Published by Portfolio Advisor – 18th Dec 2018
Darius McDermott says the revelations don’t change his view on Gam fund picks
Gam’s interim chief executive David Jacob was previously fired from a senior finance role for failing to properly oversee the activities of an employee, according to a report.
The Financial Times has reported that Jacob was let go by Merrill Lynch Investment Managers in 2001 when he was head of fixed income for EMEA after failing to supervise a currency trader.
It said over a six-year period the currency trader in question allegedly misallocated profits on foreign exchange dealings and diverted the profits of successful currency hedging deals to some clients at the expense of others.
Jacob was one of two executives fired at the time before moving on to become head of fixed income at UBS Asset Management in London.
GAM AWARE OF HIS PAST
According to the report, a person familiar with the situation said the Gam board was aware of Jacob’s past when joined as a non-executive director last year.
It also said Jacob has received regulatory approval for roles he has held since 2001, including from Finma, the Swiss regulator, when he joined Gam.
Gam chairman Hugh Scott-Barrett leapt to Jacob’s defence, telling the FT: “David is a man of the utmost integrity and has an excellent reputation in the industry.”
He added: “He has demonstrated his exceptional experience and leadership already, taking decisive actions to focus on Gam’s strengths, rebuild profitability and ensure that we continue to put our clients at the forefront of everything we do. We are lucky to have him.”
The firm had nothing to add when contacted by Portfolio Adviser.
JACOB’S APPOINTMENT DOES NOT AFFECT HOW FUNDS ARE RUN
Darius McDermott, managing director of Chelsea Financial Services, said Gam has had a tough time and a bit of bad luck, but something that happened in 2001 is of no concern to him as an investor.
“If [Jacob] has had regulatory approval to hold these senior roles in both UK and Switzerland, that would tend to suggest whatever he did in the past was not so serious that he could not have senior roles at asset management companies,” he added.
“All I care about is the fund managers we currently support and we have a lot of time for Niall Gallagher, who runs their European funds, and a lot of time for the guys that run Gam Star Credit Opportunities, which is a good high-yield bond fund. Has anything with them changed because this guy has been made interim CEO? The answer is no.”
TOUGH TASK TO MANAGE
Jacob was appointed as interim chief executive of the beleaguered asset manager in November after Alexander Freidman quit amid mounting pressure over his handling of the whistleblower crisis, which saw absolute return bond fund manager Tim Haywood suspended for conduct issues related to his due diligence and record keeping.
He set about restructuring Gam’s fixed income and equities franchises just two weeks into the role. In an email to staff he warned redundancies were to be expected as a result of the reshuffle.
Last week Gam said in a profit warning ahead of its fourth quarter update that it would be incurring a CHF925m (£737m) loss for 2018, after taking into account massive writedowns including its acquisition of a UK-based hedge fund. This is compared with a profit of CHF123.2m for 2017.
