David Solo, the former head of GAM, is still doing business with his former employer – and, more crucially perhaps, with investment manager Tim Haywood. The old network has caught up with GAM.
David Solo and Tim Haywood were close for years. Haywood, the suspended fund manager of GAM, was already with Julius Baer when Solo joined the private bank from UBS thanks to the sale of GAM.
As CEO of GAM, Solo helped Haywood found his own asset management firm Augustus by management buyout – and saved him at the height of the financial crisis in 2009, when he bought the firm back. From then on, Haywood became one of the best performers in the GAM of Solo, thanks to his great loans strategies. In 2014, Solo left the job and passed on the torch to Alex Friedman.
Keeping in Touch
That wasn’t the end of the connection between Solo and Haywood though. Solo joined Greensill as a senior adviser for Switzerland – and used his good relations with Haywood in his new job.
In 2016, GAM and Greensill launched a funds, the GAM Greensill Supply Chain Finance Fund (GAMSCFB). Haywood was in charge of this fund until his suspension.
Bulk Risk
The 53-year-old fund manager extended the strategy employed at GAMSCFB to further of his absolute return bond funds (ARBF). He invested strongly in credit securities that belonged to GFG Alliance. The company, led by Sanjeev Gupta has been in the news for several acquisitions of crisis-ridden steel and energy firms.
Those investments by Haywood were managed through Greensill as well and his old friend Solo. The GFG notes recently amounted to much of the Haywood funds, according to a report by «Bloomberg». A bulk risk hardly in the interest of GAM and its clients.
Liquidity Problems?
At the beginning of the year, liquidity problems started to beset the Haywood Funds, according to people close to GAM. The asset manager started an internal investigation against Haywood in February, after the top management had received indications about certain deficiencies in the investment process applied by Haywood.
He was suspended at the end of July. The main reason given: Haywood had been slack with due diligence in some of his investments and had not document the procedure properly.
It isn’t known whether this applied to the GFG investments in particular – GAM didn’t comment. Nor did it comment about the continued business relations between Haywood and his previous boss Solo.
Deep Crisis
But it wouldn’t come as a surprise if the connection between Solo and Haywood had led to the suspension of Haywood and the liquidation of the funds, worth some 7.5 billion Swiss francs ($7.7 billion).
The consequences suffered by GAM are major and they have plunged the company into a crisis that is far from over. The share price today reached a record low of 7 francs.