‘Tarred’ Gam boss exits after absolute return fund saga

Institutional client base set to welcome change in leadership

GAM

Gam group chief executive officer Alexander Friedman has announced he is stepping down with immediate effect after four years at the firm in a move set to be welcomed by the fund house’s institutional clients following a turbulent summer that saw one of its key fund ranges liquidated.

The group said its board of directors, along with the CEO, agreed that the next stage of the company’s leadership would be best served by new leadership. It has appointed David Jacob as interim group CEO while it searches for a replacement.

Chairman Hugh Scott-Barrett said Friedman had had the full support of the board in the decision to suspend Tim Haywood, a move that heralded the liquidation of the absolute return bond fund (ARBF) range. However, investors say Friedman was tarred by the saga that has resulted in fund outflows and a falling share price.

Scott-Barrett said: “The group is facing some important decisions as we seek to position the business for future growth. Alex has ably led the business during a time of unprecedented challenges for the active asset management and hedge funds industry.”

Institutional investors require strong processes

Adrian Lowcock, head of personal investing at Willis Owen, said this was a “necessary step”.

“Gam operates in the institutional space and these companies require that the fund managers they deal with have very strong processes and governance. The suspension of Tim Haywood brought issues of Gam into the spotlight and has tarred the management teams reputation along with it.”

Likewise, Jason Hollands, managing director at Tilney, said Gam has been hit by reputational damage and Friedman’s departure is necessary step to draw a line under recent events. “It is obviously imperative now that the business acts to restore both client and shareholder confidence in its control and oversight as well as searching for an experienced and credible new CEO.”

Share price collapse and profit warnings

Lowcock said plenty of investors were calling for Friedman’s resignation due to funds flooding out of the door, share price collapse, a profit warning and confrontation with activist shareholder RBR.

Darius McDermott, managing director at Chelsea Financial Services, the existing issues in the company won’t go away under new leadership but may allow Gam to focus on the “excellent franchises” within the company.

McDermott added: “Often as the head of a business you end up, particularly in the eyes of shareholders, as the person responsible even if you had not done anything wrong. This would appear to be the case.”

Interim CEO

Meanwhile, Jacob’s immediate priority will be focussed on strategy and supporting profitability.

He said: “Despite the setback suffered by the business this year, we are fortunate to have a board with a wide and relevant range of experience as well as the strong management team that Alex assembled. I look forward to working with both teams and ensuring that we keep our focus firmly on continuing to meet our clients’ expectations.”

GAM confirmed that a search for a new CEO is being conducted.

Scott-Barrett thanked Friedman for his efforts at the company over the last four years. “During his tenure as CEO he has driven a significant programme of change that has made us a more modern, diversified and cost-effective business.”

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