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Money Management

GAM suspends trading on absolute-return bond fund following redemptions

GAM CEO Alexander Friedman

Move comes after investment director suspended for risk management and record-keeping issues

GAM Investments has suspended trading on its unconstrained/absolute-return bond funds due to a "high level of redemptions" following the suspension of an investment director.

The 163.8 billion Swiss francs ($165 billion) money manager said in a statement Thursday that all subscriptions and redemptions in the impacted strategies, which represent 7.3 billion francs in assets under management, had been suspended effective Tuesday "by the relevant fund boards of directors" following the redemptions.

The manager said on Tuesday it had suspended Tim Haywood, investment director business unit head for the unconstrained/absolute-return bond strategy, for issues relating to risk management procedures and record keeping, following an internal investigation.

"The fund boards are considering all future steps, including fund liquidations, to maximize value and liquidity for clients," said the statement. It added that, following the suspension of Mr. Haywood, the strategies "have experienced a high level of redemption requests. Although the funds have the necessary liquidity to serve these requests, such actions would lead to a disproportional shift in their portfolio composition, which could compromise the interests of remaining investors." The company did not comment on the size of redemptions.

The company is engaging with clients and focused on resolving the situation as quickly as possible for investors. It will cease charging management fees on the relevant strategies while they remain suspended, or if they go into liquidation.

No other part of the business is affected, and the firm continues to run strategies as usual.

"We are working with the relevant fund boards to ensure that we maximize value and liquidity for (absolution-return bond fund) investors, and are looking at establishing alternative structures for clients who want to remain invested with the ARBF team," CEO Alexander S. Friedman said in the statement.

Chairman Hugh Scott-Barrett added: "The board of directors acknowledges that recent events have been a setback for the company. However, we have absolute confidence in the strength of GAM as a diversified asset manager and the ability of its investment teams to deliver returns for clients."

A spokeswoman for GAM said she was unable to comment beyond the statement.