I'm joined today, as usual, by Richard McNamara, our Group CFO. Turning to our agenda today, I'm gonna spend a few minutes giving you an overview of the first half. Richard will then take you through the financial results in more detail. I'll then sum up with a brief update on our strategy, and we'll move on to Q&A. Please note that you can only ask questions if you're logged in to the Cisco Webex and use the Q&A chat function. You won't be able to ask questions if you're dialed in only by phone. Before we start, I wanted to spend a moment on another announcement we made earlier today in case you haven't seen it. We've announced that Sally Orton, currently our Deputy Chief Financial Officer, will become Chief Financial Officer and a member of the Group Management Board.
This follows Richard McNamara's decision to step down from his role. Richard's been our CFO since 2015 and will leave the firm towards the end of the year. Sally's appointment, both as CFO and as a member of the GMB, will take effect immediately. Richard will stay on at the firm over the coming months to ensure a smooth handover to Sally. I'd like to warmly welcome Sally to the Group Management Board, and I'd also like to thank Richard for his enormous contribution to GAM over the last seven years. He's been a great support to me personally and has worked tirelessly to help us manage through a challenging period. You'll be hearing from Sally at future results presentations and hopefully meeting her before then as well. Okay, turning to slide four. During the first half of 2022, our overall financial performance has certainly been challenged.
We have seen elements of the business showing increasing resilience in the face of extraordinary economic and geopolitical conditions. Clients are still demanding high-conviction active strategies to help them navigate the current environment and as a result, while still an outflow, we are seeing an improving trajectory of flows in our investment management business. Fund performance remains good, with 73% of our funds assets under management outperforming their benchmarks over three years. We continue to see strong client engagement, and this has certainly been helped by our Beyond the Obvious global client conference in March, and by the quality of thought leadership from our investment professionals, which continues to prove insightful for clients, particularly in these market conditions. Through these continuing strong levels of client engagement in the first half, I'm encouraged by our pipeline of future potential flows.
Clients clearly value the accessibility and quality of our investment professionals, as evidenced by the top rating we received for this in the European Citywire Selector survey, where we were awarded best in class in four categories. GAM continues to invest in our talents, and we've seen several high caliber investment and client-facing professionals joining us during the first half of the year, including our new Head of Investment, David Dowsett. Finally, we're capitalizing on our new cloud-based operating platform, which brings with it a number of benefits, including the opportunity to become more efficient, deliver even better for our clients, and provide the flexibility to scale our operations as needed. Our overall financial performance was certainly challenged by the impact of the market environment.
In fact, almost 80% of the reduction in assets under management came from negative market and foreign exchange movements with a consequent impact on our revenues. Of course, we're not alone in seeing this market impact, and we are focused on measures to accelerate our efficiency program and continue to reduce our costs given the reduction in revenue. Richard will take you through the detail of this in a moment. I mentioned earlier that we've been seeing an improving trajectory of flows in our investment management business, and you can clearly see on this slide the encouraging trend. As you can see, while still an outflow, the first half of 2022 was the best half year since 2018, notwithstanding the challenging market conditions. Of course, I recognize the importance of needing to turn this into net inflow, which continues to be our focus. Turning to Fund Management Services.
Our Fund Management Services business saw outflows, but this was mostly related to the last tranche of an outflow, which was already announced in January 2021. We're continuing to make progress as we aim to diversify and regrow the client base in this business. On the next slide, you can see the pattern of flows in investment management. There are encouraging inflows for some of our distinctive high conviction strategies with Mortgage-Backed Securities and cat bonds in particular demand. In terms of outflows, the reduction in Credit Opportunities reflects some weakened performance and risk-off sentiment around European financials. The outflows in our Local Emerging Bond Fund have slowed. Despite some headwinds still in the asset class, it's on the back of some excellent investment performance.
Our differentiated strategy is delivering good investment performance with a three-year outperformance against benchmark strengthening compared to the end of last year, now at 73%. Our five-year numbers reflect some noise, particularly from the 2018 period as they come through in the numbers. I thought it would be interesting to spend a moment to look at a few examples of where our strategies are attracting strong client interest in the context of current markets. First, our cat bond strategy, which generated CHF 480 million of inflow in the first half. Second, our U.K. Equity Income fund, which has seen client interest from a wide range of clients, including Latin America. This saw inflows of CHF 129 million. Third, mortgage-backed securities, which is showing strong top quartile performance and which saw net inflows of CHF 86 million in the first half.
These examples illustrate the engagement with our clients and that the diversification within our range of high conviction strategies means that we can meet client demand even as we see meaningful changes in the market environment. I'll now hand over to Richard to take you through the financials.
Thanks, Pete, and good morning to you all. Before I start, let me highlight that the underlying and IFRS loss we are presenting here today are in line with the announcement we made on the eighteenth of July. As usual, I'll start by giving an overview of the financial results. I will then focus on management fee margins and a change to how we report our AUM capabilities, our expenses, and our progress in driving efficiencies. I'll then finish off on the IFRS numbers and our cash and capital position. Starting with the financial summary. Peter's already talked about our net new money and AUM movements. The lower level of AUM in our investment management and fund management services businesses reduced our net management and fee and commission income by 19% compared to the first half of last year to CHF 90.9 million.
Performance fees of CHF 2.6 million were significantly lower than the first half of 2021, as market declines impacted high-water marks set in 2021 for certain strategies. 2021 was a standout year for performance fees, but it was still pleasing to see a modest level of performance fees being generated in the first half of this year. There is more information on our performance fee potential in the appendix. With the current market environment and our reduced AUM levels, we've remained focused on controlling costs to offset some of the headwinds to the top line. Total expenses were down some 9% compared to the first half of last year, driven primarily by lower fixed and variable personnel costs, which I'll come on to later.
Our underlying pretax result was CHF 15.4 million loss, driven by the reduced revenues despite our efforts in reducing costs. This obviously impacted our operating margin, which was a -17.1%, in contrast to the +3.6% result for the first half of last year. Now turning on to management fee margins. Our blended investment management fee margin remained stable at 51.1 basis points compared to 51.3 basis points for the full year 2021. Our exit margin at the end of June is consistent at around 51 basis points. We continue to see some minor frictional pricing pressure, but the key driver of future movements in our margin will be flow and asset mix. The average margin in fund management services increased to 4.6 basis points.
This was primarily driven by the large outflow at the end of last year from one client whose pricing was below the average. As previously highlighted, our pricing levels here are more driven by the level of service provided to a client rather than the client's assets under management. The exit margin from our fund management services at the end of June also stood at 4.6 basis points or approximately around that level. I now want to update you on some changes to how we report our investment capabilities going forward. This slide shows the development of our AuM from the end of last year and a reclassification between capabilities. We are changing how we report our assets under management and net flows going forward to reflect how our clients engage with our strategies and how we manage the business.
The previous six capabilities in investment management are being consolidated into four. You'll note that some fixed income and equity strategies are reclassified into multi-asset, and our systematic and absolute return strategies are being combined under alternatives. The next slide shows the impact on margins. The overall investment management fee margin of approximately 51 basis points is unchanged and not impacted by this reclassification. This slide shows the margins by capability based upon that new classification. For the benefit of those running models, we have updated our investor workbook for this new classification and for historical data where possible. We're providing the relevant information on the old basis now, but for the last time. As you can see, there is no material change in fee margins in equities, fixed income, and multi-assets.
The margin for alternatives, now at 47 basis points, is impacted due to the combining of absolute return and systematic assets into that capability. Just to reiterate, this has no impact on the group's revenues or our overall fee margins. Now looking at Opex costs. Total personnel expenses were 20% lower compared to the first half of last year at CHF 62.1 million. The main driver was a reduction in variable pay reflecting lower management and performance fees. Overall, variable pay reduced by 45% to CHF 12.5 million compared to the first half of last year. Our headcount as of June 30th reduced by 9% compared to this time last year as we continue to action our efficiency steps. This resulted in our fixed personnel expenses falling by 10% to CHF 49.6 million.
The compensation ratio at 66.4% reflects the decline in our revenues being greater than the cost reductions we were able to achieve. Our general expenses came in at CHF 37.9 million, higher than the first half of last year. This was driven by higher travel and marketing spend as the impact of the pandemic reduced, and some one-off professional and consulting costs. Depreciation and amortization has increased by 8%, reflecting the investment we have made in the One GAM platform now being amortized. In 2021, our total expenses were CHF 234.5 million, approximately CHF 140 million lower than in 2018. Despite these large reductions, we know we must and can do more in reducing our costs.
As mentioned, our efficiency program in the last 12 months has seen a reduction in headcount, now down at 594. As always, and particularly given our reduced revenues, we continue to drive for greater efficiencies and now expect a further CHF 20 million reduction in total expenses in 2022 compared to 2021. We also expect to reduce total expenses by at least a further CHF 20 million in 2023. When this is achieved, we will have almost half the group's total expenses since 2018. These reductions have been achieved through the modest investment we have made into the One GAM platform over the past few years. This investment is largely complete. Turning now to our IFRS numbers.
We recognized a CHF 275.2 million net loss compared to a CHF 2.7 million net loss in the first half of last year. This increase in the IFRS net loss was primarily caused by the recognition of a CHF 263.6 million impairment charge on the brand intangible. This intangible was created at the time of the acquisition of GAM by Julius Baer in 2005. The remaining intangible brand value is approximately CHF 10 million. This impairment reflects the drop in AUM we have experienced in the first half of 2022. Other items excluded from our underlying profits are significantly less material and are detailed in the half year report. Our underlying effective tax rate is less meaningful given our profits are negative.
Given this, and the fact that non-tax deductible costs have a disproportionate impact on our effective tax rate, the rate will become more meaningful once profits are returned. Turning to cash and capital. It's important to highlight that our balance sheet remains debt-free, and that we continue to ensure our capital structures are the most efficient they can be, particularly through the simplification of our legal entity structures and business activities. Adjusted tangible equity was CHF 164 million, down from CHF 174 million at the end of last year. This reduction was mainly driven by the underlying net loss of CHF 14 million, with the movements in foreign exchange being offset by the improvement in the pension scheme deficit.
Our cash position reduced to CHF 172 million compared to CHF 235 million as at the end of last year. The key driver for this reduction in the first half is the net effect of the 2021 bonuses being paid in the first half of 2022. We always have the seasonality impact. Other drivers were the first half loss, the one-off settlement of the FCA fine, and pension repair payments. In summary, we are focused on the self-help actions to improve capital efficiency and to achieve our cost reductions now in 2023 and beyond to support the financial position of the firm. Thank you. With that, I'll hand you back to Pete.
Thanks, Richard. We have a clear set of strategic priorities for the remainder of 2022 and going forwards. First and foremost, we're doing all we can to ensure that we maintain our good investment performance. We're doing this by continuing our focus on high conviction, high alpha strategies in niche areas of mainstream asset classes. Our new head of investment is ensuring that we communicate well across our investment teams and that our diverse perspectives drive debate for the benefit of all of our investment professionals. We're staying very close to our clients, and we're building on the positive momentum and engagement that we've seen over the past month and remain focused on helping meet their needs with our diverse active strategies.
The key priority is that we move into net inflows, and continuing to achieve good client outcomes will help us achieve this. Third, we will further capitalize on our cloud-based operating platform, which is already proving its worth by helping deliver operational excellence and efficiencies. Fourth, we plan to deliver a total of CHF 20 million of cost savings in 2022, and a further at least CHF 20 million in 2023. We'll also focus on driving capital efficiency across our legal entities and businesses as we maintain cost and operating discipline. Finally, we recognize that our 2024 financial targets are now more challenging, and we'll be revisiting these at the end of the year given the current volatile market environment. I want to conclude with our outlook. We expect the current market uncertainty to persist and clients to remain cautious.
However, we're confident that our approach to active management is well-placed to assist clients in the current market environment, and we do expect clients to continue to allocate to our range of active strategies as they seek to navigate both the risks and the opportunities presented in the current market conditions. Thank you. That concludes our presentation this morning. We'll now turn to address any questions that you may have. Richard, could you please open the Q&A?
Thanks, Pete. Yes. Just a reminder to everyone, if you have any questions, if you can put it into the Q&A function in WebEx, and we'll take the questions from there. Due to some technical difficulties, I will guide ourselves through the Q&A, and pass them on to Pete. Pete, we have a question regarding whether we expect further consolidation within the sector, and would you expect GAM to be involved in such consolidation, pointing to the recent Bloomberg article.
Oh, thanks, Richard. Yeah, we certainly don't comment on market rumors and speculation. I won't do that. I don't think it's helpful. What I will say in terms of our focus, I'd just reiterate really the closing remarks there. You know, we're very focused on performance. We're focused on staying close to clients and through the cost saving and the investment that we've already made in how we run the business just remaining very focused on you know financial discipline going forward.
Thanks, Pete. We have a question regarding client activity in the past month, and effectively whether we expect the investment management inflows to continue to improve even though the tough market environment.
Thanks, Richard. Yeah, I think it's hard to sort of provide kind of monthly commentary or prediction on flows. You know, clearly, everyone in the industry has seen a difficult first half. I'd say I remain confident in terms of you see the slide showing our overall progression of flows on a annual basis. I'd say I'm confident in that continuing, but I wouldn't go as far as talking into month by month.
Thanks, Pete. There's a couple of questions which are on a similar basis around giving more color around our cost savings. Perhaps, Pete, I'll take that and if you want to add any color after I've.
Thank you.
Answered that. Yeah, you know, clearly, as we've tried to demonstrate, we've been on a very clear path of reducing our costs and we've set out here today some further cost saving targets for this year and for next year. It's very much more of the same. You know, the investment which we've made into the platform is enabling us to drive efficiencies and benefits of how we operate and enabling us to reduce costs further, which clearly, given the headwinds in our top line, is important to protect the from a profitability perspective. It is generally focused around our sort of supporting operating activities.
Clearly, our focus is around interacting with clients, so it is very much focused around how we can operate sort of more behind from a client perspective. I'm not gonna get into specifics as to what exactly the sort of reductions are and where, but effectively it is, it's sort of continuation of what we've been doing for the past number of years. In terms of how those reductions are achieved, it is, it's very much sort of piece by piece. There's no sort of big single bang event to cause those reductions. It is just very methodically ensuring that we operate as efficiently as we can. Pete, I don't know if you've got anything you want to add to that.
No. Thanks, Richard. I think that's comprehensive.
Got a question here, Pete, regarding whether the board has considered adding any investment colleagues to the Group Management Board.
It's a good question. Within our governance structure at the moment, you know, I don't think we have a need for that. We've got the business well represented, with myself primarily on the investment side, and then the key group roles within the firm on the GMB. Certainly when you look at the governance of the firm overall, I'm confident that everything is properly represented all the way up to the corporate board. The GMB, we should be clear, is subordinate in some way to the corporate board. It is in the corporate board. It's a separate structure.
Peter, there was a couple of repetitious questions which I think you've dealt with regarding M&A in the industry and really around our cost reductions. Unless somebody has a final question which they can enter into the Q&A, I think we're through all the questions. Maybe we give it 30 seconds to see if anyone adds anything.
Yeah. Maybe I can just pick up a little bit on the question on the industry and cost. I think we have sort of largely dealt with it, but what I will say is, you know, you can see the earnings pressure at an industry level. I've had the view for a long time, and I maintain the view that, you know, everyone is gonna have to put the effort in, to really modernize the technology platforms that they use, and really to keep continually trying to improve the way they operate. We're on that journey ourselves. We've made really good progress. I'm pleased with the effort and the investment that we've made over the last two years to put us in a good position, you know, to continue to get more efficient.
As an industry trend, I do think that's an important one, and I'm kind of pleased with how we're positioned in that regard.
Thanks, Pete. Couple of additional questions just come in. Pete, maybe you want to take this one. Can you comment on how variable pay bonuses are likely to look this year for senior executives and the wider staff?
Sure. Well, for compensation for us, we tend to distinguish between our investment professionals who are paid in a different regime from the rest of our staff. We're very clear that the formulaic basis that drives our investment professionals remains unchanged, and that will be the case this year as all prior years. That's been a good source of stability and retention and motivation for our investment professionals to keep producing the strong performance that they have for our clients. No change there. Obviously, you know, discretionary bonuses for the firm at large will depend on, you know, our performance as a firm. You know, we need to strike a balance of retaining talent and motivating them.
I will say, I think there's a strong sense that the firm, that people are also proud and want to see the firm do well, you know. I think, there is obviously more to that job retention than simply the bonus amount. It will, of course, be a function of how we're performing as a business first and foremost.
Just going back through this. Final question is around your confidence, Pete, in attracting new clients, new talent to the organization, given the cost savings initiatives were needing to perform.
Yeah. I mean, I'm very confident. We are in fact attracting new clients. We highlighted some of the dynamics at least briefly, which are new, including, you know, Latin America flow into our U.K. Equity Income as an example. It's always exciting when you kind of open a new client and a new client channel into a new area of the business. I think that's really encouraging, and we're certainly seeing more of that through time. In terms of attracting talent to the firm, you know, we've been really disciplined and tough in a way with managing our cost base for the last two years or more.
Through that period, we have also been attracting some really excellent talent externally, and we've been promoting excellent talent internally. You know, the environment is tough. You know, many of us have been around the business for a while and will remember that there's been periods like this before. It is tough. It means that you have to have even more focus on performance. You know, strong talent tend to recognize that and respond, you know, and kind of rise to the challenge. I don't see the disciplined cost environment as being at all out of alignment with attracting and encouraging strong talent.
You know, my view, kind of talented individuals want to come somewhere where they can make a difference, and see the impact of their work, and that's certainly the case here. I don't see any reduction in our ability to attract talent. Again, our track record all the way up to this year, including the new hires you mentioned, have been really positive and feel very humbled to have them join us.
Pete, that concludes all the questions in the Q&A. I think, maybe you want to close down this presentation.
Thank you, [Eugene. Thank you, everyone. Again, apologies for the delayed start. Thank you for bearing with us. We do appreciate it. I know it's busy. Hopefully we've made up a little bit of time. Thanks again for your time and interest in GAM, and have a good rest of the day. Thank you.