GAM to shut down absolute-return bond funds following suspension of director

GAM Investments is liquidating a number of absolute-return bond funds, the Swiss money manager said Friday in a letter to clients published on its website.

The liquidation was announced more than a week after the suspension of Investment Director Tim Haywood. Mr. Haywood, who also was business unit head for absolute-return strategies, was suspended following an internal investigation into issues related to risk management procedures and record keeping.

GAM's fund board of directors decided to liquidate the funds, which represent 7.3 billion francs ($7.3 billion), subject to regulatory and fund shareholder approvals, according to the letter.

The funds set to go to liquidation are GAM Absolute Return Bond, GAM Absolute Return Bond Defender, GAM Absolute Return Bond Plus, GAM Star Absolute Return Bond, GAM Star Absolute Return Bond Defender, GAM Star Absolute Return Plus, GAM Star Dynamic Global Bond, GAM Absolute Return Bond Master Fund and GAM Unconstrained Bond funds, the letter said.

GAM said in the letter the liquidation procedure will "allow investors to receive proceeds in a more timely manner and ensure equal treatment."

"It is expected that all fund shareholders would periodically receive their proportionate interest in cash as it becomes available throughout the liquidation process." the letter said. "GAM is working with each of the fund boards to maximize liquidity and value for investors."

GAM said it is also working on alternative structures for investors who want to remain invested in absolute-return bond funds.

"We fully support the independent fund boards' recommendation to move these funds into liquidation," Tim Rainsford, group head of sales and distribution at GAM, said in an email to Pensions & Investments. "We believe that this decision underscores our commitment to treating all clients equally and fairly and to ensuring that investors receive proceeds in a timely manner. Despite the short-term implications of these liquidations for GAM, our decisions continue to be guided by what's best for our clients."

GAM has 163.8 billion Swiss francs in assets under management.