GQG’s Rising Costs and Lower Performance Fees Pose Questions Despite Strong Earnings

Strong Financial Growth Amid Market Challenges

GQG Partners Inc. has delivered a solid financial performance for the half year ended 30 June 2025, with revenue climbing 11% to $403 million and net income attributable to shareholders increasing 14.4% to $230.2 million. This growth was supported by a 10.8% rise in assets under management (AUM) to $172.4 billion, reflecting continued client trust and positive net flows despite a modest slowdown in inflows compared to the prior period.

The company’s management fees, which form the bulk of its revenue, rose in line with AUM growth, while performance fees declined due to lower relative investment returns during the measurement period. Operating expenses increased moderately, driven by investments in talent and expanded distribution efforts, yet GQG maintained a strong operating margin and a debt-free balance sheet with over $100 million in cash.

Strategic Product Expansion and Defensive Positioning

In a notable strategic move, GQG launched its first US Equity exchange-traded fund (ETF) in July 2025, marking its entry into a rapidly growing segment of the asset management industry. This product launch complements the firm’s existing suite of active equity strategies and aims to broaden its appeal to investors seeking diversified, actively managed equity exposure in a cost-efficient vehicle.

GQG continues to emphasize a defensive portfolio positioning, particularly underweighting sectors like technology and regions such as China in its emerging markets strategy. The firm’s leadership underscores this approach as a deliberate risk management tactic designed to deliver long-term, risk-adjusted returns, even if it means underperforming benchmarks during exuberant market phases.

Leadership and Alignment with Shareholders

The company’s leadership team, led by CEO Tim Carver and CIO Rajiv Jain, highlights a culture of co-investment and alignment with shareholders. Executives and portfolio managers hold significant stakes in the firm and its strategies, reinforcing a shared commitment to long-term value creation. This alignment is reflected in the firm’s sustainable fee structure and disciplined investment philosophy.

Despite short-term underperformance in some strategies relative to benchmarks, GQG points to its consistent alpha generation over rolling five-year periods since inception, outperforming benchmarks in the vast majority of periods. This track record supports the firm’s confidence in its investment process and client value proposition.

Dividend Policy and Outlook

Reflecting its strong earnings and cash flow, GQG declared an interim dividend of $0.0356 per share, payable in September 2025. The dividend represents approximately 90% of distributable earnings for the period, consistent with the company’s policy of returning a significant portion of earnings to shareholders. There is no dividend reinvestment plan for this interim dividend.

Looking ahead, GQG remains focused on navigating dynamic market conditions with a disciplined approach, leveraging its global footprint and diversified client base. The firm’s expansion into ETFs and Quality Value strategies signals an intent to capture evolving investor demand while maintaining its core active management strengths.