Traders at GAM contacted investment banks and institutions in an attempt to unwind positions ahead of the suspension of its scandal-hit absolute return bond manager, according to the Times.
GAM suspended the GAM Multibond – Absolute Return manager, Citywire + rated Tim Haywood (pictured), at the end of July following an internal investigation into his risk management and record keeping. It closed the funds to client trading at the end of last week.
A trader at a big investment bank, who asked not to be identified, told The Times that his company had been contacted by staff at GAM late last month, asking it to bid for assets being sold by the funds.
The trader said: ‘I got messages like, "Can you bid on this bond for a fund liquidating?". I saw loads of messages from GAM traders about a fund liquidating.’
Another trader told the newspaper that GAM had approached financial institutions in an attempt to sell assets from its absolute return bond funds.
A spokesperson for the Swiss asset manager contacted by the newspaper declined to comment.
It comes after GAM sent a letter to clients last week which said it found no departure from ‘a legitimate investment strategy’ from Haywood.
In a statement to shareholders last week, the firm’s chief executive Alexander Friedman said the investigation which preceded the suspension found there had been no ‘departure from a legitimate investment strategy.’
He added that no evidence had emerged of ‘material client detriment to date,’ though said the firm will consider client detriment ‘on an ongoing basis’.
The FT reported that in its review, GAM learned that some of Haywood’s portfolio investments were in ‘illiquid debt securities’ that ‘had not been subject to proper due diligence and risk control reports’.
The firm said it has ceased charging any management fees on the funds while they remain suspended, and is considering liquidating the funds, though no decision has been made public.
Jack Flaherty and Alex McKnight have assumed joint responsibility for the GAM Multibond – Absolute Return fund and associated portfolios.
Citywire+ rated Daniel Sheard, who had co-run the absolute return strategies, is now not involved in the day-to-day running of the fund and continues to run other fixed income portfolios.