GAM Holding saw its share price fall about 22% on Thursday as it announced a drop in assets under management, a companywide restructuring and an absence of a dividend this year.
The money manager said overall assets under management fell 4.8% to 139.1 billion Swiss francs ($139.8 billion) for the two months through Nov. 30. This was largely driven by net outflows across the investment business.
Over the two-month period, absolute-return strategies excluding absolute-return bond funds recorded 500 million francs in net outflows, with assets falling to 1.9 billion francs. Fixed-income assets fell to 32.2 billion francs, with net outflows of 3 billion francs; and equity strategies recorded 400 million francs in net outflows bringing assets under management to 9.8 billion francs.
Systematic, multiasset and alternatives strategies each recorded 100 million francs in net outflows, bringing assets to 4.3 billion francs, 8.2 billion francs and 4.4 billion francs, respectively.
Assets under management in the investment management arm fell 8.7% over the two months, to 60.8 billion francs.
The financial update said the liquidation of its unconstrained/absolute-return bond fund strategies — following the suspension of Tim Haywood, investment director business unit head for the unconstrained/absolute-return bond strategy, following an internal investigation — is continuing.
GAM said it expects underlying profit before taxes for 2018 to be about 125 million francs, down 27.5% vs. figures for 2017. The update said the expected fall is primarily driven by reduced performance fees and a decline in AUM for the investment management unit, although lower total expenses will partly offset these impacts.
The update also outlined a restructuring plan for GAM, "that will allow it to support profitability and shareholder value in the near term, while not affecting its ability to create value for clients."
The restructuring includes an expected reduction in fixed staff costs and general expenses, with about 10% of positions being eliminated across the company next year. Further, Larry Hatheway, group head of investment solutions and chief economist; and Tim Dana, group head of corporate development, will step down from the group management board following a decision to reduce directors to seven from nine members.
The update also said GAM expects to propose to shareholders that no dividend is paid for 2018 "to accelerate the group's capital rebuild."
"We have experienced a difficult year given our issues relating to (the absolute-return bond fund), on top of a challenging market environment," said Hugh Scott-Barrett, chairman of the board of directors of GAM, in the update. "We have taken the difficult decision to propose the suspension of the 2018 dividend in order to accelerate the pace of our capital rebuild program. All the measures announced today allow us to move forward as a leaner business that is focused on those areas where we can add most value to our clients. I am convinced that this creates a base for the company to emerge stronger than it was before."
GAM's share price fell about 22% Thursday to 3.58 francs. Year-over-year, that represented a fall of about 77% vs. the market open on Dec. 13, 2017.