Vodafone invests in GAM fund making money off late payments

Bloomberg

Big companies often leave their suppliers hanging for weeks without pay, but Vodafone Group Plc is taking this a step further: it’s investing in a fund that makes money off the delay.
The British phone operator poured 1 billion euros ($1.1 billion) into the 2.4 billion-euro fund run by beleaguered Swiss asset manager GAM Holding AG, which generates returns by paying suppliers early if they accept less than they’re owed.
The fund is full of invoices from many of Vodafone’s 15,000 vendors of anything from antenna systems to furniture, according to three people with knowledge of the investment, who declined to be identified because the data are private. Vodafone makes its partners wait 48 days for their money, versus a 36-day global average, according to consultancy PricewaterhouseCoopers.
“They are behaving a bit like a hedge fund when they are a telecoms company,” said Stephen Baseby, who recently retired as policy and technical director at the Association of Corporate Treasurers in London after more than 40 years in the field. “This is the kind of complexity that more conservative treasurers like me would warn against.”
While companies postpone payments all the time to keep cash on their balance sheets and bolster a metric known as working capital, earning investment income from the haircuts their suppliers bear if they can’t afford to wait is unusual, according to Daniel Windaus, a partner for PWC’s consultancy arm.