GAM Rises as Investors See Impact of Haywood Scandal Easing
GAM Holding Sees First Half Net Loss as Asset Shrinkage Bites
(Bloomberg) -- GAM Holding AG shares jumped after the company said assets rose and it’s on track to liquidate funds tied to ousted bond manager Tim Haywood, clearing the way for a possible sale of the company.
Group assets under management rose by about 4 billion francs ($4 billion) from the end of last year to 136 billion francs at the end of June. The liquidation of around 1 billion francs of assets from Haywood’s bond funds is expected by mid-July, removing a lingering concern that has made firms reluctant to bid for GAM. The shares rose as much as 7.2%.
The firm suspended Haywood in July 2018 and began liquidating its second-biggest strategy, sending GAM into a tailspin and causing large losses for embattled shareholders. Other firms have been hit by sudden investor flight, underscoring the unease in the market. Neil Woodford, one of Britain’s most famous stock pickers, froze withdrawals from his flagship equity fund. A global macro fund run by H2O, which is backed by Natixis SA, saw billions of dollars pulled in a matter of days amid concern about illiquid debt tied to controversial German entrepreneur Lars Windhorst.
GAM said on Wednesday that it expects a first half net loss of about 14 million Swiss francs, including one-time items. It also lost billions of francs from its high-margin investment management businesses. The day before, GAM shares fell 9%, the most since December, after UBS AG analyst predicted a sharp slump in profits.
Star bond manager Haywood was ousted for “gross misconduct” earlier this year, capping a tumultuous period for the firm. GAM said that there was “serious failure” to achieve the standard of skill and care that should be expected of someone in his position. He was suspended a year ago after the company said he breached certain internal rules. Haywood said in February that he was being made a “scapegoat” in the process to dismiss him.
The loss of confidence prompted investors to pull almost $25 billion, which also cost former chief executive officer Alexander Friedman his job. GAM has been operating with an interim CEO, board member David Jacob, since November.
The company has recently revived an effort to sell itself, people familiar with the matter have said.
Share Drop
The shares were up 5.5% at 4.48 francs as of 10:04 a.m. The stock has declined about 63% from just before Haywood’s suspension. Wednesday’s increase boosts this year’s gain to about 16.5%.
Underlying pretax profit is expected to total about 2 million francs, down from 91.3 million francs a year earlier, GAM said on Wednesday. Assets under management in investment management amounted to about 52 billion francs as of June 30 compared with 84.4 billion a year earlier. Final first-half results will be published on July 30.
It hasn’t all been bad news for the asset manager this year. Outflows slowed significantly in the first quarter compared with the last three months of 2018, according to data compiled by Bloomberg. In May, billionaire investor George Soros disclosed a 3% stake in the company.
GAM has gauged interest from banks, asset managers and insurers, according to the people familiar. Most of the money it oversees is in the low-margin private labeling business, but the company still runs more than $50 billion in its own investment strategies.
"The completion of the Absolute Return Bond Fund liquidation could serve as a stabilizing force for the assets under management, and in turn, could provide a catalyst for more intense takeover talks as well," UBS analysts led by Mate Nemes wrote in a note to clients yesterday.
--With assistance from Leonard Kehnscherper.
To contact the reporters on this story: Ross Larsen in Rome at rlarsen2@bloomberg.net;Patrick Winters in Zurich at pwinters3@bloomberg.net
To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen, Keith Campbell
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