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Swiss Fund’s Independent Future Is Far From Certain

Mark Gilbert
·3 min read

(Bloomberg Opinion) -- It’s a bit more than a year since BlackRock Inc. veteran Peter Sanderson took the helm at GAM Holding AG as the Swiss fund manager attempted to convince clients to stop pulling money from the scandal-embroiled firm. It may be time for him to revisit his decision to try to restore the company’s reputation alone rather than seek a buyer.

More than two years have passed since GAM suspended star fund manager Tim Haywood, the head of its flagship absolute return bond funds, accusing him of gross misconduct. In July 2019, it announced it had reached a truce with Haywood, who in turn said he dropped his unfair dismissal suit because the cost of pursuing it would be higher than any damages he might have received.

Even though the firm said that customers trapped in his funds got all of their money back, the year they had to wait for those redemptions dented confidence in GAM. The regulators, who operate on a timescale that might at best be described as glacial, have yet to opine on the matter. Customers, though, continue to desert the asset manager.

GAM said on Wednesday that its investment management unit oversaw 33.9 billion Swiss francs ($37.5 billion) at the end of the third quarter. That’s down 30% since the end of last year and 40% lower than it managed at the beginning of 2019.

What’s really hurting the firm is its investment acumen — or lack thereof. By the end of September, a staggering 78% of its assets under management had underperformed their respective benchmarks on a three-year basis, continuing a disastrous run that its portfolio managers have suffered throughout this year.

While the figures over a longer five-year period are more flattering, with more than two-thirds of GAM’s assets beating their benchmarks, the pandemic has made markets much more volatile this year, producing exactly the kind of environment that should favor active managers. The persistence of outflows shows customers are punishing GAM’s failure to deliver index-beating returns against that backdrop.

And there’s a dog that hasn’t barked yet. German banker Joerg Bantleon has a 10% stake in GAM after doubling his investment in July, making him the second-biggest holder after Silchester International Investors LLP. As my Bloomberg News colleague Patrick Winters noted in April, Bantleon’s company website says its policy is to actively engage with the companies it invests in.

Last year, GAM held talks with potential buyers including Italian insurer Assicurazioni Generali SpA, Bloomberg News reported at the time. “We looked at these options, but we currently believe that the strategy presented is the best one to add value,” Sanderson told Swiss newspaper Finanz und Wirtschaft in June.

With GAM shares down about 38% this year, worse than many other publicly traded European asset managers, maybe it’s time for Bantleon to start agitating for a change of direction. As the Swiss fund manager continues to shrink, its future as a standalone company in an industry where scale matters more every day looks distinctly perilous.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of "Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable."

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