Shares of the listed group wiped out 20 per cent of their value on the news.
A Rest spokesman responded: “Rest is aware of the recent developments involving GAM. We cannot comment on the internal matters of an external fund manager, but we regularly review all of our fund managers as part of our processes. These developments will not have a material impact on members’ returns.”
CareSuper’s chief investment officer, Suzanne Branton, declined to comment on any changes to the industry super fund’s investment mandates beyond its periodic updates to members. GAM International Management is listed online as a current CareSuper absolute return investment manager as of June 30, 2018.
Local Government Super has been invested in the Absolute Return Bond Fund since 2013. “LGS is currently in the process of redeeming all of its investment in the fund, which forms only a small portion of LGS’ $11 billion investment portfolio,” it confirmed.
Another industry fund, the $8 billion Statewide, had allocated to GAM under a defensive alternatives mandate but terminated in early July, seeing all of members’ money returned before the gates went up at the Swiss group, CIO Con Michalakis said.
According to a report Bloomberg published earlier this month, the Australian feeder fund linked to Mr Haywood’s strategy experienced a spike in withdrawals during July after asset consultant Jana recommended clients reallocate, unrelated to the events GAM would disclose on July 31.
On Tuesday, GAM confirmed that it would begin the process of liquidating the frozen unconstrained/absolute return bond funds, including Australian feeder funds.
It estimated in June that it managed more than $5 billion of Australian money. It chose to freeze redemptions on August 2 upon receiving a “high level” of redemption requests for the CHF7.3 billion ($10.2 billion) of assets involved.
While GAM promised “all fund investors will receive their proportionate interest in cash from the liquidation process,” the first payment due in early September will see investors who participate via the Australian and Cayman funds get between 60 and 66 per cent of assets, leaving up to 40 per cent still restricted. Luxembourg and Irish-domiciled fund investors will see 74 to 87 per cent.
“The company expects to make a further distribution for each fund before the end of September, and continue distributions in the coming months, dependent on market conditions,” GAM said, without providing definitive dates.
The absolute return bond fund was also invested in some illiquid securities, according to the Financial Times, which may have lacked proper due diligence and risk control reporting. Illiquid securities are more difficult to exit because they are thinly traded, and market participants may opportunistically capitalise on GAM’s liquidation to extract more favourable prices.
GAM has declined to provide additional detail on the illiquid securities “as this could put GAM’s liquidation efforts and fund investors at a disadvantage when these assets are put up for sale,” the fund manager advised.
Equity Trustees was the responsible entity for the GAM Absolute Return Bond Fund and the GAM Absolute Return Bond Defensive Fund in Australia.