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GAM stock drops 30% on loss forecast of 925m Swiss francs

Assets under management have declined by a further 7 billion Swiss francs since the end of September.


GAM Holding's bad year just got a lot worse.

Shares of the Swiss asset manager fell a record 30 per cent after the company forecast a 925 million-franc (S$1.28 billion) loss for the full-year related to a series of goodwill charges at the group and its Cantab quant funds. Assets under management declined by a further 7 billion francs since the end of September and the group is cutting 10 per cent of jobs.

The loss more than erases eight years of earnings since GAM went public, as interim chief David Jacob seeks to move beyond the tumult created by the suspension of bond manager Tim Haywood in July.

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GAM held informal talks with potential buyers as it explored options to stabilise the business, people familiar with the discussions have said, though Mr Jacob said Thursday that for now, he's focusing on cleaning house.

"Today is about facing our financial reality so that we can move on and build a future for this business," he said on a conference call. "The board has stated that we consider all strategic options. However, as you can see from the release that we have made this morning, we are absolutely focused on the structure of this business, looking internally, and making sure this business is positioned for growth in future."

GAM fell 27 per cent at 9.43 am in Zurich trading, bringing losses this year to 79 per cent.

Mr Haywood's suspension triggered a wave of outflows, forcing the firm to freeze redemptions and liquidate his entire strategy, and accelerating a slump in the stock. GAM reacted to the crisis by redoubling its efforts to keep important employees, while reducing costs elsewhere.

The suspension came as GAM was already buffeted by headwinds in the asset-management industry. Volatile returns and an investor flight to low-fee products have squeezed profits, forcing many money managers to consolidate.

Assets under management declined by about US$18 billion in the third quarter as Mr Haywood's funds were liquidated and clients pulled money from other strategies.

GAM got a rare boost recently from Mario Gabelli, the 76-year-old billionaire head of Gamco Investors. He's built a stake of around 3 per cent in GAM, according to a filing.

Mr Jacob said: "October and November were particularly bad months for the industry in general, with added difficulty for European asset managers." BLOOMBERG