GAM to post $931mn loss, cut jobs

Bloomberg

GAM Holding AG forecast a large loss, scrapped its dividend and plans to eliminate 10 percent of jobs as the firm struggles to contain a scandal prompted by the suspension of a star fund manager.
Shares of the Swiss asset manager fell as much as 17 percent after the company outlined a 925 million-franc ($931 million) loss for the full year related to a series of goodwill charges at the group and its Cantab quant funds. Assets under management have declined by a further 7 billion francs since the end of September and the group has started a restructuring program.
The loss will more than erase eight years of earnings since GAM went public, as the new management under interim chief David Jacob seeks to move beyond the tumult created by the suspension of bond manager Tim Haywood in July. GAM held informal talks with potential buyers as it explored options to stabilise the business, people familiar with the discussions have said, though Jacob said that for now, he’s focussing on cleaning house.
“Today is about facing our financial reality so that we can move on and build a future for this business,” Jacob said on a conference call. “The board has stated that we consider all strategic options.
However, as you can see from the release that we have made this morning, we are absolutely focussed on the structure of this business, looking internally, and making sure this business is positioned for growth in future.”
Haywood’s suspension triggered a wave of outflows, forcing the firm to freeze redemptions and liquidate his entire strategy, and accelerating a slump in the stock. GAM has reacted to the crisis by redoubling its efforts to keep important employees, while reducing costs elsewhere.
The suspension came as GAM was already buffeted by headwinds in the asset-management industry. Volatile returns and an investor flight to low-fee products have sque-ezed profits, forcing many money managers to consolidate. Assets under management declined by about $18 billion in the third quarter as Haywood’s funds were liquidated and clients pulled money from other strategies.
GAM got a rare boost recently from Mario Gabelli, the 76-year-old billionaire head of Gamco Investors. He’s built a stake of around 3 percent in GAM, according to a filing.