Bonds Advice

Investment house sacks £8bn fund manager for 'gross misconduct'


Asset management firm Gam has sacked suspended bond manager Tim Haywood, after an internal investigation found him to have acted with “gross misconduct”.

Mr Haywood was suspended in July 2018 for issues related to his “risk management procedures and record keeping” while in charge of the then £8.5bn Gam Unconstrained/Absolute Return Bond Strategy and an investigation subsequently began.

In its annual report released today the firm said it had dismissed Mr Haywood following the conclusion of the investigation. It also announced total assets under management had fallen from £84bn to £56bn.

“There was serious failure to achieve the standard of skill and care which were to be expected of someone in his position,” it said.

In a statement, Mr Haywood announced he intends to appeal the decision, suggesting the investigation was prejudged following his suspension.

He responded: "I dispute many of the findings, while noting the majority of the allegations have been dropped. Meanwhile, I have been made redundant by a process which I also consider to have been run unfairly. 

"This reinforces my belief that my dismissal from Gam was a foregone conclusion, and that I have been unjustly singled out.”

Following his suspension last year, the firm’s board decided in August to liquidate the fund in response to investors pulling their cash from the portfolio.

The fund house noted that it had made good progress on this and expects the fund to be fully closed, with all money returned to investors, in the next few months, subject to market conditions.

There is still £1.5bn in assets yet to be returned and much of what has been may be sat in cash rather than reinvested.

Below, Telegraph Money asks advisers for alternative absolute return funds they could look to move their cash into.

Andrew Merricks, of Skerritts Wealth Management, said that most absolute return funds disappoint when they’re most needed, effectively giving you no more than a cash return.

While he does not use many, he added that there are two funds that are able to provide decent returns in a falling market while eking out small returns when the market is rising.

These are Church House Tenax Absolute Return and Artemis US Absolute Return.

“They are exposed to different markets (the UK and US respectively) but have outperformed their peer group since the very beginning of 2016,” he said.

This timeframe takes into account two sharp corrections at the start of 2016 as well as the fall at the end of last year.

More recently the Artemis fund has outperformed the Church House one, which has been affected by Brexit sentiment, but the opposite is true over the longer period.

“The worst thing that you can get from an absolute return fund is no real protection in a downturn, yet missing out on any subsequent recovery. These don’t do that,” Mr Merricks added.

Ryan Hughes of AJ Bell, a broker, said the M&G Absolute Return Bond fund could be a good option for investors no longer in the Gam fund. Managed by Wolfgang Bauer, it draws on the huge fixed interest team at M&G which is headed up by veteran Jim Leaviss.

“The fund is very focused on reducing risk and trying to limit losses,” Mr Hughes said.

Given it aims to take on very little risk, this fund is unlikely to make you rich but should grind out returns higher than you can get on a cash deposit. Since its launch in 2016 the fund has made 3.6pc compared to its average peer’s 2pc.

Gill Hutchison of The Adviser Centre, a research house, said that there are no absolute return bond funds that they currently rate. However, one that she would highlight is the Vontobel TwentyFour Absolute Return Credit fund.

Managed by Chris Bowie and Gordon Shannon, it is relatively straightforward compared to a lot of its peers. It aims to provide a return of 2.5pc above the base rate after its fees have been taken into account, while keeping volatility very low.

Most is invested in high-quality bonds from companies that have a maturity date within the next five years – meaning they are less likely to default.

The fund has resturned 11pc since its launch in 2015, compared to its average peer’s 3.2pc gain.

Sheridan Admans of The Share Centre said that absolute return strategies are notoriously diverse and differ from one fund to the next.

He said that while he is not well versed with the Gam fund, investors looking at the sector should consider the  Pyrford Global Total Return fund.

“We hold it in two of our in-house multi-manager funds,” he said

The fund aims to be a steady performer over the long term without taking on too much risk and is always conscious of not losing money. The fund launched in 2009, since when it has made 125.2pc for investors. The average peer has made less than half this, up 54.9pc.

For the best of the Telegraph’s investment analysis, advice and expert opinion, plus columns from our stock-picker Questor, sign up to our weekly newsletter.


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