GAM freezes some bond funds amid crisis plans
Firm’s chairman seeks to soothe investor fears and hints it is pondering ways to boost share price
GAM Holding AG froze withdrawals at some of its bond funds after clients sought to pull their money following the suspension of manager Tim Haywood, the latest in a series of setbacks that have shaved off a third off the company’s market value in the past month.
Chairman Hugh Scott-Barrett sought to soothe investor fears, acknowledging that recent events have been a setback and hinting that the company is considering ways to strengthen the share price.
“The board of directors and the management team are committed to considering all avenues to optimise shareholder value as we continue to build on the many achievements to date,” he said in a statement yesterday.
Shares of the asset manager extended a slide that started early last month when the company warned of a write-down because of losses at a quant hedge fund unit. The suspension of Haywood, who headed an 11 billion franc ($11.1 billion, Dh40.76 billion) absolute return bond strategy, and a warning by Chief Executive Officer Alex Friedman that clients may allocate less money to the firm because of volatile market conditions, accelerated the slide. GAM fell 9.4 per cent at 9:16am in Zurich trading, bringing losses in the past month to 33 per cent.
The halt to redemptions came into effect on July 31, GAM said yesterday. The firm said an investigation into Haywood raised issues with his risk management procedures and record keeping, and that it had suspended the manager.
The board of directors and the management team are committed to considering all avenues to optimise shareholder value.” Hugh Scott-Barrett | GAM Holding AG Chairman
Alternative structures
The boards of the investment pools are now considering all future steps, including liquidations, for 7.3 billion Swiss francs of assets managed at the unconstrained/absolute return bond funds. Although there is enough liquidity to pay investors back, the firm said “such actions would lead to a disproportional shift in their portfolio composition, which could compromise the interests of remaining investors”.
While the asset manager said the probe had not raised concerns about Haywood’s honesty and that there had not been a material impact to investors, clients have sought to exit.
The company is “looking at establishing alternative structures for clients who want to remain invested with the ARBF team,” Friedman said.
The last major fund freezes in Europe came in the wake of the Brexit vote when investors pulled money from UK property funds, fearing real estate values could plummet. That led asset managers to halt redemptions of funds with about £18 billion ($23.6 billion) of assets.