Swiss Firm Tries to Stem Fallout From $11 Billion Liquidation
(Bloomberg) -- GAM Holding AG climbed the most since October after the company reported slowing outflows and said it would soon complete the liquidation of its scandal-hit bond fund.
The Swiss fund manager gained as much as 15 percent in Zurich trading, erasing this year’s declines. The Absolute Return fund, once operated by former star trader Tim Haywood, should be wound down by mid-July, GAM said on Wednesday.
"Liquidation by mid-2019 is a positive -- if losses are avoided -- putting an end to the cause of major troubles for GAM," Vontobel Holding AG analyst Andreas Venditti said in a note to clients.
Wrapping up Haywood’s funds -- eight months after his suspension triggered a wave of outflows -- may revive interest in a sale of the company. GAM has held informal talks with potential buyers for all or part of the business, people familiar with the discussions said in October. The company has lost almost $25 billion since the scandal broke, $11 billion of which was due to the liquidation of Haywood’s funds.
"Having now sold all but the final group of material assets and with an agreement in place which leads to the sale of them as well, we look forward to putting this difficult period behind us," Chief Executive Officer David Jacob said about the absolute return funds on Wednesday. Money flows in the first quarter were still affected by issues stemming from the funds, he said.
GAM said it had reached an agreement to sell “one remaining group of material assets” in Haywood’s funds to the GFG Alliance, British industrialist Sanjeev Gupta’s conglomerate. The notes are “power purchase receivables” with a face value of 1.35 billion Swiss francs and GFG will “facilitate” their acquisition at the original valuation by July 15. GFG issued the notes to finance the development of power plants in Scotland and elsewhere, Bloomberg has reported.
GAM was up 15.4 percent at 4.05 francs as of 12:58 p.m. The shares have fallen about 65 percent since Haywood was suspended at the end of July.
Jacob took over as acting CEO at the end of last year with GAM reeling from client withdrawals triggered by the suspension of Haywood, who was dismissed in February. Jacob has cut jobs and merged teams to slash costs, but his biggest challenge has been to stop clients from pulling more cash out of the firm’s funds.
GAM reported first-quarter net outflows of about 4 billion Swiss francs ($4 billion) in investment management, which generates the bulk of its fees. Bloomberg estimated $2.4 billion of outflows based on data that doesn’t include private mandates to manage money for institutional clients.
Firm-wide assets under management rose by 5.2 billion francs to 137.4 billion francs during the three-month period. The total dropped by more than 26.5 billion francs over the whole of last year.
GAM said it expects to make another distribution to investors in the ABRF fund over the next two weeks, saying it has found a buyer for the "material” Absolute Return assets that remain and expects to sell them without taking a haircut.
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