GAM warned of a full-year loss following a scandal at a showcase bond funds. The battered asset manager is scotching its dividend, cutting 10 percent of jobs, and demoting top management members in response.

Zurich-based GAM said it will suspend dividend payouts to shareholders this year as it embarks on a major restructuring and cost-cutting program. The move follows a profit warning for this year, when GAM expects to post a loss, as well as next, when underlying profits will fall.

The problems piling up on GAM include a whistleblowing scandal at a prominent bond fund which has involved the British regulator and the unsuccessful acquisition of systematic trading boutique Cantab two years ago. A raft of GAM executives including CEO Alex Friedman and top regulatory watchdog Nathalie Baylis have exited. GAM now finds itself struggling to survive.

«With today’s announcement we are seeking to give our shareholders and our clients the clearest assessment of our financial situation,» CEO David Jacob, who replaced Alex Friedman in the job five weeks ago, said in a statement.

Deep Losses

The situation is dire: GAM expects a full-year loss of 925 million ($931.3 million) for this year, and for underlying profit in 2019 to fall short of this year's, it said. This year's loss is due to a 885 million franc writeoff to account for roughly 4 billion francs of asset outflows since the bond fund scandal emerged in July. The withdrawals have in turn hit performance fees, from which GAM lives.

But GAM is also writing off 62 million francs for Cantab, which the Swiss firm snapped up in 2016 for $217 million plus a 40 cut of future fees. This is slightly more than the 59 million flagged by previous CEO Friedman in July.

The restructuring as well as costs related to the absolute return bond fund formerly managed by Tim Haywood will add another 30 million francs to its charges this year. As a result, dividends are being halted for this year.

High-Profile Exits

Jacob, the new CEO, has launched a restructuring push including cutting 10 percent of jobs next year, which would translate to at least 90 people. It has also reportedly had prominent exits including luxury fund manager Scilla Huang Sun and fixed income expert Enzo Puntillo. GAM hasn't named fund managers who have left.

Last month, the company had began merging investment teams and cutting jobs. GAM will also demote two top executives: investment chief Larry Hatheway and head economist Tim Dana, reducing its C-suite to seven from nine people. Hatheway and Dana will remain with the firm's senior management, GAM said. The company is in an extraordinarily fragile state, and fending off suitors for individual parts of its business