GAM will begin returning money in a troubled line of absolute return bond funds to investors next month. The Swiss asset manager voiced hoped that investors will eventually come back with their money.
The Zurich-based asset manager first gated, then said it would begin liquidating a 7 billion Swiss franc ($7.1 billion) line of absolute return bond funds. The move followed a clamor from investors for GAM to return more than 10 percent of funds after the company suddenly suspended star fund manager Tim Haywood.
The bond funds have since received regulatory approval to unwind, GAM said in a statement on Tuesday. The asset manager said it will begin payouts as soon as next week, and aims to continue paying back the proceeds of the wind-down «in the coming months, dependent on market conditions.»
No Guarantees
Investors are likely to take a hit: there is no guarantee they will recoup what they put in. The company aims to pay clients their proportionate interest in the funds back by year-end depending on how quickly it can unwind trades, a spokesman said. Because GAM is in crisis, buyers have more far leverage than the company does at the moment.
In a first step, GAM said it will be able to return between 74 percent and 87 percent of funds domiciled in Luxembourg and Ireland next month, as well as up to two-thirds of those in a Cayman Islands master fund as well as Cayman and Australian feeder funds.
Payouts vs Bid for New Clients
At the same time, GAM voiced confidence that it can withstand the Haywood and absolute return crisis, which has put CEO Alex Friedman under massive pressure and raised the specter of a sale of the firm.
«GAM also expects to offer alternative structures for investors who want to remain invested with the absolute return bond fund team. A UCITS fund is expected to be available for investors in the coming weeks, and the company is setting up a new Cayman fund as well», GAM said.
GAM in Crisis
Whether GAM can convince skittish institutional investors to pony up funds again is questionable. The firm's justification for suspending Haywood, which sparked the glut of redemptions, failed to convince investors (or finews.asia). The stock has lost nearly one-quarter of its value since it reported first-half results and moved on Haywood four weeks ago.
On Tuesday, GAM said Haywood's actions represented «a cumulative pattern of potential misconduct» that board and management unanimously agreed warranted his suspension (click here to read more about Haywood). The firm is currently undertaking a disciplinary process against the fund manager.
