Shares in troubled Swiss fund house GAM have tumbled more than 25% to a 20-year low this morning after the business issued a profit warning and cancelled its dividend as it hoarded cash.
The company said 2019 profit was likely to be ‘materially lower than both expectation and the prior year', forecasting a net loss under IFRS reporting standards of CHF925 million (£736 million) as it announced a ‘group-wide restructuring programme’ to save CHF40 million by the end of 2019.
GAM said yesterday that 13 senior managers, including its head of fixed income Enzo Puntillo, would depart as it centralised its management in London. The company added that it was seeking regulatory permission to consolidate its equity management across its two locations in London and Zurich.
GAM chief executive David Jacob, who assumed control of the business last month following the exit of predecessor Alexander Friedman, said: ‘With today's announcement we are seeking to give our shareholders and our clients the clearest assessment of our financial situation.
‘We are taking decisive action to rebase costs and support profitability, whilst maintaining our focus on client service and control functions. We are determined to do everything it takes to rebuild the trust of our stakeholders.’
GAM has faced questions over its viability since the July exit of head of absolute return Timothy Haywood (pictured), who the company subsequently accused of breaking its inducement and dealing rules, and the suspension of redemptions from his £5.6 billion Absolute Return Bond fund.
The business subsequently said it would liquidate the range and would likely be able to return the bulk of client capital in September.
In today’s update, the business said client assets within the group had fallen by CFH4.2 billion to CHF146 billion. The cost saving outlined was twice the level envisaged in an August Credit Suisse note, which questioned whether the company would be able to survive as an independent entity.