GAM Holding investor Krupa supports Bluebell on criticism of company

• GAM should increase cost cutting efforts
• Private lebelling business should be reviewed – source
• Krupa and Bluebell seeking support from other investors

GAM Holding investor Krupa Global Investments is supporting Bluebell Capital Partners in its criticism of the company’s actions in response to its investigation of fund manager Tim Haywood, a Krupa portfolio manager told this news service.

Bluebell Capital Partners, which has a stake in the Swiss asset management group, has written a letter to GAM Chairman David Jacob accusing the firm of taking “undue and unnecessary” actions in response to its investigation of Haywood, who managed GAM’s flagship absolute return bond funds, according to a report.

GAM has potential that could be unlocked, the Krupa portfolio manager and a source close to the situation said. But both Bluebell and Krupa are critical of how GAM management has communicated issues related to the scandal, they said.

GAM’s problems started in July 2018, when it published a press release referring to risk management and record keeping in very general terms, causing a wave of redemptions from the return bonds funds, the source said. It announced Haywood’s suspension at the same time.

The board overreacted with that press release and underestimated the effects of the release in terms of investors’ reactions, the source said.

Between July 2018 to July 2019 GAM’s investment management business went from CHF 84.4bn to CHF 52.1bn of assets under management, losing about CHF 200m in revenues, the source added.

Though GAM is targeting CHF 40m in cost savings by the end of 2020, in light of the losses, the company should increase its cost cutting efforts, they both said.

Another issue is their private labelling business, which provides operational services to funds of third parties, the source said. This is an operational business, not as asset management one, and it is unclear how much it generates in terms of profitability, the source added.

There should be more transparency over this business and once it is clear what its contribution is to the overall company, it could make sense to start a review in view of a disposal, the source said. Private labelling accounted for 8.4% of GAM’s total net management fees and commissions last year. The business registered a record CHF 84bn in AuM in 1H19.

Finally, GAM should accelerate changes at board level, the source and the Krupa portfolio manager agreed.

Krupa said that the investor will wait for the company’s February results before launching a campaign to see if a strategy review of the business will be delivered. In the meantime, Krupa and Bluebell are seeking support from other investors, the portfolio manager at Krupa added.

GAM’s management is currently working on a strategic plan that will be presented to the market when the company is ready, a spokesperson said, adding that GAM maintains regular contact with its shareholders.

The Swiss fund manager is delivering on its restructuring programme, which seeks CHF 40m in cost savings by end 2020 and a 10% reduction in headcount, the spokesperson said. The company has provided guidance that it expects to achieve further efficiency gains in 2020-21, he noted.

The spokesperson stressed that GAM has been focused on delivering value and liquidity to its clients, having paid back 99.6-101.4% of their money and having stopped charging management fees after liquidation.

As for the composition of the board, the spokesperson argued that GAM appointed three new directors at its latest AGM that bring a wealth of industry experience.

A spokesperson for Bluebell declined to comment.

by Alessandra Castelli, Giulia Lasagni and Pablo Mayo Cerqueiro in London