The Swiss investment fund and hedge fund GAM Holdings AG (GAM SW) has recently (again) come under pressure after one of its managers Tim Haywood breached due diligence requirements at the firm according to Bloomberg. In addition Haywood also violated the firm’s gift and entertainment policy.
GAM decided to freeze withdrawals redemptions request for Haywoods Absolute Return fund.
As a result, there has been massive redemptions and investor withdrawals from various GAM Holdings funds. GAM has lost over $10bn in assets, including $2.3bn in redemptions from various funds just in July.
GAM has stated that it will liquidate a total of 9 different unconstrained/absolute return funds (ABRF), which as of 31st of July had over $7.3bn in assets. Other funds at GAM have suffered massive redemptions as a result of this, for example their Star Credit Opportunities fund losing almost $600m in the last month.
Source: Bloomberg
As a result, GAMs share price have taken a severe beating over the last couple of months. It is down over 50% in three months, and over 25% just in August.
Often, in situations when investors lose faith and trust in an investment manager, caution takes note, as investors are rather safe than sorry and withdraw their assets until there is more clarity. This can of course create a “Bank Run”, which withdrawals of assets begets withdrawals and worst case scenario subsequently leading to closing down of the business.
As a trader/investor, this situation gives a good opportunity to make an assessment if one believes GAMs management team can regain trust in the markets and investors.
Short Interest has already increased as there are speculators believing there is more pain to come from this situation.
