A Swiss Investment Firm Plans to Dismiss a Star Bond Manager for Misconduct

(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.

GAM Holding AG plans to dismiss suspended star bond manager Tim Haywood for misconduct, according to a person familiar with the matter.

The decision is the latest development in turmoil that has rocked the Swiss asset manager for the last seven months and Haywood may appeal the decision, said the person, who asked not to be named because the information is private.

A spokesperson for Zurich-based GAM declined to comment.

The investment firm, which reports full-year earnings Thursday, is seeking to overcome the scandal that’s triggered a wave of client withdrawals and a plunge in share prices. GAM parted ways with former Chief Executive Officer Alex Friedman in November after a series of mishaps culminated in Haywood’s suspension and left the firm fighting for its survival.

GAM was forced to liquidate more than $7 billion across nine funds after suspending Haywood in late July amid allegations of shortfalls in documenting trades and managing risk. The company is selling the last remaining positions and could complete the liquidation in the coming weeks, people familiar with the matter said last month. GAM expects that investors in the frozen bond funds will get almost all their money back, the people said at the time.

Investors have pulled about $16.3 billion from the firm since the end of June and the firm’s shares have dropped about 70 percent since Haywood’s suspension. GAM had about 139 billion francs ($139 billion) under management at the end of November. The continued outflows pose a challenge to interim CEO David Jacob, who’s trying to reverse the downward spiral of bad news and client defections.

Haywood’s funds made large bets in hard-to-sell project-finance notes tied to U.K. industrialist Sanjeev Gupta’s GFG Alliance, making them one of the largest holdings, public filings reviewed by Bloomberg show. Haywood was accused by GAM of undertaking insufficient due diligence before investing in unlisted securities, including those relating to power plants in Scotland being developed by GFG, Bloomberg has reported.

A spokesman for Gupta’s GFG declined to comment. GFG isn’t accused of wrongdoing.

Read more on GAM’s struggles here.

©2019 Bloomberg L.P.