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GAM completes wind-up of suspended absolute return bond funds

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Swiss asset manager GAM will make the final payments to investors in its absolute return bond funds by the end of July, marking the end of a 10-month process of liquidation.

In a statement yesterday, GAM said it had received “all proceeds from the sale of the remaining absolute return bond investments”. It said an average of 100.5% of the value of the funds, as of 3-4 September, had been realised and was due to be returned to investors.

Dealing in and out of nine funds was halted at the start of August 2018 after redemption requests spiked in the wake of the suspension of Tim Haywood, head of the absolute return bond team. An internal investigation had identified problems with Haywood’s risk management and record keeping.

The funds were worth CHF7.3bn (€6.6bn) at the end of July 2018. 

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“GAM’s priority throughout the liquidation process has been to maximise liquidity and value for its clients,” the company said.

David Jacob, GAM Group CEO, said: “We are very pleased that we will be making the final payment to our [absolute return bond fund] investors over the coming weeks. We would like to thank all our clients for their continued patience during the liquidation process.

“We are fully focused on further stabilising the business for future growth, executing our restructuring programme and delivering value for our clients and shareholders. With our distinctive set of investment strategies and a global distribution network, we believe we are well placed to help our clients find attractive returns.”

GAM began liquidating the portfolios in September 2018, and has since refunded the majority of the money held in the funds. Investors in funds domiciled in Luxembourg and Ireland had so far received refunds equivalent to 89-95% of the value of the portfolios, the manager stated, while those invested in Cayman Islands-based vehicles and Cayman or Australian feeder funds had received 80-84%.

Although GAM stated at the time of the fund suspensions that it had not discovered any “material client detriment” during its investigation, the incident hurt the fund manager’s assets under management and profitability last year. In its full-year report for 2018, GAM said its assets under management had fallen from CHF84.4bn to CHF56.1bn due to the liquidation process and investor redemptions from other funds, while its profit before tax fell by 27%.

Further reading

On the Record: Manager due diligence
The fallout from Tim Haywood’s exit from GAM revived the discussion about due diligence. IPE spoke to Austria’s APK Pensionskasse, Sweden’s Ericsson Pensionsstiftelse, and Denmark’s Sampension about their approach

Fitch warns on liquidity risk in European high-yield bond funds
More recently, liquidity levels in daily-dealing investment funds has come under scrutiny, with rating agency Fitch warning earlier this month that some fixed income funds appeared to be “operating with significant liquidity risk”

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