News

GAM chief warns of outflows after director’s suspension

ReportsThe chief executive of Swiss asset manager GAM warned of potential fund outflows as it reported its first half results yesterday and revealed it had suspended an investment director.

The firm, whose investment management assets under management were flat across the first half, has suspended Tim Haywood following an internal investigation into his risk management procedures and record keeping.

No concerns about Haywood’s honesty had been raised by the investigation, the firm said, and no material client detriment had been established to date. Regulators were being kept informed as the process moves towards conclusion.

Haywood is business unit head for GAM’s unconstrained/absolute return bond strategy, which has 11 billion Swiss francs in assets under management.

Jack Flaherty and Alex McKnight, investment directors, have assumed joint responsibility for the strategy and other associated portfolios. Flaherty has been one of the co-managers of the strategy for over six years.

Daniel Sheard, also a co-manager of the strategy, is not involved in the day-to-day management of the portfolios, but continues to manage other fixed income portfolios.

Haywood is also the named manager of trade finance funds and fixed income fund.

Alexander S. Friedman, group chief executive, said: "We take our responsibilities and controls very seriously. Having conducted the investigation with external counsel, we now intend to follow our usual internal processes and will take any further action that may be appropriate."

GAM reported that its assets under management within its investment management business were flat at 84.4 billion Swiss francs after a sum equivalent to the 2.6 billion Swiss francs of inflows seen in the first half was cancelled out by market and foreign exchange movements.

However, overall group assets under management had risen by 3% to 163.8 billion Swiss francs. This was driven by positive net inflows of 6.7 billion Swiss francs to its private labelling business, which provides fund solutions for third-parties.

Pre-tax profit was up 21% to 91.3 million Swiss francs.

Friedman said there was growth potential in all GAM’s capabilities, but added: "However, market conditions have become more challenging, and some clients are choosing to rebalance their portfolios as we enter the later stages of this long-running bull market. As a result, we saw a significant slowdown in net inflows in the later part of the first half of 2018.”

He warned that “volatile and directionless” market conditions are likely to continue in the second half of this year, which may affect clients' risk appetite and GAM’s flows.

“We may also experience client redemptions as a result of today's separate announcement of the suspension of Tim Haywood, investment director business unit head for the unconstrained/absolute return bond strategy," he added.

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