At the end of May, billionaire investor George Soros (Trades, Portfolio) joined world renowned bargain hunter Mario Gabelli (Trades, Portfolio) in purchasing a stake in troubled Swiss asset management firm GAM Holding AG (XSWX:GAM, Financial).
Via SFM U.K. Management, a subsidiary of Soros Fund Management, Soros purchased the 3% holding in May, according to a statement from the Swiss stock exchange. GAM endured a tough 2018, which saw the stock plummet over 70% after a whistleblowing scandal saw its CEO resign, the star asset manager dismissed and a whole host of GAM customers withdraw their funds.
This year has been kinder to the Zurich-bases asset management group, which was founded in 1983. Having appointed David Jacob as CEO last November, the former leader of Rogge Global Partners Ltd. has pushed liquidating the remaining funds managed by the suspended Tim Haywood. GAM has also been busy approaching several potential acquirers, but still has a planned timeline of mid-July to liquidate what’s left of the Haywood fund, which is worth 7.3 billion Swiss francs ($7.35 billion).
At first glance, the purchase of 3% of GAM looks a solid investment. Investors reacted to Soros' investment positively, regarding it as an endorsement. When the news broke, GAM stock shot up over 20% to 4.88 Swiss francs before pulling back in the following week. Importantly, the company’s biggest shareholder is Silchester International Investors with a 19% stake. It has declined to comment on the Soros investment so far, but things look to be heating up as investors await Silchester’s next move.
Having already laid off 10% of its staff and three of the company’s seven directors stepping down from their roles in April, GAM is certainly leaner. It started bleeding staff the moment it suspended Haywood, who is planning to appeal the dismissal. GAM’s recovery is rumored to be attracting interest from not just Soros, but German insurer Allianz too.
Although Soros’s motivations aren’t 100% clear, the investment by his family office, which manages approximately $25 billion, comes at a time when merger speculation in asset management is running high. As the summer heats up, we can expect GAM acquisition talk to heat up too.
Disclosure: The author has no stakes in the listed equities.
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