Gam has sacked star bond manager Tim Haywood who was at the centre of a scandal involving one of the fund group’s most popular ranges that unleashed a wave of redemptions and sent assets tumbling.
The Swiss manager confirmed Haywood’s firing as it unveiled its full year results for 2018 which painted a continuing picture of financial woes with the beleaguered manager posting a net loss and a 30% hit to assets in its investment arm.
“Following the conclusion of the investigation and the disciplinary proceedings, the suspended investment director has now been dismissed from the company for gross misconduct,” it said.
The Zurich-headquartered fund group has been relatively tight-lipped about Haywood’s status at the company in the months since his suspension was announced and his absolute return bond fund (ARBF) range entered liquidation.
Last summer Gam chief executive Alexander Friedman, who was ousted from the firm months later, revealed the former head of Gam’s multi-billion-pound absolute return bond strategy was suspended for conduct issues, which concerned his due diligence and record keeping “in certain instances”. It was later revealed that the investigation into Haywood had been triggered by an internal whistleblower and Gam had been looking into the bond manager since November 2017.
ARBF blow-up weighs heavy on results
The blow-up of Gam’s £8.5bn ARBF range has continued to take its toll on Gam triggering outflows from other fund ranges and wreaking havoc on its share price.
In 2018 the firm recorded CHF10.5bn (£8.02bn) of net outflows from non-ARBF strategies on top of the money that was lost from liquidating Haywood’s strategy. Coupled with CHF6.8bn (£5.2bn) from negative market movements this dragged AUM down to CHF56.1bn (£42.9bn) from CHF 84.4bn (£64.52bn) the year before.
Last year Gam saw 77% wiped off its share price, which fell to a record low of CHF 3.86 per share. Shares in the group fell 7% followiung the release
Gam posted a net loss of CHF929.1m (£710.1m) and pre-tax profits of CHF126.7m (£98.9m) last year, which it said were in line with expectations.
The group reiterated its guidance that profits for 2019 will be “materially below” last year’s given its significantly lower AUM and that no dividend will be paid to shareholders for 2018.
Restructuring update
The Swiss manager also provided an update on its restructuring efforts, that will see it eliminate 10% of the roles across the group, saying plans are now underway.
Gam expects to achieve a reduction in fixed personnel and general expenses of at least CHF40m by the end of 2019, with one third of the savings to be reflected in 2019 and the full benefit in 2020. It said further opportunities for cost savings would be examined during the overhaul of the business.
As previously stated Gam will be consolidating its fixed income team across its London, Zurich and New York offices. The firm has already consolidated its European equities managers into a single team but has said it will maintain its existing strengths in non-European equities.
Newly minted chief executive David Jacob admitted 2018 had been “a very challenging year for the asset management industry in general and for Gam in particular” but said he was confident the restructuring would put the firm on the right path again.
“We are repositioning Gam to build on the strong investment expertise we have in our business, with a distinct set of strategies that are relevant for client needs and a global distribution network to support our client relationships,” said Jacob. “A simplified business structure and more efficient processes will enable us to focus on areas of strength as well as allowing us to further enhance our control environment. This will help us to improve profitability and restore long-term shareholder value.”
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