Crisis-hit Swiss fund manager hit by withdrawals from ARBF bond strategy.
Attempts by the chief executive of GAM to draw a line under a difficult six months for the crisis-hit Swiss fund manager fell flat on Tuesday as shares in the company plunged more than 20 per cent after it announced heavy outflows. GAM lost a fifth of assets from its range of funds in the three months to the end of September as its controversial decision to erect a redemption gate in a popular bond strategy, known as ARBF, failed to stem outflows from other products. “We are putting ARBF behind us. I really want to draw a line under Q3,” the fund manager’s chief executive Alexander Friedman told the Financial Times as investors pushed down the company’s share price to its lowest level in nine years. Assets in GAM’s investment management business fell from SFr84.4bn ($84.7bn) to SFr66.8bn in the third quarter, while total group assets, including its third-party outsourcing business, declined from SFr163.8bn to SFr146.1bn.
Withdrawals were concentrated in the investment group’s ARBF funds, which GAM closed to redemptions in August in an attempt to halt mass withdrawals. Investors had been spooked by GAM’s decision to suspend the funds’ portfolio manager. Since then, GAM has been trying to sell off the assets in the ARBF range, some of which are illiquid and hard to shift. Mr Friedman defended the decision to suspend Tim Haywood in August following a whistleblower tip that he had failed to comply with company rules, and the subsequent moves by ARBF boards to prevent redemptions. “The decisions we took to liquidate the ARBF funds were profound for us as an organisation,” he said. “We took them with the long-term health of our company in mind and with the intent to underline our culture and zero tolerance attitude to misconduct.” The ARBF range accounted for a decline in assets of SFr10.8bn, but the group also suffered SFr5.3bn of outflows from its other funds, notably its fixed income products.
Tom Mills, an analyst at Credit Suisse, said the outflows were “much worse than expected”, noting other fixed income funds were vulnerable to further redemptions. “We view this as a very weak update by GAM, which shows the immediate and significant impact on its business as a result of the issues with its ARBF franchise over the summer,” he wrote. GAM’s share price has fallen more than 66 per cent since January after a series of damaging revelations.
In July, the manager warned the market that it faced a hefty write-off related to its 2016 purchase of Cantab, a UK-based hedge fund. The Swiss manager has been the subject of speculation over a potential acquisition, either of the whole company or of its investment teams. Richard McNamara, GAM’s chief finance officer, would not be drawn on whether the company was in discussions with a potential buyer. But he added: “There are always a variety of options on any table. The management along with the board are looking at all avenues where it can maximise value for shareholders. That’s not ruling anything in and not ruling anything out.”