GAM is fleeing a series of credit investments in a company under attack from a stock short-seller. The ditched investment bears the hallmarks of its recent bond fund scandal, from which the Swiss company is still reeling.

The Zurich-based asset manager sold the entirety of its bond-holdings in Burford, which it held across three GAM fixed income funds, a spokesman for the company told finews.com on Thursday. Burford saw its shares tumble on Wednesday when a short-seller publicly attacked the London-based investment fund management company.

The attack appears to have spooked GAM, which is seeking to recover from a 19-month-long scandal over another bond fund which has knocked two-thirds off its market capitalization. As with the scandal-tarnished investments which GAM offloaded after one year, the Burford bonds reportedly made up the largest chunks of three different GAM funds. 

Attack and Accusations

GAM held the now-ditched Burford securities in three funds, according to a source familiar with the matter: they made for 1.24 percent of the total fund volume in a US dollar fund, for 0.48 percent in a euro-denominated product, and nearly 3 percent in a sterling-based fund, this person said. It isn't clear what effect this had on the GAM funds' performance.

On Thursday, Burford responded to the short-selling attack by flagging plans to buy back its own shares following the sharp drop in price. The short-seller had claimed two main Burford shareholders – British money manager Neil Woodford, who is under fire from investors, and Invesco – has engaged in improper behavior. Burford rejected the claims as «false and misleading» according to media reports.

Uncomfortable Questions

The swift retreat by GAM indicates that the asset manager wants to avoid even the whiff of another high-profile scandal at all costs. Last week, the company appointed former Blackrock executive Peter Sanderson as its third CEO in nine months.

GAM is at pains to portray itself as returning to normal, but questions linger. It is still subject to a regulatory investigation in the U.K., two sources familiar with the matter told finews.com. An A$1 billion ($674 million) withdrawal from a GAM feeder fund shortly before the bond scandal blew open last year may also prompt uncomfortable questions for the company.