Clients withdraw $4.5B from GAM funds following scandal

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GAM Holding investors have pulled $4.5 billion from the firm’s funds since the end of September in a sign that the damage from the suspension of a top manager is far from over.

Clients withdrew the funds in the seven weeks through Nov. 16, during which the Swiss asset manager parted ways with CEO Alex Friedman and began a restructuring plan. Those outflows are from strategies unrelated to the original scandal, according to Bloomberg data. GAM had about 146 billion francs under management at end September.

The largest share of outflows, about $856 million, came from GAM’s biggest strategy, the GAM Star— Credit Opportunities fund. Mainfirst estimates that GAM had outflows of about $3.7 billion so far for the fourth quarter. That’s substantially above the consensus estimate of about $2 billion, Daniel Regli, an analyst at the firm in Zurich, wrote in a note to investors.

A spokesman for GAM declined to comment.

Bond manager Tim Haywood was suspended in July after the company said he breached certain internal rules, prompting the first wave of outflows and a tumbling share price.

So far, GAM has reacted to the crisis by redoubling its efforts to keep important employees, while reducing costs elsewhere. It’s offering a special retention bonus to key fund managers, people with knowledge of the matter said earlier this month.

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About 20 other investment professionals are being affected by a job-cutting plan, a person familiar with the matter said last week. GAM is consolidating some fixed income and equity teams, interim CEO David Jacob said in an internal memo obtained by Bloomberg and confirmed by the company.

Haywood’s suspension came as GAM was already buffeted by headwinds in the asset management industry. Volatile returns and an investor flight to low-fee products have squeezed profits, forcing many money managers to consolidate. Assets under management declined by about $18 billion in the third quarter as Haywood’s funds were liquidated and clients pulled money from other strategies.

GAM got a rare boost last week from Mario Gabelli, the 76-year-old billionaire head of Gamco Investors. He’s built a stake of around 3% in GAM, according to a filing.

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