GQG Partners experienced US$6.2 billion of positive net flows during the first six months of the year, the global investment boutique confirmed in its half-year results on Thursday.
As a result of these flows and gains in global equity markets, GQG’s funds under management (FUM) increased by 20.1 per cent on a year earlier to sit at US$104.1 billion as of 30 June.
“This increase in FUM led to net revenue growth of 6.5 per cent to US$237.1 million during the first half of 2023 compared to the first half of last year,” said GQG chief executive officer Tim Carver.
“Net operating income increased by 1.3 per cent during the period to US$176.4 million from US$174.2 million during the first half of 2022, reflecting a higher average FUM partially offset by an increase in expenses as GQG continues to invest in talent and overall business activities.”
GQG noted that it averaged just over US$1 billion in net flows per month in the first half, which it said was achieved despite “a difficult industry environment”.
The firm earns revenue primarily from management fees that are based on a percentage of FUM. Management fees represented 97.0 per cent of GQG’s net revenue during the half, which it suggested created stability in the revenue stream, particularly during periods of volatility.
“Our financial result is driven in large part by our investment performance over the long term,” said Mr Carver.
“As at the end of June 2023, our strategies continued to provide solid long-term performance as compared to their benchmarks, which we believe provides the underpinnings for continued business success.”
In his CEO report to shareholders, Mr Carver acknowledged that GQG’s US and global strategies lagged behind their benchmarks during the first half of the year.
Subsequently, in the year to 30 June, GQG Partners Global Equity underperformed its benchmark, the MSCI ACWI, by 7.8 percentage points with a return of 8.73 per cent, while GQG Partners US Equity returned 6.92 per cent, underperforming the S&P 500 by 12.67 points.
“While we will never make excuses and recognise that over time, we must beat the benchmarks to have a thriving business, let me offer a few thoughts on the one‑year relative returns,” Mr Carver said.
“First, both strategies exhibited a particularly strong period of outperformance in the first half of 2022 due to our material overweights to stocks in the energy and consumer staples sectors, as well as a significant underweight to technology names. Those numbers have subsequently rolled off the trailing one‑year data.
“Second, we entered 2023 with similar sector positioning from 2022, including an overweight to healthcare. During the first half of 2023, the technology sector led a rally in the equity markets while the energy and healthcare sectors were laggards, contributing to the recent underperformance.”
Since 2014, GQG Partners Global Equity has delivered an annualised return of 11.53 per cent compared to 7.79 per cent for the benchmark, while GQG Partners US Equity has delivered an annualised return of 14.25 per cent versus 11.63 per cent for its respective benchmark.
“We continue to believe if we react to dynamic markets in a disciplined manner, we will have the opportunity to find solid investments for our clients over the long‑term,” Mr Carver said.
“I can commit that we will continue to work diligently to navigate these markets and this business environment. As has been the case since our founding, we will also continue to be meaningfully invested alongside you, our shareholders, as well as our clients.”
GQG’s FUM has grown by 15 per cent since its IPO at the end of October 2021. Meanwhile, the firm indicated that the median FUM of its global large cap peers fell by more than 11 per cent.
The firm’s board declared a quarterly interim dividend of US$0.0217 per share, representing 90 per cent of distributable earnings for the quarter ended 30 June.
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.