Gam is shifting its cost cutting program into high gear by slashing director pay and unveiling hundreds of further job cuts as the embattled manager looks to mitigate the damage from the coronavirus.
In a trading update the Zurich-based fund manager said it had “accelerated its efficiency program” to shore up CHF 65m ($67m) of total cost reductions for 2020 and ensure its path to profitability does not get derailed by the current market volatility.
As part of this move Gam will reduce its headcount to 680 full-time employees by the end of this year, down from 817 at the end of 2019.
Group chief executive Peter Sanderson had already warned that several hundred job cuts were coming but these were expected to happen over a longer time frame of two to three years.
Gam had already cut 10% of its workforce in 2019 as Sanderson’s predecessor David Jacob initiated a massive overhaul of the business.
On Tuesday Sanderson said the group had already completed a voluntary redundancy programme and was now planning a firm-wide salary review to “ensure appropriate alignment” particularly in senior non-investment roles.
Gam‘s board of directors have also agreed to waive “a portion of its fees … in recognition of the market environment and the resulting impact on GAM”.
This will see them get 25% less than the CHF 2.35m being requested at the upcoming AGM at the end of the month.
“GAM remains committed to the strategy we announced in February and we have moved to accelerate the efficiency element of the strategy in order to respond directly to the pressures of the current market environment,” Sanderson said.
“The health and wellbeing of our colleagues and clients has been our paramount concern and the GAM team has been successfully working remotely since 16 March.
“We have been able to maintain a seamless operation, and I am proud of the way our teams across the globe have responded and the clear dedication at the firm to support our clients in actively navigating through such volatile markets.”
Gam reveals coronavirus toll on assets
The coronavirus market turmoil took a chunk out of Gam’s total assets under management, which plunged 16% from CHF 132.7bn to CHF 112.1bn in the three months to 31 March.
Its investment arm lost over a quarter of its assets during the period after net outflows of CHF 6.5bn and negative market and foreign exchange movements of CHF 6.2bn chipped AUM down to CHF35.7bn.
All six of Gam’s strategies recorded net outflows, with its fixed income funds suffering the largest redemptions of CHF5bn. Clients pulled a further CHF 700m from Gam’s equity funds and CHF 200m from its absolute return funds.
“GAM has not been immune to some of the toughest market conditions the industry has seen, and we saw our assets under management decline as a result of the Covid-19 crisis,” Sanderson said.
“We saw strong investment performance until the end of February, but this was impacted by the market environment during March.”
Since then the group has seen “early signs of recovery” in terms of flows and investment performance, he added.
Fixed income drives outflows
Gam said the hit to its specialist fixed income fund was due to money pouring out of its GAM Star Credit Opportunities, the GAM Local Emerging Bond, the GAM Star MBS Total Return and the GAM Greensill Supply Chain Finance funds.
The Gam Star Credit Opportunities fund accounted for half of the fixed income outflows which the Swiss fund group said was mainly down to mechanical rebalancing of client holdings via third party structured products as markets turned volatile in March. But it said flows had “stabilised in tandem with markets” by late March and early April.
Even before the coronavirus outbreak Gam had struggled to hold onto assets following the high profile dismissal of Tim Haywood and the liquidation of his £8.5bn absolute return bond fund range tarnished its reputation.
Last year Gam’s funds leaked CHF 11.1bn taking AUM down 13% to CHF 48.4bn.
The Swiss manager has been loss-making since 2018, when Haywood was first suspended over conduct issues, with the group announcing its third profit warning in January in less than two years.
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