Gam is to liquidate a $842m (£605m) fund with ties to Greensill Capital, an Australian based supply chain company it has had a complicated history with that is fighting to stay afloat.
Greensill Capital was thrown into turmoil on Monday after Credit Suisse froze $10bn worth of funds linked to the firm following concerns over the “considerable uncertainties” about the valuations of some of the underlying holdings. This included loans tied to British steel magnate Sanjeev Gupta’s company GFG, which were among the highly illiquid assets found in Gam’s now defunct Absolute Return Bond funds.
This prompted the supply chain finance company, which is owned by Australian financier Lex Greensill, to seek protection from Australia’s insolvency regime and seek out emergency finance arrangements.
In light of these events, Gam said it had blocked subscriptions and redemptions to the Greensill Supply Chain Finance fund and would start returning cash to investors.
Gam says there are no concerns about the fund’s valuation
The Swiss manager stressed there were no concerns regarding the valuation of the assets in the fund, describing the vehicle as “an investment grade only strategy” that takes payment obligations from “globally recognised multinational corporations”.
All assets in the Luxembourg-domiciled structure have a final maturity of 12 months or less, with a weighted average life of less than 60 days and are fully insured against default by third party insurers with a minimum credit rating of single-A.
Fewer than 1o clients held money in the fund which was only available to “qualified investors”. Gam said it is waiving future fees on the fund as of today.
Commenting on the Greensill Supply Chain Finance closure, group CEO Peter Sanderson (pictured) said: “Clients are at the heart of our business at Gam and we have taken the decision to close our Supply Chain Finance fund as we believe this is in the best interests of all clients in the fund.
“Our portfolio is comprised of investment grade assets and we do not have any valuation concerns. As such we anticipate an orderly fund liquidation and return of client assets in the normal course.”
Closing the chapter on the Greensill saga
The closure of the fund brings an end to Gam’s tumultuous business relationship with Greensill which has been under a microscope since the blow-up of the Zurich manager’s £8.5bn Absolute Return Bond fund, its biggest scandal to date.
Gam was forced to liquidate its mega ARBF range in 2018 after it was unable to cope with a wave of redemptions triggered by the suspension of lead manager Tim Haywood who was ultimately sacked for “gross misconduct”.
During the liquidation process it was revealed Haywood had stuffed his ARBF funds with hundreds of millions of pounds’ worth of bonds linked to Gupta projects, plus other bonds used to finance other projects arranged by Greensill. The Financial Times reported that a month before his suspension nearly 12% of the total assets in his Luxembourg-registered fund were in Greensill-related paper.
Eventually Gam struck a deal with Gupta to acquire the remaining stub of illiquid assets in Haywood’s funds as it missed its self-imposed deadline to return money to investors.
See also: Gam strikes deal with steel magnate to offload ARBF stub
