Dissident Shareholder Turns Up the Heat on GAM

Swiss activist investor RBR Capital Advisors thinks 2019 is too long to wait for asset manager GAM Holding to improve the firm — which has suffered client outflows on the back of dismal performance for two years running — and the dissident shareholder is pressuring GAM to make big changes, fast.

GAM has been slashing costs and revamping funds in an attempt to slow clients’ withdrawals from its products. The firm revealed in itsannual reportyesterday that investors pulled 10.7 billion swiss francs ($10.6 billion) from its funds last year, while performance fee income plummeted from 82.8 million francs to 3 million francs. The firm’s assets under management rose 1 percent, to 120.7 billion francs.

GAM, like many asset managers who operate hedge funds, has been suffering as investors have become skeptical of the sector amid disappointing returns and high fees. GAM CEO Alexander Friedman has been restructuring the investment manager, saying in a statement accompanying the results, “Our 2016 earnings were disappointing on two fronts: we recorded net outflows for the year and realized very low performance fees. We are addressing both issues through our strategic initiatives, many of which have started to bear fruit, while our unrelenting focus on cost discipline is showing results.”

But Friedman said the changes won’t be complete until 2019, with the firm aiming to cut $30 million in additional expenses by then. That isn’t fast enough for RBR.

“In our view, if you need to put in place a change program, you need to act quickly,” says Kasia Robinski, a partner with Hanover Investors in London and a veteran private equity executive whom the RBR Strategic Value fund, which owns 2.1 percent of GAM, hasproposedto replace GAM’s current chairman. “There is not a sufficient sense of urgency at the company. If you look back at performance over the past three years, it paints a picture of issues not being addressed.”

RBR says it has been engaged in behind-the-scenes meetings and written correspondence with the company about strategy. A GAM spokeswoman says the company doesn’t disclose the content of private meetings with investors.

RBR proposed three new members for GAM’s board: Robinski, William Raynar, and Rudolph Bohli, founder and chief investment officer of RBR. GAM’s board chairman, Johannes de Gier, is retiring, but GAM proposed that current board member Hugh-Scott Barrett be elected to chairman and a new board member, David Jacob, CEO of fixed income asset manager Rogge Global Partners, join the board.

“Our view is that teams that have not delivered need to be strengthened; whereas we welcome a change in the chairman and the appointment of one new individual to the board of directors, we do not consider that these changes go far enough,” adds Robinski.

Upcoming disclosures will show that RBR’s stake in GAM will rise to more than 3 percent, according to one person familiar with RBR’s holdings. Robinski would only confirm the 2.1 percent ownership stake.