The firm has suspended one of its senior investment directors regarding record-keeping and risk procedures, but its investigation has not raised concerns about his honesty.

Zurich-listed investment firm GAM Holding yesterday reported a 21 per cent year-on-year rise in underlying pre-tax profit to SFr91.3 million ($92.3 million). However, on an IFRS basis, net profit slumped by 61 per cent to SFr25.4 million, caused by impairments linked to the Cantab Capital Partners acquisition.

In a separate development, GAM said it had suspended the unit head of its unconstrained/absolute return bond strategy, Tim Haywood. GAM said it acted because of “some of his risk management procedures and his record keeping in certain instances”. The firm said it had not found that its clients had been hit by the actions, but it was continuing to probe the matter. "The investigation has not raised concerns about his [Haywood's] honesty," it said. 

Net fee and commission income rose by 12 per cent to SFr287.7 million, with net management fees and commissions rising by 20 per cent to SFr285.4 million. Assets under management rose by 3 per cent to SFr163.8 billion from its level at the end of December, 2017. 

Results have been encouraging, said GAM’s chief executive, Alexander S Friedman. But he threw out a word of caution: “Market conditions have become more challenging, and some clients are choosing to rebalance their portfolios as we enter the later stages of this long-running bull market. As a result, we saw a significant slowdown in net inflows in the later part of the first half of 2018. The volatile and directionless market conditions are likely to continue in the second half of this year, which may affect clients' risk appetite and our flows.”

GAM said it recorded “strong inflows” through financial intermediaries, with clients adding SFr2.7 billion in the first half, while net inflows from institutional clients amounted to SFr200 million. Net outflows from the private client channel of SFr300 million largely reflect the redemptions from the Group's previous captive channels.

Suspension
Friedman said GAM might suffer client pull-outs because of Haywood’s suspension. “We take our responsibilities and controls very seriously. Having conducted the investigation with external counsel, we now intend to follow our usual internal processes and will take any further action that may be appropriate,” he said. 

Jack Flaherty and Alex McKnight, investment directors, have assumed joint responsibility for the ARBF and other associated portfolios. Flaherty has been one of the co-managers of the ARBF strategy for more than six years, while McKnight has been a member of the ARBF team for the past 11 years. Daniel Sheard, a co-manager of the ARBF strategy, is not involved in the day-to-day management of the ARBF portfolios, but continues to manage other fixed income portfolios. 

The total assets in the ARBF portfolios as at 30 June 2018 were SFr11.0 billion, with an average management fee margin of 61.9 basis points. Approximately SFr6.2 billion of these assets are eligible for performance fees. In addition to these portfolios, Haywood is a named manager of SFr2.9 billion in trade finance funds (average management fee margin 11.0 basis points) and of SFr653 million in other fixed income portfolios (average management fee margin 36.6 basis points).