term incentive plan) granted to current members of the Group Management Board. While the Board recognises that the Group Management Board demonstrated the required strong leadership, coordination and determination throughout the year to navigate the Group through the complex and fast moving business environment, the financial underperformance and the impact on our shareholders continues to be a dominant factor when considering the variable compensation in respect of the Group Management Board. Notwithstanding the above, the Group Management Board continue to demonstrate commitment and enthusiasm about growth opportunities, and together with the additional hires in senior leadership, they all remain focused on making GAM fit for the future.
The total compensation of all employees combined with our reduced underlying net fee and commission income has resulted in a compensation ratio for 2020 of 64.5%. Our target compensation ratio is 45-50% of underlying net fee and commission income. We continue to believe this is an appropriate metric to reflect the balance of employee reward and shareholder return, and this target will remain part of our compensation framework. In light of our inability to achieve this target for 2020, any bonus awards granted under the annual discretionary bonus plan for the non-Group Management Board employees will be fully deferred.
Compensation for 2021
As part of the ongoing review of the compensation framework, the Compensation Committee has introduced a cap on variable compensation for both the Group Chief Risk Officer and the Group Chief Operating Officer. This cap is in line with the existing cap for the Group Chief Financial Officer, which is 200% of base salary for the annual bonus and 200% of base salary for the long-term incentive award. The Group Chief Executive Officer variable compensation with respect to both the annual bonus and long-term incentive award will continue
to be capped at a maximum of 300% and 250% of his base salary respectively. The base salaries for all members of the Group Management Board remain unchanged for 2021.
As announced earlier in the year, the Board of Directors reviewed its fee structures and, in recognition of the market environment and the resulting impact on GAM, the Directors agreed to waive a portion of their fees, in respect of the period from AGM 2020 to AGM 2021. David Jacob agreed to waive forty per cent of his total fees and the other members of the Board of Directors agreed to waive sixty per cent of their Committee fees. We have taken the decision to make this waiver permanent given the continued challenge to profitability facing GAM. Further details of the Board of Directors fees are included in sections 5 and 6.1 of this report.
Compensation for shareholder approval at 2021 AGM
Board compensation
As noted in this letter, in respect of the 2021 AGM, the overall fixed compensation requested for the Board of Directors will be decreased to CHF 1.975 million, representing a 16% reduction from the level requested last year. Further details are included in section 5 of this report.
Group Management Board variable compensation As outlined in section 4.1 of this report, as well as earlier in this letter, no variable compensation will be awarded to members of our Group Management Board for the year ending 31 December 2020. This is a result of the Group's financial performance and the compensation framework in place. The Compensation Committee, along with the rest of the Board of Directors, acknowledge the hard work and dedication of the members of this team. The Group has faced the industry challenges, as well as those specific to GAM, keeping our clients' interests as the top priority. The team has worked tirelessly this year, exhibiting the core values of integrity, collaboration and excellence that we believe will lead to the successful transformation of GAM as outlined earlier in the Annual Report. We look forward to your continued support at the Annual General Meeting of Shareholders.
Nancy Mistretta
Chair of the Compensation Committee
Group Management Board fixed compensation
The overall fixed compensation requested for the Group Management Board will be decreased to CHF 3.25 million from CHF 4.5 million.
18 February 2021
1. COMPENSATION PRINCIPLES
This section of the report outlines the compensation principles that are applied across the Group.
The Group's compensation framework is designed to attract, retain and motivate the talent which the Group needs in order to achieve its strategic goals as well as to create a tangible link between performance and compensation. Through a mix of fixed and variable components, the framework aims to promote long-term, sustainable performance by encouraging employees to focus on delivering outstanding results through appropriate and controlled risk taking.
There are four key principles to our compensation framework:
Pay for performance | Compensation is linked to the Group's overall performance as well as to the individual's professional skills, expertise and contribution. |
Alignment with shareholders' long-term interests | The long-term interests of employees and shareholders are aligned through the use of deferred compensation, share-based awards and share ownership guidelines. |
Transparency | Retrospective shareholder approval is requested for the Group Management Board variable compensation. |
Incentivise sound risk management | A well-balanced mix of fixed and variable compensation is combined with deferrals as well as malus and clawback provisions to encourage sustainable performance and sound risk management. |
2. AT A GLANCE
This section of the report summarises the compensation framework.
Summary of the compensation framework
Principle
Pay for performanceAlignment with shareholders'
TransparencySound risk managementElement
Rationale
Target compensation ratio: a group-wide target compensation ratio of 45-50% of underlying net fee and commission income.
• Provides a clear and appropriate metric by which to evaluate the balance of all-employee reward and returns to shareholders.
Group Management Board (GMB) variable compensation cap: the total granted GMB variable compensation (comprising annual bonuses and long-term incentive plans) is capped at 5% of underlying profit before taxes excluding GMB variable compensation. The cap excludes social security, pension costs and one-time awards for new members.
• Enforces a direct link between financial performance and variable compensation for the GMB.
Balanced scorecard for annual bonuses: a balanced scorecard of stretch financial and non-financial measures has been formalised to determine GMB members' annual bonuses. For the Group CEO and Group CFO the scorecard is comprised of 60% financial metrics (underlying profit before taxes, operating margin, net flows, investment performance); 20% strategic and business metrics; 20% personal objectives.
• Provides a clear structure to assess performance for the annual bonus.
• Evidences the link between pay and performance.
Individual caps: a cap for the Group CEO and other GMB members on annual • Aligns GAM with market practice anddiscretionary bonus (300% and 200% of their respective salaries) and long-term incentive plan (LTIP) awards (face value of 250% and 200% of their respective salaries).
shareholder expectations.
Annual bonus deferral:1 the proportion of GMB bonuses deferred into GAM shares is 50% with a deferral period of four years.
long-term interests Bonus deferrals are also in place for non-GMB employees.
• Aligns annual bonuses with long-term value creation.
LTIP framework: LTIP awards, in the form of performance shares, are an integral part of the GMB compensation package. Vested awards will not be released until five years after grant. Performance measures will be annual underlying earnings per share (EPS) growth (50%); three-year relative total shareholder return (rTSR) performance (25%); three and five-year investment performance (25%).
• Further emphasises the longer term nature of the GMB compensation package.
Shareholding guidelines: formal shareholding guidelines are in place for all GMB and Board members:
• Group CEO and Group CFO are required to build up a holding of GAM shares worth 200% of their salary
• Other GMB members are required to build up a holding of GAM shares worth 100% of their salary
• Board of Directors are required to build up a holding of GAM shares worth 200% of their annual cash fee.
• Provides greater alignment between GAM Board members, GMB and other shareholders of GAM.
Retrospective vote: GAM requests retrospective shareholder approval for GMB variable compensation.
• A retrospective vote provides shareholders greater transparency as to the amount of variable compensation requested for GMB awards relative to the year's performance.
Disclosure: the annual compensation report provides a transparent explanation of compensation decisions, in particular retrospective disclosure of targets for financial performance measures used in the determination of annual bonuses and prospective disclosure of targets for LTIP awards.
• Provides shareholders with increased visibility of the link between the performance in the year and GMB compensation.
Risk management: a well balanced mix of fixed and variable compensation is combined with deferrals, which includes malus and clawback provisions.
• Continues to align compensation to support sustainable performance and sound risk management.
1 As outlined in the Chair's letter of this report, the GMB will not receive any variable compensation for performance year 2020, as such the annual bonus amount deferred for the GMB was not reviewed by the Compensation Committee.
3. COMPENSATION FRAMEWORK
This section of the report details the compensation framework for the Group.
The following table sets out the elements of compensation which Group Management Board members are eligible to receive and how they will be structured during 2020.
Fixed compensation
Element | Structure | 2021 implementation |
Base salary | Generally reviewed annually. The review takes | Aggregate GMB members: GMB fixed compensation will be capped |
To appropriately | into consideration a number of factors, including | at CHF 3,250,000. |
recognise | (but not limited to): | |
responsibilities | Group CEO: The Group CEO has a base salary of CHF 750,000 per | |
and attract and | • The individual's role, experience and performance | annum. |
retain talent | • Business performance | |
• Market data for comparable roles in appropriate | Group CFO: The Group CFO's base salary remains unchanged | |
comparators1 | at GBP 500,000 per annum. | |
• Compensation decisions elsewhere in the Group. | ||
Pension/benefits | Benefits take into account local market | Aggregate GMB members: Pension contributions and benefits for GMB |
To provide | practice. Benefits may include pension | members are in line with local practices for other employees. |
market competitive | contributions, life assurance and private | |
benefits | medical insurance. Benefits are intended to be | |
competitive in each of the markets in which | ||
we operate. |
1 Survey data is taken into consideration for each of the Group Management Board roles. The data is one of the inputs used to inform the Compensation Committee of compensation practices in peer companies and as a broad market sense-check of our proposals. It is not used as a specific benchmark.
Variable compensation
GMB variable compensation cap
Total GMB variable compensation (comprising annual bonuses and long-term incentive plans) will be capped at 5% of underlying profit before taxes, excluding GMB variable compensation. The cap will exclude social security, pension costs and one-time awards for new members.
Element
Structure
2021 performance year
Annual bonus 2, 3, 4, 6 All GMB members' annual bonuses are basedTo link reward to key business targets for the forthcoming year and to individual contribution
Additional alignment with shareholders' interests through deferred compensationon performance assessed over one year using a balanced scorecard.
For financial metrics, 25% of maximum will be paid for achieving a threshold level of performance increasing to 50% for target performance and 100% for significant outperformance.
Annual bonuses for GMB members are capped as a percentage of salary. This is at a maximum of 300% for the Group CEO and at a maximum of 200% of salary for all other members.
50% of GMB members' annual bonuses are paid in cash with 50% delivered in GAM shares vesting equally over a four-year period.
GMB annual bonuses will be determined by a balanced scorecard comprising financial, strategic and business and personal performance metrics. For the Group CEO and Group CFO these will be weighted 60% / 20% / 20% respectively.
Financial metrics will be underlying profit before taxes, operating margin, net flows and three-year investment performance.
Strategic and business metrics will be based on agreed budgets, KPIs and on the delivery against strategic priorities.
Long-term 2, 3, 4, 5, 6
incentive plan (LTIP)
To link reward to key business targets for the longer term with the objective of providing sustainable value and growth for our shareholdersIndividual LTIP awards for the Group CEO and other GMB members are capped with a maximum face value (at grant) of 250% and 200% of their respective salaries.
For LTIP awards granted from 2018 onwards:
• Vesting will be determined by corporate performance targets measured over a three-year period
• Vested awards will be released five years after grant date
• A maximum of 25% of the LTIP will vest for achieving a threshold level of performance increasing to 50% for target performance and 100% for exceptional performance.
As stated in the Chair's letter in this report there will be no LTIP awards in relation to the 2020 performance year. LTIPs will continue to feature in our compensation framework.
Generally, the performance metrics utilised in the LTIP are annual underlying earnings per share (EPS) growth (50%); three-year relative total shareholder return (rTSR) performance (25%); three and five-year investment performance (25%).
Share ownership guidelines
To align executiveThe Group CEO and Group CFO are expected to build up and maintain a holding in GAM shares worth at least 200% of salary.
interests with those Other GMB members are expected to build up and maintain a holding worth at least 100% of salary. of shareholders
2 The Compensation Committee will retain an overriding discretion to ensure that there is appropriate alignment between business performance and incentive payouts.
3 All variable compensation awards to GMB members are subject to provisions that enable the Group to reduce or cancel the awards, whether vested (but not yet settled) or unvested, or claim back variable compensation, even after vesting and distribution, of members whose individual behaviour has caused, wholly or in part, a material loss to the Group as a result of reckless, negligent or willful actions or inappropriate behaviour.
4 When an individual ceases their employment with GAM their outstanding awards will lapse, except where the Compensation Committee deems the individual to be a 'good leaver'. In this case awards made under the deferred bonus plan will typically vest as per the original vesting schedule. For 'good leavers', awards made under the LTIP will remain subject to performance conditions, will typically be pro-rated by the proportion of the performance period in which the individual has been employed and subject to the original vesting schedule.
5 TSR performance for previous LTIP grants will be measured against the following comparator group: Alliance Bernstein L.P., Amundi SA Asset Management, Ares Management L.P., Artisan Partners Asset Management plc, Ashmore Group plc, BrightSphere Investment Group plc, Eaton Vance Corp, Invesco Ltd, Janus Henderson Group plc, Jupiter Fund Management plc, Franklin Resources, Man Group plc, Brookfield Asset Management Inc., Sculptor Capital Management LLC, Partners Group Holding AG, Schroders plc, Standard Life Aberdeen plc, Vontobel Holding AG.
6 Investment performance is defined as the proportion of funds outperforming their benchmark as disclosed by GAM in its annual results.
3.1 Distribution of Group Management Board members' variable compensation
Our general policy is that Group Management Board variable compensation over the longer term should be appropriately balanced between cash, deferred equity and long-term incentive plan awards (based on face value) although the weightings may vary year to year. This ensures that Group Management Board members are aligned with a strategy of delivering long-term sustainable growth.
3.2 Key terms of Group Management Board members' employment contracts
All employment-related agreements for members of the Group Management Board comply with the Swiss Ordinance against Excessive Compensation in Listed Stock Companies. They do not include severance payments or supplementary contributions to pension plans.
3.3 High level compensation principles for other employees
The compensation framework for employees other than the Group Management Board is designed according to the same four overarching principles, reflecting the values which run throughout the organisation.
Pay for performance
The Group aims to provide competitive total compensation in order to attract and retain experienced and talented individuals who will promote its values, better service the needs of its clients and contribute to the overall development and profitability of the Group. The group-wide target compensation ratio of 45-50% of underlying net fee and commission income ensures that reward will be appropriately divided between all employees and shareholders.
Alignment with shareholders' long-term interests Compensation awards, particularly discretionary bonus payments, are designed to align the interests of employees with those of the Company's shareholders. Annual bonus deferrals for non-Group Management Board employees is into shares or fund units and the proportion of annual bonus deferred is one-third of any annual bonus over CHF 75,000. Deferred shares or fund units will be released in equal tranches over three years. From time to time employees may receive long-term incentive awards that are structured on a consistent basis to those granted to Group Management Board members. These measures help to ensure that employees will only be rewarded for the delivery of sustainable value and growth. In respect of performance year 2020, in recognition of the Group's financial position, any variable compensation will be significantly reduced in terms of quantum and will be fully deferred for a significant proportion of non-GMB employees.
Transparency
The Group's overall approach to compensation is transparent to shareholders, compliant with applicable laws and regulations and consistent with published guidance and with local market practice. A robust annual appraisal process forms part of the compensation process so as to reward success, but minimise the possibility of payment for failure. The annual appraisal process is used to evaluate and measure an employee's performance against defined objectives, which are required to be specific, measurable, achievable, realistic and time-bound. Employees agree on their annual objectives with their line manager and include risk-based objectives at the start of each calendar year. While some objectives may be standardised within certain functions, most are tailored to the individual employee's role and responsibilities.
Incentivise sound risk management
The Group regards effective risk management and control as fundamental to all its shareholders and clients and as being central to the successful achievement of its business objectives. Our compensation framework plays an important part in creating ownership throughout the Group for the risks assumed in day-to-day business and ensuring the independence of its control functions. For control functions, such as compliance, risk, audit and finance, bonus payments are not directly linked to the profitability of the business areas that they support so as to maximise the independence of such functions. Conduct, risk and compliance matters are taken into account when approving all annual bonus payments.
4. GROUP MANAGEMENT BOARD COMPENSATION FINANCIAL YEAR 2020
This section of the report outlines the total fixed and variable compensation for members of the Group Management Board (GMB), comparing 2020 with 2019. It also provides details of the performance targets used to determine variable compensation awards for 2020.
4.1 The total fixed and variable compensation to the members of the Group Management Board in respect to financial years 2020 and 2019 (audited)
Aggregate GMB
Group CEO 1 | Group CFO 2 | |||||
(in CHF) | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
Base salary | 750,000 | 254,423 | 603,032 | 635,968 | 2,514,589 | 3,785,756 |
Fixed equity award | - | 659,745 | - | - | - | 659,745 |
Pension fund contributions | 67,445 | 23,565 | 23,504 | 26,711 | 252,695 | 377,442 |
Social security contributions | 112,815 | 128,863 | 84,692 | 89,137 | 321,047 | 566,350 |
Other benefits | 9,454 | 2,895 | 4,358 | 5,067 | 26,210 | 37,504 |
Total fixed compensation | 939,713 | 1,069,491 | 715,586 | 756,883 | 3,114,541 | 5,426,797 |
Annual bonus 3 | ||||||
Cash payments | - | - | - | - | - | - |
Deferred bonus | - | - | - | - | - | - |
Pension fund contributions | - | - | - | - | - | - |
Social security contributions | - | - | - | - | - | - |
LTIP 3 | ||||||
Performance shares | - | - | - | - | - | - |
Social security contributions | - | - | - | - | - | - |
Total discretionary variable compensation | - | - | - | - | - | - |
Total compensation | 939,713 | 1,069,491 | 715,586 | 756,883 | 3,114,541 | 5,426,797 |
(inclusive of CEO and CFO)
1 The highest-paid member of the GMB in 2020 was the Group CEO, Peter Sanderson, with a total compensation of CHF 939,713 including CHF 112,815 employer's social security contributions.
2 The Group CFO salary remains unchanged. The year-on-year difference is reflective of the exchange rate used when converting from GBP to CHF.
3 No annual bonus or LTIP grant in respect of the Group Management Board are included for shareholder approval in respect of the 2020 performance year.
4.2 Compensation to former members of the Group Management Board (audited)
In 2020, no compensation was awarded to former members of the Group Management Board.
4.3 Loans to members of the Group Management Board (audited)
In 2020, no loans were granted to the current or former members of the Group Management Board. No such loans were outstanding at year-end.
4.4 Compensation and loans to closely related parties (audited)
In 2020, no compensation was paid to closely related parties of current or former members of the Group Management Board. No loans were granted in, or were outstanding at the end of 2020 to closely linked parties of current or former members of the Group Management Board.
4.5 Total annual bonus awarded for the year ending 31 December 2020
The objective of the Compensation Committee is to pay Group Management Board members an annual bonus appropriate to the performance achieved both by the Group and by the individual, ensuring the proper balance of employee reward and returns to shareholders and motivating key executives.
A balanced scorecard of financial and non-financial measures is usually utilised to determine annual bonuses for each of the Group Management Board members. Group financial metrics are an integral component of that scorecard and are aligned with our key performance indicators. Each Group Management Board member was also evaluated on strategic, business and personal objectives set earlier in the year.
The relevant financial metrics used in the balanced scorecard to determine the annual bonuses for the Group Management Board are as follows:
• Underlying profit before taxes of CHF (14.9) million;
• Operating margin for 2020 of (4.7)%;
• The investment management business experienced net outflows of CHF 10.6 billion;
• Over the three-year period to 31 December 2020, 23% of our assets under management in funds outperformed their respective benchmark.
The following sections provide a detailed breakdown of the balanced scorecard for the Group CEO and Group CFO and an overview in relation to other Group Management Board members.
i) Group CEO and Group CFO
Maximum opportunity
Maximum annual bonus of the Group CEO is capped at 300% of salary and for the Group CFO the maximum annual bonus is capped at 200% of salary.
Form of payment
Under our compensation framework, 50% of any annual bonus is deferred into GAM shares vesting in equal tranches over four years.
Performance metrics
The decisions for the Group CEO and the Group CFO annual bonuses are based on financial performance (60%), and achievement against strategic and business (20%) and personal objectives (20%).
The table below summarises the metrics, weightings and targets by which financial performance was assessed during 2020. As a result of the changes to composition of the membership of the Group Management Board with effect from 1 April 2020, the Compensation Committee reviewed the weightings of each of the financial metrics for both the Group CEO and the Group CFO as highlighted in the table below and as noted in the Chair's letter.
97 | Annual Report 2020 | |
Financial metrics (60%) | ||
Vesting (% of | ||
Weighting | performance metric) | |
Group | Group | |
Metric | CEO | CFO |
Underlying profit before taxes 1 | 20% | 25% |
Three-year investment performance 2 | 15% | 10% |
Operating margin 3 | 10% | 15% |
Net flows 4 | 15% | 10% |
Total 5 | 60% | 60% |
Threshold | Target | ||||
(25% | (50% | Maximum | Group | Group | |
of max) | of max) | (100%) | Actual | CEO | CFO |
0.7 | 21.9 | 53.4 | (14.9) | 0.0% | 0.0% |
50.0% | 62.5% | 75.0% | 23% | 0.0% | 0.0% |
0.9% | 7.6% | 15.1% | (4.7%) | 0.0% | 0.0% |
(3) | 0.0 | 3.0 | (10.6) | 0.0% | 0.0% |
0% | 0% |
1 Net profits before tax in accordance with the International Financial Reporting Standards, excluding certain non-recurring and acquisition-related items.
2 Percentage of AuM in funds outperforming their benchmark over the relevant period as at 31 December 2020.
3 Operating margin is calculated as net fee and commission income less expenses, divided by net fee and commission income.
4 Represents the net asset additions or redemptions by clients for our investment management business.
5 Notwithstanding the outcome of the scorecard, no bonus is being granted to current members of the GMB.
The Board of Directors consider many factors when determining target, threshold and maximum levels for each financial metric for any given year. When setting such levels the Board of Directors aims to ensure that targets are stretch in nature and take into consideration performance from prior periods, current expectations for the period in question and other factors that should be taken into account. Threshold and maximum levels are determined on the same basis, but with emphasis on providing appropriate parameters for which performance should be judged.
Individual performance assessment of the Group CEO and Group CFO
Given the financial performance of the Group and in line with our compensation framework, the Group CEO and the Group CFO, along with the rest of the Group Management Board, will not receive variable compensation for the 2020 performance year.
Performance assessment of the Group Management Board Members
The Group Management Board played an integral part in forming the Group's original strategy for 2020 and were key to providing a pathway to meet the efficiency, transparency and growth goals to make GAM fit for the future.
The Covid-19-related market correction required a critical re-evaluation to reset and increase efficiency goals and required extreme focus on execution to materially reduce the timelines for those objectives. The Group Management Board demonstrated the required strong leadership, coordination and determination throughout the year to safely navigate the Group in a complex and fast moving business environment.
Some of the notable accomplishments achieved by the Group Management Board include:
Continued work on accelerated efficiency programme on track
Reduction of total expenses, including variable and fixed costs, in excess of CHF 71 million in full year 2020 compared to full year 2019 was achieved;
Significant technological upgrades
Implementation of SimCorp, a fully-integrated front-to-back solution, continues to be on track and will enhance client experience, improve transparency, increase operating effectiveness and generate efficiencies;
Partnership with WorkDay, an enterprise resource planning solution, as our new corporate platform provider. This will deliver a single consolidated system which will reduce complexity and bring numerous efficiency benefits to our HR and finance processes. Established resilient operations in a Covid-19 remote working environment.
Agile working
Employees working remotely since mid-March, with high productivity, collaboration and engagement levels.
New leadership
Sales and Distribution co-heads: A new leadership structure was put in place to facilitate the enhanced focus on specific client segments. Jeremy Roberts joined as Global Head of Distribution, with a focus on wholesale clients, and Jill Barber joined in the newly created role of Global Head of Institutional Solutions. They will together lead GAM's sales and distribution efforts.
Global Head of Sustainable and Impact Investment: In this newly created global role, Stephanie Maier will be responsible for leading GAM's sustainability strategy and strengthening the firm's ESG proposition for clients.
Sustainable investment
Continued development and efforts relating to sustainability, with initiatives focused on responsible investing, corporate sustainability, diversity and inclusion and culture.
GAM has improved its scoring on the six UN Principles for Responsible Investment, the PRI assessment. The Group achieved its first ever A+ for the strategy and governance module, putting GAM in the top quartile of all signatories globally. As well as improving the overall scores, the firm made excellent progress on the Local Emerging Bond strategy, which achieved an A rating in the 'Fixed Income - sovereign category', which is above the median and puts the Group in the top 40% of all signatories. These results, and the firm's progress over the past two years, demonstrate that the Group's strategic approach to ESG is beginning to have real impact.
4.6 Long-term incentive grant to be awarded in 2021
In line with section 4.1, as there will not be any variable compensation put forward to the shareholders for a vote in respect of the current Group Management Board, there will not be any long-term incentive awards granted to the Group Management Board in 2021.
Attachments
- Original document
- Permalink
Disclaimer
GAM Holding AG published this content on 18 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 February 2021 08:40:05 UTC.
