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GAM forced to halt dealing for €6.3bn bond funds after redemptions spike [updated]

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Swiss asset manager GAM has halted dealing in its unconstrained and absolute return bond funds after a spike in redemption requests following the suspension of a fund manager.

Clients began pulling their money out of the funds following the suspension of Tim Haywood, head of the strategy’s management team, on 31 July.

The company announced his suspension on Tuesday morning after an internal investigation highlighted problems with his risk management and record keeping.

In a statement today, GAM said it had halted dealing in and out of nine absolute return and unconstrained bond funds run by Haywood’s team to protect investors. It also stopped charging management fees on the affected portfolios.

The management boards of the affected funds were “considering all future steps, including fund liquidations, to maximise value and liquidity for clients”, the company said.

The affected funds had CHF7.3bn (€6.3bn) in assets under management as of 31 July when trading was stopped.

In addition to the absolute return bond funds, Haywood also worked on trade finance portfolios worth CHF2.9bn and other fixed income strategies worth CHF653m. These have not been affected by the investigation.

There have been no changes to the investment process and philosophy behind the funds, and no other GAM strategies have been affected, the company said.

It added that it had not discovered any “material client detriment” during its investigation but the situation remained “under review”.

“GAM is committed to ensuring equal treatment of all investors and protection of their interests,” the statement said. “The company is actively engaging with clients and is focused on resolving the situation as quickly as possible for investors.” 

Investment directors Jack Flaherty and Alex McKnight were jointly placed in charge of the absolute return bond strategy following Haywood’s suspension.

Alexander Friedman, group chief executive at GAM, added that the company was “fully committed to safeguarding the interests of our clients”.

Chairman Hugh Scott-Barrett said: “The board of directors acknowledges that recent events have been a setback for the company.

“However, we have absolute confidence in the strength of GAM as a diversified asset manager and the ability of its investment teams to deliver returns for clients.

“We have a clear strategy and management will continue to execute against it.”

Zurich-based GAM ran CHF163.8bn in total as of 30 June, across equities, bonds, multi-asset and hedge funds.

[This article was updated to state that GAM had halted dealing in the bond funds rather than trading.]

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