Published by Fund Selector Asia – 12th Oct 2018
Compliance issues that resulted in Tim Haywood’s exit hit the firm’s reputation and flows.
Rival asset managers are reportedly circling troubled Swiss asset manager Gam after a turbulent summer for the group, when compliance issues at the firm led to the suspension of fund manager Tim Haywood (pictured) and the liquidation of the unconstrained bond range he headed up, as reported by FSA‘s sister publication Portfolio Adviser.
Gam is in early-stage negotiations with potential buyers for part or all of the business, Citi said in an analyst note published on Wednesday afternoon.
Gam did not wish to comment on any potential negotiations.
ARBF range hits Gam’s reputation
Citi currently rates Gam as high-risk due to reputational damage, significant fund outflows and sharp profitability decline following Haywood’s exit and the liquidation of the funds. Citi expects earnings and valuation could be volatile.
The asset manager froze Haywood’s funds in July, days after it announced his suspension.
The absolute return bond fund (ARBF) strategies have been a core staple of Gam’s offering for many years, Citi said. The range held CHF11bn ($11.11bn) in June 2018 with CHF7.3bn being liquidated via the Ucits funds and the remaining assets in segregated mandates are likely to be withdrawn. “Contagion of outflows to other Gam strategies will be hard to prevent,” the bank said.
Haywood’s range was one of the higher-margin strategies at the asset manager with an average 61.69 basis point management fee margin.
Rival fund houses eye core and alternative strategies
Gam is a well-known brand, particularly in Switzerland, with core active management strategies as well as “unusual” strategies, such as mortgage-backed securities, credit and physical metal ETFs, Citi said.
In the past, Gam has highlighted cat bond, insurance-linked securities local emerging bond fund, and Gam Systematic Core Macro as potential growth areas.
“A more traditional asset manager could see this as a complementary product set, or a distributor could view an acquisition a good way of bringing specialist asset management in-house,” Citi said.
Talk of a potential sale should support the asset manager’s share price but a sale may hit assets under management if the whole business is sold, Citi warned. “In the past we have seen deals with up to 25% attrition, but the extent does vary.”
