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After Brief Turnaround, Assets Are Flowing Out of GAM Again

The investment manager had reported positive inflows for the first time in two years during the fourth quarter of 2020. That progress was short-lived.

It seemed like things were finally turning around for investment firm GAM Holdings.

In February, the company revealed in its 2020 annual results that it had posted its first quarter of positive inflows since 2018, while also reporting improved performance in its investment management division.

But the progress with flows was short-lived. In its first-quarter earnings report on Wednesday, GAM said its investment management division had experienced outflows totaling CHF 989 million ($1.04 billion) during the three-month period.  

Weeks earlier, the firm had alerted investors that it was winding down the GAM Greensill Supply Chain Finance fund.  

Although the fund closure affected less than ten clients, it wasn’t the first one GAM has dealt with in recent years: In 2018, the firm gated its unconstrained/absolute return bond funds to stem outflows. The firm then liquidated those funds and fired their director, Tim Haywood, claiming that he failed to conduct sufficient due diligence on certain investments.  

That news kicked off years of outflows and a turnaround effort that involved cost-cutting measures. Although GAM stymied the outflows for a quarter, the pattern returned during the first three months of 2021. 

The quarter’s outflows included CHF 500 million in net redemptions from specialist fixed income strategies, primarily driven by allocation decisions, according to the announcement. Similarly, the firm’s systematic strategies, including its systematic core macro and systematic multi-strategy funds, experienced outflows of CHF 400 million for the quarter.  

GAM’s equity strategies, meanwhile posted strong performance, driven by its Japan and European funds. This resulted in inflows of CHF 200 million, GAM said. 

“I am pleased with the continued progress of our strategy and, although we saw outflows in investment management, we are seeing encouraging client activity on the back of strong investment performance,” Peter Sanderson, group chief executive officer, said in a statement. 

[II Deep Dive: A Beleaguered Asset Manager Was Poised for a Turnaround. Then the Pandemic Hit.

GAM announced in January that a large client in its private labeling business, which helps with fund administration arrangements and management company services, was ending its relationship with the firm. The client, which has assets under management of CHF 20 billion, provided GAM with CHF 5 million in revenue.  

According to GAM’s quarterly earnings report, the private labeling business saw an uptick in assets under management at the start for 2021 from CHF 86.1 billion to CHF 89 billion, resulting from net inflows and strong markets. 

GAM said in the announcement that its cost-cutting plan continues, with the expectation that the firm will save CHF 15 million more in fixed personnel, general, and administrative expenses during 2021.

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