(Bloomberg Opinion) -- The nightmare that GAM Holding AG has lived through for the past year is about to end, with the Swiss fund manager expecting to finish unwinding its frozen Absolute Return Bond Funds in coming days. The question is whether a buyer will now emerge for what’s left of the firm.
Last July, GAM announced the suspension of Tim Haywood, the manager of those funds, and halted redemptions from them. It’s taken since then to liquidate the holdings. Meanwhile, investors in the firm’s other products have been pulling their cash.
The bad news is that customers have withdrawn almost 40% of their funds in the past year, reducing the assets the firm oversees to 52 billion Swiss francs ($52 billion). The good news is that the pace of departures has slowed: The decline of just 4.1 billion francs in the first half of this year is far less than the 28.3 billion francs the firm lost in the last six months of 2018.
Rising stock and bond markets mean GAM expects to make an underlying pretax profit of 2 million francs in the first half, boosted by 5 million francs of performance fees. Profit will still be down from 91.3 million francs a year earlier, the fund manager said on Wednesday, but those performance fees will have more than doubled.
GAM hasn’t had a chief executive officer since Alex Friedman was ousted in November, with board member David Jacob stepping in as interim CEO. Its current market capitalization of about 700 million francs is about a third of what it was a year ago, though some 42% better than at its nadir in March.
So the question now is whether GAM is cheap enough for a bidder – or whether the brand is still too toxic for a takeover. Private equity firms are awash with cash; maybe taking GAM private and combining it with two or three other small- to medium-sized specialists, squeezing out costs and gaining economies of scale, would be the way to finally draw a line under the firm’s dreadful year.
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Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of "Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable."
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