RBR Capital, a hedge fund run by Rudolf Bohli, wants GAM to slash its spending – with massive job cuts. The investor is also calling for CEO Alex Friedman's head.

Hedge fund RBR Capital, run by Rudolf Bohli, detailed its demands detailed its demands of GAM for the first time on Thursday. Its biggest demand it to slash spending, especially by cutting GAM's support functions.

Bohli, who spoke on a conference call together with Kasia Robinski and William Raynar, sees the spending cuts with particular urgency: something needs to happen, and quickly, he said. 

100 Millionen Sfr Cuts

Bohli sees 100 million Swiss francs in potential cuts through 2019, which he claims would double profits – and potentially the asset management firm's share price as well.

Cutting jobs could achieve roughly 50 million francs in annual cuts, while another 50 million could be chopped in rental space and lower spending for information technology, communication and marketing, in Bohli's view.

One-Third of Jobs

His plan translates to roughly 350 of currently 1,000 employees being cut. The support functions he sees as superfluous would target everything not directly in investment and distribution, such as operations, administration, management, auditing, IT, finance as well as legal and compliance.

Bohli describes GAM as a bloated organization in desperate need of simplification. He sees the potential for another 15 million francs in savings by moving some jobs out of pricey Switzerland and into lower-cost locale Poland. 

Friedman in Firing Line

Management, led by Chief Executive Alex Friedman is incapable of returning the asset manager, which has suffered massive outflows of client money recently, to success, according to Bohli.

The excoriation of Friedman includes pay, which finews.com has also sharply criticized: Friedman's salary is excessive and in no way linked to his performance, Bohli said. While his predecessor David Solo was paid an average of 1.5 percent of GAM's profits, Friedman takes home 6.1 percent.

Bohli and Robinski underpinned their demands with comparisons to the wider asset management industry including Schroders, Jupiter, Azimut or Henderson. These firms managed a continual rise in managed assets, with sometimes a dramatically lower cost-income ratio than GAM's, which is 76 percent.

New CEO in Wings

Bohli said RBR's strategy plan has been vetted by consultants and industry experts. The hedge fund executive said he has a CEO to replace Friedman waiting in the wings if RBR is able to win a majority of GAM's shareholders with its demands. This as-yet undisclosed executive has more than 25 years of industry experience and is prepared to act, Bohli and Robinski said.

RBR also wants to revamp GAM's board: as previously reported, Robinski, a former investment banker, is proposed to chair the board, while Bohli and Raynar are to be elected members.

Robinski is a veteran of Goldman Sachs and Credit Suisse First Boston. Most recently, she was a partner at Hanover Investors in London. Raynar was with UBS for more than 20 years and is currently the deputy CEO of Bank Hottinger, which is being liquidated.

Booting Compensation Committee

RBR rejects Hugh Scott-Barrett as GAM's chairman, but would allow the British banker to remain on the board, as well as the David Jacob, who the asset manager is proposing as a board representative.

Nancy Mistretta and Benjamin Meuli would also be reelected under RBR's view, but not Ezra Field and Diego du Monceau, who are members of the board's compensation committee.

Bohli and RBR said they see considerable dormant potential in GAM: its brand is strong and the asset manager sells several very good products, they said. However, its distribution needs to be strengthened, including with new, alternative selling channels.

Doubled Gategroup Price

Bohli, a former Bellevue banker, pointed to the success of his hedge fund in attacking Gategroup: the airline caterer's shares doubled in value within two years, he said. He has set his sights on the same for GAM.

RBR Capital controls 3.28 percent of voting rights in GAM, which holds its annual shareholder meeting on April 27.