GAM Investments Bleeds $18 Billion in a Single Quarter

The firm lost 20 percent of its assets under management over the last three months.

Jason Alden/Bloomberg

Jason Alden/Bloomberg

After several months of tumult resulting in the closure of its unconstrained bond funds, GAM Investments bled assets last quarter.

The Swiss money manager reported a 20 percent decrease in assets under management in its third-quarter earnings Tuesday. It opened the quarter managing CHF 84.4 billion ($84.85 billion) on June 30, and closed it with CHF 66.8 billion three months later.

GAM Investments cited three factors for the decline: the closure of its unconstrained/absolute return bond funds, outflows from non-absolute return bond fund strategies, and negative foreign exchange and market movements.

Outflows have begun tapering off this month, the firm said. “We are taking immediate and near-term measures to support GAM’s profitability,” said group CEO Alexander Friedman in a statement.

The bond unit’s shutdown accounted for about half (CHF 10.8) of GAM’s total net shrinkage, according to its earnings report.

In July, the firm suspended its head of unconstrained/absolute return bond funds (ARBF), Tim Haywood, for potentially failing to conduct enough due diligence on certain investments, in addition to other policy breaches, the firm said at the time.

“The consequences of the suspension of an ARBF investment director marked a clear setback for GAM,” said Alexander Friedman, group chief executive officer, in a Tuesday statement.

After the suspension, GAM received a high level of redemption requests and eventually announced in August that it would wind down nine products, which managed roughly CHF 7.3 billion ($7.34 billion) of July 31.

But the upheaval continued in September when GAM disclosed that compliance chief Natalie Baylis would step down only months after joining, citing “personal reasons.”

[II Deep Dive: GAM Investments’ Compliance Chief Quits After Just Four Months]

Beyond the outflows from shuttering ARBF, the firm attributed CHF 1.5 billion in lost assets to negative foreign exchange and market movements. Those not related to the bond fund closure or market sentiment totaled CHF 5.3 billion, according to the earnings report.

GAM has taken a few steps to strategically improve its operations, according to its earnings report. It has elevated its head of investments, Matthew Beesley, to its group management board. It has also created front-office control functions.

“We have a stable and diversified business that we continue to build upon and we remain fully focused on delivering the investment returns expected by our clients,” Friedman said.

Nevertheless, the company’s shares fell more than 12 percent Tuesday during Swiss trading hours.