UPDATE 1-Swiss asset manager GAM's new CEO to deepen cost cuts

Swiss asset manager GAM Holding said it aims to deepen already severe cost-cutting measures to help it hit an operating margin of 30% within two years, sending its shares higher. The strategy update on Thursday by new Chief Executive Peter Sanderson is the latest attempt by the company to woo investors and bolster a market valuation that has yet to recover from the exit of a high-profile fund manager in 2018.

Sanderson unveiled targeted additional cost savings of 40 million Swiss francs ($40.7 million) by 2022, to take the total to more than 80 million francs, including more than 40 million francs of savings achieved in 2019. On a conference call with journalists, Sanderson said the cost savings would largely come from simplifying its mid- and back-office work processes, consolidating on to one platform and better using technology.

While that would result in further job losses to add to the around 12% of staff laid off in 2019, he said he had no specific target in mind. UBS analyst Mate Nemes said the targets appeared reasonable in a note to clients flagging a "buy" rating, although he added, "details on how GAM plans to achieve the targets as well as understanding risks to the plan will be crucial".

At 1036 GMT, shares in GAM were up just over 9%, although they remain down around 80% from the highs struck in 2018. GAM had said last month it expected to break even for 2019 as performance fees improved, although it saw a sharp outflow of assets in the aftermath of a row with its former star fund manager.

The Swiss company called a truce with manager Tim Haywood last year after months of wrangling over his sacking, drawing a line under a saga that hammered its stocks. The asset manager, which employed around 850 people in 14 countries as of September, said it aims for an underlying pre-tax profit of 100 million francs under its new strategy.

Last year, GAM posted an underlying profit before taxes, excluding non-recurring and acquisition-related items, of 10.5 million Swiss francs, down from 126.7 million francs in 2018. This was driven mostly by a drop in assets under management (AuM) to 48.4 billion francs at the end of 2019, from 56.1 billion francs in the prior year.

The drop in AuM was "primarily driven by net outflows of 11.1 billion francs across capabilities" and the sale of precious metal funds, only partially offset by net positive market and foreign exchange movements of 5.3 billion francs, the company said on Thursday. GAM proposed omitting a dividend and said its group management board would get no bonuses for 2019.