Key Highlights

• Year to date, from 31 December 2025 to 30 September 2026, FUM fell from US$163.9 billion to US$149.2 billion, with net outflows of US$26.2 billion and Investment gains of US$11.6 billion.

• For the half-year to 30 June 2026, reported on 21 August 2026, Revenue was US$397.2 million, down 1.4% on the previous corresponding period.

• All four core strategies posted positive absolute and relative returns in September and the quarter, and net returns for the three years to 30 September 2026 were double-digit annualised.

• Average FUM, rather than period-end FUM, determines fee revenue within a period, so lower balances at the end of 2026 would weigh on results in subsequent periods.

How much can an asset manager's Earnings hold up when more client money is leaving than arriving? That is the question facing GQG Partners, Inc. (ASX:GQG), the US-based active Equity manager listed in Australia through CHESS depositary interests. Its monthly update on 12 October 2026 reported funds under management (FUM) of US$149.2 billion at 30 September 2026, with net outflows of US$11.1 billion across the September quarter, partly offset by investment gains of US$4.4 billion. Because most of its income is a percentage of assets, falling FUM tends to feed through to revenue with a lag.

The central development

All four core strategies posted positive absolute and relative returns in September and the quarter, and net returns for the three years to 30 September 2026 were double-digit annualised. Year to date, from 31 December 2025 to 30 September 2026, FUM fell from US$163.9 billion to US$149.2 billion, with net outflows of US$26.2 billion and investment gains of US$11.6 billion.

Two points stand out. Recent performance has improved, but flows have not yet turned. And the scale of cumulative outflows means that market gains are being used to offset client redemptions rather than to grow assets. The figures are unaudited and exclude GQG Private Capital Solutions activity, according to the reports.

Business model and revenue drivers

GQG runs concentrated, high-conviction equity strategies in four main areas: US equity, global equity, international equity and emerging markets equity. Revenue is mainly management fees calculated on average FUM, with performance fees a smaller and more variable component. Costs are comparatively fixed, which has historically produced a high operating margin, but the same Operating Leverage works in reverse when Assets fall. Average FUM, rather than period-end FUM, determines fee revenue within a period, so lower balances at the end of 2026 would weigh on results in subsequent periods.

Clients include institutional investors, wholesale and retail platforms in Australia, UCITS funds in Europe and US mutual funds and separately managed accounts.

Reported earnings

For the half-year to 30 June 2026, reported on 21 August 2026, revenue was US$397.2 million, down 1.4% on the previous corresponding period. Net profit after tax was US$228.4 million, down 0.8%, and distributable earnings were US$234.9 million, down 0.7%. Average FUM for the half was US$164.5 billion, up 1.0%, while period-end FUM was US$156.0 billion and net flows were negative US$15.1 billion. Operating expenses fell 0.5%, and GQG had US$168.9 million of cash and no debt.

This highlights a key gap: the half-year result reflects average FUM of US$164.5 billion, whereas FUM at 30 September 2026 was US$149.2 billion, about 9% lower than that average. If FUM stays near current levels, the next result would face a lower fee base, all else being equal. That is arithmetic on reported figures and not a forecast, because markets, flows and fee rates can all move.

Why flows have weakened

It said GQG's year-to-date inflows had dropped sharply compared with the previous year, and that "redemption pressure" had come from larger investors in Australian and UCITS funds. The more recent reports show better returns in the September quarter, which could help flows over time, but investor decisions usually lag performance by months or years.

Sector and competitive position

Active equity management is under structural pressure from low-cost passive funds, fee compression and shifts in client Demand toward private markets and alternatives. GQG has been a notable winner in recent years because of its performance record and distribution reach, and its margin has been high relative to peers. The competitive question is whether encouraging long-term numbers can be re-established with clients after a period of weaker relative returns, and whether newer initiatives, such as private capital solutions, can diversify revenue.

Risks and what to monitor

The main risks are as follows. First, continued net outflows would reduce the fee base. Second, investment performance could weaken again, which would harm both flows and any performance fees. Third, market falls would cut FUM regardless of flows, given the equity focus. Fourth, key-person risk is relevant, as the firm is closely identified with its founder and chief investment officer. Fifth, fee pressure and regulatory change across the multiple jurisdictions in which funds are sold could affect margins. Sixth, GQG reports in US dollars while its shares trade in Australian dollars, so currency movements matter.

Dates to monitor: the company's next FUM update is scheduled for 11 November 2026, followed by 10 December 2026 and 13 January 2027 (subject to change, per the reports).

The central point is that GQG's earnings are more resilient than its flows might suggest, thanks to encouraging margins and a debt-free balance sheet, but the lower FUM base requires either a turn in flows or sustained investment performance to restore growth.