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The exit of Haywood's co-manager of 12 years caps a frantic 15-month emergency response by GAM to the initial alarm. The whistleblower and Haywood had clashed for years, according to an industry rival. But Haywood's investments in unlisted securities of a company controlled by British-Indian billionaire Sanjeev Gupta brought the fire-and-water relationship to the breaking point.

Fee Hit

The whistleblower took his concerns to GAM management in November 2017. After several months, he went directly to the U.K. Financial Conduct Authority, which raised the stakes considerably for the company. GAM hastily suspended Haywood last July, probably fearing regulatory action by British overseers newly-armed with tougher whistleblowing rules.

The shock move sparked immediate and massive withdrawals, which hit GAM where it hurts: in the fees. Haywood and the unconstrained bond funds had been made for more than one-quarter of GAM’s 44.1 million Swiss francs ($44.1 million) in performance income in 2017. 

Haywood's co-manager appeared on GAM materials promoting the bond products, but had largely stayed in the background. Haywood was marketed as the public face of GAM’s absolute return bond arm, including through client visits and frequent media appearances. A spokesman for GAM didn't comment on the whistleblower.

Personal Clash

The absolute return bond funds went into liquidation, and GAM ditched the strategy last autumn. Last week, the company said it still has 1.5 billion francs to go in selling down the fund assets, after first blocking withdrawals and later liquidating (which it hopes to finish in the next few months).

Clients are probably going to lose money: GAM said it redeemed 66 percent to 72 percent of funds held in a Cayman Island fund as well as an Australian «feeder» fund. Investors who bought funds housed in Luxembourg and Ireland received 89 percent to 92 percent of their assets back, the company said.

«Deep Regret»

GAM said last week it is roughly one-third of the way through cutting 10 percent of its staff, which translates to at least 90 people. The asset manager, which reportedly let go prominent staff like luxury fund manager Scilla Huang Sun and fixed income expert Enzo Puntillo, is finished with letting go investment managers, a source told finews.com.  

The FCA is grappling with new whistleblowing rules rolled out in 2017. «We deeply regret that the absolute return bond fund situation has impacted all our stakeholders, including clients, shareholders and employees», GAM Chairman Hugh Scott-Barrett said last week.