Australia | 10:30 AM
New research on GQG Partners highlights higher earnings margins relative to peers due to a low-cost operating model.
-GQG Partners' low-costs and superior margins
-Competitive fees, scalable platform, and attractive yield
-Sustained investment performance across all strategies
-ASX200 inclusion seen as a potential catalyst
By Mark Woodruff
Boutique fund manager GQG Partners ((GQG)) was founded in 2016 by Chairman and CIO Rajiv Jain and CEO Tim Carver, listing on the ASX in October 2021 at $2.00 per share.
Since debut, shares have swung between $1.20 and $3.10, with a recent sharp dip in November 2024 after GQG's high-profile investment exposure to the Adani Group drew criticism amid bribery and governance allegations at the Indian conglomerate.
Still, GQG posted net inflows of US$0.1bn that month, down from the year's US$2.0bn monthly average, but a win in context, noted Ord Minnett. The broker maintained a positive outlook given strong investment returns and an expanding distribution base.
New research from RBC Capital further highlights GQG's nimble, low-cost operating model, outsourcing back-office functions to keep cost-to-income (CTI) ratios lean and earnings margins ahead of peers.
A competitive fee structure, scalable platform and attractive dividend yield round out the appeal, offering insulation from sector-wide pressures, RBC research highlights.
Growth has been largely organic, as management deliberately avoids the integration and synergy risks often accompanying broader industry consolidation.
Serving institutional investors, financial intermediaries, and high-net-worth clients globally, GQG Partners manages equity portfolios across four core strategies: Global Equity; International Equity; Emerging Markets; and US Equity.
As the company is headquartered in Fort Lauderdale, Florida, Global refers to all markets developed and emerging, while International is excluding the US.
Additionally, GQG manages three Quality Value sub-strategies, Global, International, and US Quality Value, which focus on dividend-paying stocks while drawing from the same investment universe as their core strategies.
RBC believes ongoing expansion into new geographies and asset classes will strengthen the company's ability to attract net inflows while also diversifying its revenue base and reducing concentration risk.
Management is already well placed to capture growing investor allocations to alternative assets through its newly established Private Capital Solutions (PCS) division.
PCS was established through the acquisition of minority interests in three boutique private capital managers: Avante Capital Partners, Proterra Investment Partners, and Cordillera Investment Partners.
Management is pursuing further diversification through opening an Abu Dhabi office in 2024 and targeting expansion in Australia, the UK and Canada to offset an Americas-focused funds under management (FUM) base.
Recent performance
In 2024, GQG was a top 10 actively managed US mutual fund ranked by net flows and was first in the Global Equity category for Australia ranked by Morningstar.
Recent FUM growth is supported by sustained performance across all strategies, observes RBC.
The Global Equity strategy has particularly benefited from significant inflows via model platforms and institutional mandates in the US. Meanwhile, Emerging Markets Equity has also regained traction following a period of underperformance in 2023, supported by improved relative returns and new flows from sovereign wealth funds.
As of May 2025, the Global Equity strategy accounted for 39% of total FUM (US$168.5bn) and continues to be the primary growth engine with inflows of US$2.6bn year-to-date. This strategy is followed by International Equity (28%), Emerging Markets Equity (21%), and US Equity (13%).
A key factor underpinning GQG's success, according to RBC, is a focus on high-quality, resilient companies with strong earnings visibility.
GQG's revenue model is tied directly to FUM via management fees, making net inflows and market performance its core earnings drivers.
Management fee margins have remained stable around 50bps, while performance fees are not a major contributor, but they contribute to revenue stability.
The company has increased its management fee margins over time, which the market expects to continue as GQG pushes into higher margin channels (Retail) and higher-fee strategies such as Emerging markets and International.
Operating leverage is improving as the business scales, with cost-to-income ratios declining steadily. Analysts expect earnings margins to rise above 70% over the medium term.
GQG maintains a conservative balance sheet with no debt and a high dividend payout ratio. It continues to return surplus capital to shareholders via fully franked dividends and has committed to sustaining its current payout profile.
Consistent with the final 2024 dividend, the board declared a US3.78 cent dividend on May 9, which was paid on June 27.
The distribution was 9.8% ahead of Jarden's forecast, helped by a stronger payout ratio of 93.3%, as well as stronger implied earnings.
Importantly, the first quarter dividend suggested to this broker a profit margin of 29.2bps on average assets under management (AUM), 5.1% ahead of the consensus estimate.
Flows in March, April, and May
In early-April, following the monthly flow update by GQG Partners, Morgan Stanley noted asset manager stocks were coming under pressure due to weaker markets.
The broker continued to see value in GQG Partners, praising the company's track record, organic growth trends, and global distribution pipeline.
Indeed, GQG registered an "impressive" performance in March, commented Ord Minnett, given the tumultuous time for markets in the first three months of the year.
Defensive positioning meant portfolios outperformed their benchmarks for the year to date in the global equity, international equity, and US equity strategies, explained the broker.
For the quarter, GQG registered net inflows of US$1.8bn ($2.8bn) and US$4.6bn for the quarter. Subsequently, net inflows of US$1.4bn in April beat consensus forecasts.
Then in May, GQG recorded net inflows of US$1.4bn, lifting first-half 2025 year-to-date inflows to US$7.4bn.
Total funds under management (FUM) rose 3% month-on-month to US$168.5bn, supported by favourable market moves which offset strategy underperformance during the month.
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