GAM Investments has begun the liquidation process of a number of its absolute return bond funds following the suspension of one of its lead fund managers.
The asset manager - which holds around CHF7.3bn (£5.8bn) in the affected absolute return bond fund (ARBF) strategies, including substantial amounts from UK scheme investors - said the liquidation process follows the suspension of ARBF investment director Tim Haywood after an internal investigation, which accused him of poor due diligence and a number of internal policy breaches.
The firm subsequently blocked all redemptions in its ARBF funds following high level of outflows.
GAM said all fund investors would receive their "proportionate interest" in cash as a result of the liquidation process.
It expected to make the first payments early next month - returning between 74% and 87% of the Luxembourg and Irish-domiciled UCITS funds, and between 60% and 66% of the assets in the Cayman master fund and the associated Cayman and Australian feeder funds.
GAM said its priority was to maximise value for the fund investors throughout the liquidation process, while ensuring "equal and fair treatment to all" - but warned that, as the affected funds include some less liquid assets, it would need to liquidate the remainder of the portfolio over a more extended period.
It said it expected to make a further distribution for each fund before the end of September and continue distributions in the coming months, dependent on market conditions.
GAM also announced it is planning to offer alternative structures for investors who want to remain invested with the ARBF team - noting that a UCITS fund is expected to be available for investors in the coming weeks and announcing that the company is setting up a new Cayman fund as well.
GAM group chief executive Alexander Friedman commented: "The suspension and the subsequent decision to liquidate the ARBF funds has been a difficult process, but necessary to ensure that we deliver on our principles of acting in the best interests of all fund investors and treating them equally and fairly. This does not take away from the fundamental strength of GAM as a diversified asset manager.
"We have spent the past few years restructuring GAM into a more efficient business with a less volatile earnings profile, while continuing to build out high performing, specialist strategies that are relevant for our clients. This has made GAM better positioned to weather a challenging environment, and we believe we will continue to attract clients to our platform and deliver value to our investors in the years to come."
Haywood's suspension was announced on 31 July after an internal investigation found he may have failed to conduct or evidence sufficient due diligence on some of the investments that were made and accused him of a number of internal policy breaches.
Subsequently, GAM said its ARBF strategies received redemption requests in excess of 10% of their assets and had to be suspended to ensure fair and equal treatment of all investors. On 10 August, the relevant fund boards decided to place the funds into liquidation to allow investors to receive proceeds in a more timely manner.
GAM said the investments that were made in its ARBF funds were not prohibited by any of the restrictions applying to the respective funds - and added its investigation did not conclude there had been any departure from a legitimate investment strategy. It also said there has been "no material client detriment to date" but said it was keeping this under review.
GAM also defended its risk management and compliance processes - noting it operates a standard "three lines of defence model", with clearly defined roles and responsibilities.
It said it keeps its processes and resources under ongoing review and has been moving regionally-based governance arrangements to a group level by establishing a series of group oversight committees covering risk, compliance, investment, distribution and change activities.
GAM said it has taken a number of measures to improve its overall control functions - noting the firm has created a number of new roles, including a head of investments to provide oversight across portfolio management and trading, a group head of compliance, a head of front office controls, and a head of trading. It said it has also strengthened its capabilities in financial crime prevention, compliance monitoring and regulatory developments.
It also noted the role of the group chief risk officer was elevated to the group management board in 2017 and that, this year, the compliance and legal functions were separated to underscore the importance of compliance - with the group head of compliance also joining the group management board.
MSCI is calling for all investors globally to more readily integrate ESG considerations throughout their investment processes to contribute to “an effective balanced transition towards a sustainable economy”.
Border to Coast Pensions Partnership has become a signatory of the United Nations supported Principles for Responsible Investment (PRI).
In an exclusive Professional Pensions webinar, Aviva Investors chief investment officer of real assets Mark Versey talks about the benefits and challenges of real assets and some of the key issues for trustees and other investors to consider when making...
Investment managers are much more transparent on their stewardship approaches, but it remains important for there to be an ongoing dialogue with trustees. Kim Kaveh explores the findings.
Pensions funds’ focus on long income property is increasing, with 84% of investors agreeing the level of investment in this area will rise over the next two years, according to research by Alpha Real Capital.