Trying to stop a dollar sell-off? Multi-Billion Fund Manager Freezes Redemptions At Bond Funds

Multi-Billion Fund Manager Freezes Redemptions At Bond Funds

In 2015, at the peak of the commodity-crush induced wave of energy defaults, a high-yield bond fund at Third Avenue in froze withdrawals to avoid having to divest holdings at fire-sale prices. That set off a chain of events that rattled credit markets and deepened one of the worst selloffs in years.

Fast forward to today, when Swiss multi-billion asset manager, GAM Holdings announced it has frozen withdrawals at some of its bond funds after a surge in redemptions from clients who sought withdraw their money following the suspension of manager Tim Haywood, the latest in a series of setbacks that sent the company’s shares into a tailspin.

GAM’s troubles started last month, when as we reported at the time there was market speculation that a market neutral quant fund it had purchased in October 2017, Cantab Capital Partners, was in trouble, with some pointing fingers at AQR. Perhaps, but it turns out that GAM was also involved when the fund warned of a writedown due to losses at one of its quant hedge funds. The announcement launched a slide in its shares that only accelerated after this week’s suspension of Haywood, who headed the firm’s second-largest strategy, and a warning by CEO Alex Friedman that clients may allocate less money to the firm because of volatile market conditions, accelerated the slump.

Quoted by Bloomberg, Chairman Hugh Scott-Barrett sought to soothe investor fears, saying he’s open to all ways to strengthen the stock price.

“The board of directors and the management team are committed to considering all avenues to optimize shareholder value as we continue to build on the many achievements to date,” he said in a statement Thursday.

It only made things worse, and as Zuercher Kantonalbank analyst Michael Kunz wrote in a note to clients, the fund freeze “actually brings GAM out of the frying pan and into the fire.” The first was certainly raging in GAM’s stock price today, which plunged 12% in Zurich trading, wiping out a third of the company’s value in the past month…..More Here

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