09/09/2010 Author: Shannon Hawthorne

Gottex's first half-results reveal mixed fortunes

Gottex Fund Management continued to enjoy positive cash earnings in the first half of 2010, despite a fall in gross revenues, according to its latest interim results. 

In the six-month period ending 30 June 2010, Gottex enjoyed a cash operating profit of $2.3m; however, this was down from $5.9m in the second half of 2009 (2H09) and $13.7m in 1H09. 

Gross revenues also declined in comparison to previous half-year results: from $46.1m in 1H09 and $36.7m in 2H09 to £32.9m in the first half of this year. 

Gottex also saw total fee-earning assets decline by 11% over the six month period from £8.1bn to $7.3bn. However, the firm’s flagship market neutral strategies performed well, posting gains of 4.22% and outperforming many fund of hedge funds indices. 

“The first half of 2010 proved to be a difficult environment in the global capital markets as high volatility combined with a broad based decline in the second quarter,” said Gottex Chairman and CEO Joachim Gottschalk.  “This had a delaying effect on asset raising in our industry as well as the return of incentive fees.” 

He continued : “On the other hand, we have seen positive developments such as the positive  absolute performance and continuing outperformance on a relative basis of our flagship market neutral products, pockets of client activity, the launch of our Ucits product and the slowing of the decline in gross revenues and management fees in the first half of this year versus second half of 2009. 

According to recent research by Morgan Stanley, total FoHF assets remain substantially below their peak level at $600m, due in large part to the lack of recovery in private client demand, as well as an growing institutional preference for direct investments. 

“As institutions look to go direct, we think winners will need to offer bespoke solutions,” states the report. “FoHF AuM is 30% below peak, despite recovery in direct allocations as private clients stay away and institutions go direct for liquidity, transparency and control.” 

However, the report does state that there are a small number of large FoHF managers, including Grosvenor, Mesirow and Fauchier Partners, primarly focused on the US institutional market which have continued to enjoy strong growth.