Swiss group GAM has confirmed that the sudden suspension of one of its top portfolio managers during the summer was made after a whistle blower prompted an internal investigation.
Tim Haywood (pictured), former co-manager of the group’s £6.5bn flagship unconstrained absolute return bond fund (ARBF) range, had been suspended in July, following an internal investigation for several misconduct allegations, which include failure to comply with the group’s due diligence requirements and not collecting sufficient evidence on fund investments.
Haywood’s suspension resulted in the liquidation of the ARBF fund range and investors are now receiving a partial refund.
According to reports by Swiss financial newspaper finews, concerns over Haywood’s due diligence first emerged following investments in non-listed notes by Sanjeev’ Gupta’s GFG Alliance, aimed at financing energy businesses in the UK. Failures to launch these businesses in turn affected the liquidity level of GAM’s ARBF range.
Haywood’s investments in these notes over the past two years were executed by trade-finance firm Greensill Capital, which also employed former GAM chief executive David Solo.
GAM confirmed that an internal investigation over Haywood’s conduct had been launched in November 2017, following initial accusations by an anonymous whistle-blower. The group also revealed that the whistle-blower had expanded on their concerns in March 2018 and informed the Financial Conduct Authority. This in turn resulted in Haywood’s suspension four months later.
GAM group chief executive Alexander Friedman expressed his support for the whistle-blower. “At the heart of every modern financial services firm’s systems and controls should be a culture that encourages people to come forward with concerns about colleagues’ behaviour,” he stressed.
Yet Friedman’s role is increasingly being questioned, as GAM’s shares have dropped to an eight-year low in September, following a damning Credit Suisse analyst report which predict further outflows from other GAM funds.
GAM states that 60% to 75% of the ARBF fund assets have been returned to investors and that it has launched the second round of liquidation payments.
However, investors in the Cayman-islands domiciled ARBF fund range are expected to book significant losses as a result of the liquidation.
Both Haywood and his former co-fund manager continue to be listed as investment directors for GAM.
The Zurich-based group will release a Q3 interim management statement at the end of October.
