GAM Set to Pay Investors Premium in Haywood Funds Wind-Down

(Bloomberg) -- GAM Holding AG completed the wind-down of Tim Haywood’s scandal-hit bond fund and is set to repay investors with a premium as it seeks to end a year of tumult after his suspension, according to people with knowledge of the matter.

Investors are set to receive a 50-basis point premium on their holdings in the more than $7 billion Absolute Return Bond Fund, the people said, asking not to be identified discussing private matters. GAM is set to announce it sold the final assets in the Haywood-managed fund on Monday, the people said. The premium is an average across funds and share classes.

The company is in the process of settling the sale of the remaining assets in the ARBF fund, it said in a statement on Monday. GAM had previously indicated that it would pay 99.6 to 101% of the assets held when it began to liquidate the fund.

The end of the liquidation -- three months later than GAM initially predicted -- helps draw a line under a scandal has dogged the company since the shock suspension of Haywood in July 2018 and his later dismissal for what the company called gross misconduct. Investors have since been waiting to find out what they will receive as the fund’s assets were gradually sold off.

GAM reversed losses in Zurich trading after the wind-down was reported, only to decline shortly after. The stock closed down 1.8% at 4.37 Swiss Francs. The shares are up about 13% this year.

More Money

“You could argue that people got more money than they expected," Michael Kunz, an analyst at Zuercher Kantonalbank said by phone. While completing the wind-down removes a due diligence obstacle for potential investors in GAM’s funds, “we need to see inflows.”

Star bond manager Haywood was ousted earlier this year. 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 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 more than a third of assets from the key revenue generating funds, 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 suspension and the liquidation of the company’s second-biggest strategy sent GAM into a tailspin and caused the shares to plummet last year. The stock rebounded last week after the company said it was on track to meet its liquidation goal and that assets under management increased.

Finishing the liquidation may pave the way for a sale of GAM. After initial efforts were unsuccessful, the company revived the process of finding potential buyers, people familiar with the matter have said.

To contact the reporter on this story: Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen

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