Gam strikes deal with steel magnate to offload ARBF stub

Swiss asset manager misses liquidation target for absolute return range

Gam has struck a deal with a steel magnate to offload the remaining stub of assets in its stricken absolute return fund range, as it misses the self-imposed deadline to return money to clients.

GFG Alliance which is led by Indian-born British entrepreneur Sanjeev Gupta has agreed to acquire all outstanding notes held in the Swiss manager’s absolute return bond fund (ARBF) range by mid July.

Gam was forced to liquidate its £8.5bn ARBF range last summer after it was unable to cope with a wave of redemptions triggered by the suspension of lead manager Tim Haywood (pictured) who was ultimately sacked for “gross misconduct”.

But the liquidation has dragged on past the firm’s self-imposed target of 31 March 2019 due to difficulties selling down the more illiquid assets in the portfolios, including notes related to Gupta projects.

Haywood was first introduced to the British steel magnate in 2017 by Australian financier and deal maker Lex Greensill who provided him with a place to park his capital in higher-yielding investments.

Over time Haywood 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.

Illiquid stub remains

Gam said in an update on Wednesday that the notes to be purchased by GFG Alliance, a collection of companies owned by the Gupta family, forms the “one remaining group of material assets within the ARBF funds and mandates”.

Following the recent sale of “two more material assets” the Swiss manager said 89% to 95% of assets in the Luxembourg Gam Multibond and the Ireland-domiciled Gam Star funds, as well as 80% to 84% of assets in the Cayman master fund and associated feeder funds had been returned to clients.

The Gupta-led firm has already refinanced one third of the GFG originated notes previously held in strategies managed by Gam.

As part of its agreement with Gam, GFG will acquire the notes at the valuation at which they were originally purchased by the relevant accounts.

Redemptions continue

With the last of the assets scheduled to be divested interim CEO David Jacob said the group “look forward to putting this difficult period behind us”.

“Our priority during the liquidation process has been to maximise liquidity and value for clients, while ensuring fair treatment for all. I would like to thank our clients for their patience, as we continue to work hard to return their assets. Our full focus remains on rebuilding Gam as a leading active asset manager, known for its differentiated product offering and strengthening the company for our shareholders.”

Jacob said first quarter net flows had continued to be impacted by the ARBF scandal.

Assets under management in the investment division plunged from CHF 56.1bn (£42.6bn) at the end of December 2018 to CHF 55.1bn (£41.8bn) by the end of March.

The group saw CHF 4bn (£3bn) net redemptions across its funds, driven by clients pulling CHF 2.3bn from its equity strategies.

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