4. Puzzle «Performance»
GAM CEO Alex Friedman said the performance of Haywood’s funds had been slightly down so far this year. GAM has more than 100 absolute return bond funds in all; here is the performance of a Swiss-franc denominated one:
The idea is that absolute return funds provide a flatter return when regular bonds get battered. Haywood couldn’t pull it off in the first half, but he isn’t alone: U.K. asset managers St. James's Place and Man also noted weakness in their respective absolute return bond business in the first six months.
Haywood, by definition of absolute return funds, could invest much like a hedge fund in nearly anything he deemed appropriate. The fund manager may have got stuck reaching for more esoteric, less liquid products, technical analyst Murray Gunn (pictured above) of Elliott Wave posited.
Is the GAM funds collapse a warning sign of credit illiquidity on par with the implosion of two Bear Stearns credit funds at the start of the financial crisis of 2008/09? GAM’s reluctance to disclose any specific investments or trades deepens the mystery – and uncertainty.
