Schroders is reportedly circling a Gam business unit that was responsible for a profit warning during the Swiss asset manager’s difficult summer.
Gam purchased systematic quant platform Cantab in October 2016 for an initial $217m cash payment. It was touted as the first asset management acquisition announced in the UK after the Brexit vote and aimed to increase Gam’s footprint in alternative assets.
But in July this year the fund house warned markets profits for H1 2018 were set to be CHF25m, compared to CHF67.7m for the same period the previous year, due to lower assets under management and cashflows at Cantab than those forecast at acquisition. The market update came two weeks before the fund house revealed it had suspended Tim Haywood (pictured), the start of a series of events that triggered the liquidation of the company’s absolute return bond fund (ARBF) strategies.
Despite the profit warning, Gam has reportedly rejected a bid from Schroders for the systematic quant arm due to concerns it would make an overall sale of the business difficult, the Financial Times reports.
In October, reports started that rival asset managers were eyeing Gam. Its share price has fallen 60% in the year to date and short interest in the asset manager is now at its highest level in a decade.
Gam views Cantab as prize asset
At the time of the profit warning, Gam chief executive Alexander Friedman said he continued to see Cantab as a key driver of future growth for the company. “While the developments in assets under management since the acquisition have been below expectation, they have been in line with industry trends as investors have turned more averse toward high volatility hedge funds,” Friedman said.
He added: “Cantab’s industry-leading, scalable technology platform has been critical to enabling the launch of several new lower-volatility systematic products that are receiving increasing interest from clients and are integral to diversifying Gam’s business into capabilities with strong future growth potential.”
Analysts have previously said talk of a sale should support Gam’s share price but that it may face a fall in assets if the whole business is sold.
In October, a Q3 update showed assets in Gam’s investment arm had already dropped by 21% to CHF66.8bn (£51.5bn) from CHF84.4bn driven by net outflows of CHF8.5bn. Total assets for the group were down 10.8% from CHF163.8bn to CHF146.1bn.
The update also revealed Gam had returned between 82% to 91% of assets in Haywood’s Luxembourg and Irish-domiciled Ucits funds, and 66% to 72% of the assets in the Cayman and Australian feeder funds.
