GAM releases FAQ over ARBF issue

Swiss group GAM has released a Q&A post on its website in which the manager has answered 18 questions regarding the situation of its frozen absolute return bond funds and the suspension of absolute return bond chief Tim Haywood.

GAM has stopped dealing in the funds last week after an internal investigation revealed failures in Haywood’s risk management procedures and his record keeping in certain instances. Following the suspension of Tim Haywood, the ARBF funds have experienced a high level of redemption requests.

In its Q&A post, GAM said its absolute return bond funds have received “redemption requests in excess of 10% of their assets since GAM’s announcement on 31 July 2018 that Tim Haywood, investment director in the ARBF team, was suspended”, adding no redemptions requests had been paid since Tim Haywood’s suspension.

“The funds have the necessary liquidity to serve the redemption requests we have received, but such actions would lead to a disproportional shift in their portfolio composition, which could compromise the interests of remaining investors. GAM is committed to ensuring equal treatment of all investors and protection of their interests,” the Swiss manager explained.

There will be no priority list based on when redemption requests are received, claimed GAM. “If the funds move to liquidation, subject to fund boards’ approval, all investors as at 31 July 2018 will receive their proportionate interest in cash as it becomes available.”

GAM confirmed that it is considering with the funds boards all options for the future of the funds including their liquidation while priority is to “provide liquidity and maximise value for clients in a timely manner.”

“We hope to be able to resolve the situation as soon as practicable,” it said.

The Swiss group also announced it was working on establishing alternative structures for investors who want to remain invested with the ARBF team.

Disciplinary procedure on the way for Haywood 
GAM recalled the investigation upon Haywood’s behaviour was largely completed and that it now intends to follow its internal disciplinary processes, hoping to complete that “swiftly”.

“No other employees are being investigated in relation to these matters and no evidence was found to indicate such an investigation regarding other employees was required.

“The investigation concluded that in certain instances Mr Haywood may have failed, in GAM’s judgement, to conduct or evidence sufficient due diligence on some of the investments that were made, or make accessible internal records of documents relating to these. Additionally, the investigation concluded that Mr Haywood may have breached the firm’s signatory policy by signing alone certain contracts where two signatures were necessary. And he breached the company’s gifts and entertainment policy by not asking for required pre-approval and used his personal email for work purposes,” GAM said.

In addition, no material client detriment has been found to date but the firm is still reviewing this. No further evidence that Haywood “was motivated by an improper rationale in making investment decisions or that there was any conflict of interest between him and clients” has been found as well.

GAM said Haywood remains GAM’s employee despite his suspension and will not comment his situation yet as he will face the firm’s internal disciplinary processes very soon.

Investment directors Jack Flaherty and Alex McKnight have taken over Haywood for the management of the ARBF and other associated portfolios. Flaherty has been one of the co-managers of the ARBF strategy for more than six years, while McKnight has been with the ARBF team for the past 11 years.

Adrien Paredes-Vanheule
Adrien Paredes-Vanheule is deputy editor and French-Speaking Europe Correspondent for InvestmentEurope, covering France, Belgium, Geneva and Monaco. Prior to joining InvestmentEurope, he spent almost five years writing for various publications in Monaco, primarily as a criminal and financial court reporter. Before that, he worked for newspapers and radio stations in France, in particular in Lyon.

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