GAM expects 'challenging' 2019, sacks suspended director

GAM expects 'challenging' 2019, sacks suspended director
By Reuters

By Michael Shields

ZURICH (Reuters) – Assets under management at GAM Holding AG continued to fall at the end of last year, the Swiss group said on Thursday as it forecast a “challenging” 2019 ahead.

GAM had a torrid year after being forced to write down the value of its $217 million (166.5 million pounds) acquisition of UK hedge fund Cantab and close several funds after suspending top money manager Tim Haywood for alleged breaches of its rules.

“Following the conclusion of the investigation and the disciplinary proceedings, the suspended investment director has now been dismissed from the company for gross misconduct. There was serious failure to achieve the standard of skill and care which were to be expected of someone in his position,” it said.

Haywood has not responded to requests for comment.

GAM’s investment management business had 56.1 billion Swiss francs (43 billion pounds) of assets under management at the end of the year, down from 84.4 billion a year earlier, while assets at its private labelling arm rose to 76.1 billion francs from 74.3 billion francs at the end of 2017.

Together that came to 132.2 billion francs. Overall assets had totalled 139.1 billion Swiss francs at the end of November.

The company had said in December that it would cut 10 percent of its staff and ditch its dividend as it warned it would slide to a 2018 net loss, which it confirmed on Thursday was 929 million Swiss francs.

GAM reiterated that it expects underlying profits for the 2019 first half and full year to be materially below last year’s levels. “This is mainly driven by the significantly lower investment management AuM and corresponding revenues,” it said.

It set aside previous targets for operating margin and earnings per share growth while it focuses on stabilising the business.

“The operating environment for the asset management industry continues to be challenging, given subdued economic growth, geopolitical tensions and trade disputes, with investors continuing to remain cautious and price sensitive,” it said.

“Against that backdrop, and as a result of the issues encountered in the second half of 2018, 2019 will prove a challenging year. Along with normal flow dynamics, the daily flow position has improved in the first weeks of 2019 compared to December 2018, but institutional flows remain unpredictable.”

Shares in the group were indicated to open down 1.7 percent, according to pre-market data by bank Julius Baer.

For 2019 and beyond, GAM aims to pay out a dividend of at least half of underlying net profit.

GAM said it expects to cut fixed personnel and general expenses by at least 40 million francs by the end of 2019 and is examining other opportunities to make savings.

(Reporting by Michael Shields; Editing by David Goodman)

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