Swiss fund manager GAM is to restructure in order to rebuild trust with stakeholders after a difficult year for the firm that saw a fund manager suspended and a chief executive resign.
On Thursday GAM Holding AG said it saw outflows of 4.2 billion Swiss francs in the two months to November 30, which was the main cause of a decline in assets under management (AUM).
GAM issued estimated results for 2018 and announced a “comprehensive” restructuring programme to “strengthen its core business and reduce costs”.
The estimated results include a fall in underlying profit before taxes that is now expected to be SFr125 million, compared to SFr 172.5 million at the end of 2017.
The restructuring is expected to lead to a reduction in “fixed personnel” and general expenses of at least SFr40 million by the end of 2019 and reflected in the 2020 results
The group is to pay an expected goodwill impairment charge of about SFr885 million, but says this will not impact the group’s tangible equity or cash position.
A non-recurring charge of approximately SFr30 million is expected in relation to the restructuring and the professional costs in connection with the absolute return/unconstrained fixed income strategy (ARBF).
GAM suspended Tim Haywood, business head of the ARBF, in July following an internal investigation into his risk management procedures and record keeping.
“Given the significantly lower levels of AuM and the phasing of the cost reduction programme, GAM expects its 2019 financial results to be materially below those of 2018,” GAM said in a statement.
David Jacob, group chief executive, said: “With today’s announcement we are seeking to give our shareholders and our clients the clearest assessment of our financial situation. We are taking decisive action to rebase costs and support profitability, whilst maintaining our focus on client service and control functions.
“We are determined to do everything it takes to rebuild the trust of our stakeholders. We are fortunate to have excellent talent across our business, the ability to continue to invest in areas of strength and an attractive product range to build upon as we reposition GAM for future sustainable growth.”
Directors have proposed to suspend GAM’s 2018 dividend in order to strengthen capital buffers.
The firm reported SFr139.1 billion of AUM at the end of November, mainly driven by the outflows since September.
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