Activist Pressure on GAM Heats Up

Investment firms Krupa Global Investments and Bluebell Capital Partners want to see a turnaround at GAM or will aim to replace the firm’s board in 2020.

Illustration by II

Illustration by II

More than one year after GAM Holdings announced it would liquidate certain bond funds, leading to outflows of assets and staff members, the firm remains a target of activist investors.

Krupa Global Investments, which owns a nearly three percent stake in the investment firm, announced this week that it is now communicating with Bluebell Capital Partners, another activist investor in GAM.

Krupa is giving GAM’s new chief executive officer, Peter Sanderson, who began working for the firm over the summer, until February 2020, when GAM’s full-year results are due, to show a path to restoring profitability.

If Sanderson fails, Krupa has threatened to join forces with other activist investors including Bluebell and aim to replace GAM’s board in 2020, it said.

GAM’s problems began in July 2018, when it announced that it would liquidate its unconstrained/absolute return bond funds. It later fired the director of those funds for allegedly failing to conduct enough due diligence on certain investments.

Following that move, the firm lost assets and high-level staff and announced that it would work to complete a comprehensive restructuring process.

Krupa began its activist campaign in July 2019, when it acquired a one-percent stake in the firm. Krupa’s message has been that the firm did not effectively handle the communications surrounding the bond fund redemptions, which led to a large drop in the company’s share value.

Giuseppe Bivona, partner and chief investment officer at Bluebell, shared similar complaints about the redemptions.

“Everything started with the press release from the company, which was hinting that there was some mismanagement issue,” Bivona said by phone Wednesday. “The reality was that there was no breach that was reported.”

He added that Bluebell wants to replace the firm’s board because the firm thinks GAM’s board mishandled the communications surrounding the bond fund situation, noting that trust in the firm had eroded following the redemptions.

“The raw material of the asset manager is the fiduciary trust,” Bivona said. “If there is not trust, there is no business.”

The size of Bluebell’s stake has not been disclosed.

Krupa’s executives met with GAM in August and had issued a few statements supportive of the firm in the fall. But Krupa’s latest missive shows the firm seems to have changed its tune.

[II Deep Dive: Stop the Outflows, Activist Shareholder Urges GAM]

“This situation brought down AUM in investment management more than CHF 30 billion ($30.5 billion) and the only solution that current management suggested so far was a CHF 40 million cost cut, which is absurd in our opinion compared to damages that have been made recently to AUM and GAM shareholder value in recent months,” the firm wrote in its latest letter.

A spokesperson for GAM declined to comment on the matter.