As GAM unwinds a $7.3 billion bond portfolio, the Swiss asset manager is reportedly still sitting on paper linked to an little-known investment firm with ties to former CEO David Solo.
The Zurich-based asset manager is redeeming a whopping $7.3 billion in a flagship bond fund to investors. The move followed the suspension of star fund manager Tim Haywood sparked by a whistleblower, as finews.com exclusively reported two weeks ago.
The wind-down is going smoothly, the «Financial Times» (behind paywall) reported on Wednesday, citing sources – except for big chunks of paper linked to Greensill. The company, which counts ex-GAM CEO David Solo as an advisor, also cooperates on so-called supply chain funds managed by GAM.
Haywood's absolute return portfolio, which is effectively allowed to invest in any fixed income instrument or security if it provides return, is a hodgepodge. While GAM has handily sold paper including pre-crisis perpetual dollar bonds issued by Barclays, Lloyds, and RBS, the troubled asset manager is still sitting on more illiquid Greensill-linked instruments.
Daily Liquidity vs Slow Sale
The investment firm's main business is financing: Greensill pays bills «early» on behalf of companies with outstanding invoices, for a small fee. The firm later snaps up the full invoice payment.
The Greensill investments are a spanner in the works because as unlisted and opaque investments, they cannot be sold quickly. This runs contrary to promises made to investors of daily liquidity – a moot point since Haywood was suspended, because the absolute return business was gated shortly after to prevent a run on GAM.
Half of a key Luxembourg absolute return fund's top ten trades were securities tied to British-Indian billionaire Sanjeev Gupta, whose firm used Greensill's services, the «FT» reports.
Market Unruffled
The Greensill paper GAM still holds may be illiquid, according to the paper, but it is fairly short-term and is due to roll over towards year-end. finews.com reported that Gupta notes issued last year which led to the whistleblowing are «in the money» and set to be redeemed shortly.
Rival fund managers appear unruffled from the massive unwind: GAM hasn't had to resort to fire sale of large positions, and $100 million in bank bonds issued by Lloyds went for just one percentage point lower than their market price, according to the paper.
