The Swiss asset manager is returning to the bond strategy at the heart of its current troubles, but the fund’s former star manager still isn’t going quietly, finews.com has learned.

Alex McKnight GAM 160Zurich-based GAM is returning to the bond strategy it was forced to shut down last fall, finews.com has learned. Alex McKnight, one of the fixed income experts who stepped in the liquidation last fall, recently began managing a GAM total return bond fund, a company spokesman said.

The fund pursues an unconstrained strategy, meaning McKnight can invest in effectively any fixed income product he wishes to. He and Jack Flaherty took over the original absolute return bond set of funds following star manager Tim Haywood’s suspension last July. ARBF redemptions are due to wrap up by mid-July (a GAM spokesman said the process is on track).

Appeal Denied

The launch comes after GAM last month rejected an appeal by Haywood, who the company sacked in February for gross misconduct. The former star's alleged shortcomings don't include violations to fund limits or damage to clients. Haywood told finews.com he isn’t willing to accept the verdict, which came tens months after he was suspended and 19 months after a whistleblower first raised alarm.

«I have offered to enter conciliation talks with GAM, and – as has become the norm – I am awaiting a response from the company,» Haywood said. So-called conciliation talks are the first stage in an employment tribunal process under ACAS, a service which arbitrates labor disputes in the U.K., where Haywood was based. GAM didn't comment. 

Silent Fund Launch

The successor fund to Haywood’s boutique range isn’t new: it was previously managed by Enzo Puntillo, who left GAM in December. But McKnight’s role in kickstarting the absolute (or total) return strategy in recent weeks via the fund is.

His team of three other GAM money managers will draw on expertise from GAM’s other fixed income teams such as Paul McNamara’s emerging market debt fund. The bond fund, which hasn’t been marketed to clients yet, currently manages 190 million Swiss francs ($190 million).

That is puny compared to the 16 billion francs that Haywood managed at ARBF’s peak, in 2013. However, the silent fund launch illustrates that GAM isn’t ready to leave unconstrained bond trading following the whistleblowing scandal which more than halved its market cap since last August.

GAM in Crisis

Last month, GAM said it expects to have sold off the remaining ARBF assets and returned between 99.6 and 101.0 percent of investors' money by mid-July. The whistleblowing has wrought havoc on the company: clients fled with $21.5 billion last year. GAM is to report first-half results under new CEO David Jacob (click here for finews.com interview) on July 30.
The company posted a net loss for 2018, scrapped its dividend, and began slashing spending. GAM’s board was denied a key approval by shareholders last month, and the company reaped embarrassing headlines when Haywood was apparently prevented from attending the meeting.
Separately, an influential politician in the U.K., where a potential employment dispute will play out, is calling for deeper regulatory scrutiny of GAM. Swiss regulator Finma, GAM’s lead regulator, has not investigated, several people familiar with the matter told finews.com.