Wealth management firm Gluskin Sheff + Associates Inc. posted a sharp drop in fourth quarter profit as performance fees tumbled.

The Toronto-based firm said after markets closed Thursday that net income for the quarter ended June 30 was $11 million, or 38¢ a share. That compared with $57.7 million, or $2 a share, in the year ago period.

Total revenue for the quarter was $28.7 million, compared with $121 million a year ago.

The company’s revenues are derived from base management fees, calculated as a percentage of assets under management (AUM), performance fees, which are earned when the company exceeds pre-specified rates of return, and investment & other Income.

Base management fees for the quarter were approximately $20.9 million, compared to $19.4 million for the year ago period, an increase of approximately 8%.

AUM as at June 30 were approximately $5.6 billion, compared to $5.1 billion as at March 31, 2008, and $5.4 billion as at June 30, 2007.

“Since June 30th, capital markets have been extremely adverse and volatile and our AUM have been negatively impacted. As at Sept.17, 2008, our AUM was approximately $4.6 billion, with the change from June 30th being overwhelmingly attributable to investment performance,” Gluskin Sheff said in a release.

Performance fees for the quarter tumbled to $6.7 million, compared with $101.5 million for year ago period. These fees relate to approximately $3.6 billion of AUM invested in portfolios with a performance year end of June 30, 2008, compared to $3.7 billion of AUM invested in portfolios with a performance year end of June 30, 2007 for fiscal 2007.

“In general, we are pleased with the results of our second full year as a public company. This has been and continues to be a very challenging year in the equity markets generally as well as for our investment portfolios. Difficult capital markets, together with extreme volatility, have resulted in significant declines in some of our best investment ideas which has adversely impacted our short-term investment performance and reduced our AUM,” commented Gerald Sheff, chairman and CEO.

IE