The group also on Tuesday named BlackRock executive Peter Sanderson as its chief executive after an eight-month search. Its shares bounced more than 7 percent from a near two-month low seen the previous session.

GAM's stock lost three quarters of its value in 2018 after the dismissal of Haywood for alleged breaches of the company's rules prompted the closure of his funds and spurred clients to pull billions of Swiss francs from the company.

Heading off concerns of a protracted legal tussle that could hamper attempts to restore investor confidence, GAM said both parties had agreed a ceasefire, without giving details.

"GAM is focused on the future of the business, and while it stands by its finding of gross misconduct, it has agreed with Tim Haywood that neither party will pursue the other based on current facts," it said on Tuesday.

A spokesman for Haywood said he had declined to proceed with a case before an employment tribunal because the expected legal costs far exceeded the possible financial award.

"Mr Haywood still believes in the merit of his case for unfair dismissal," the spokesman said, adding Haywood was pleased clients of his absolute return bond fund range would get their money back, in some cases more than 100%.

"I am extremely grateful to all parties, inside and outside GAM, who worked so assiduously to create such a positive outcome for clients," the spokesman quoted Haywood as saying.

After completing the planned return of capital to investors in Haywood's funds, Interim Chief Executive David Jacob said the company could now "close the most difficult chapter in our history".

Jacob told an analyst call that the company had seen net inflows of client cash to its funds during June and July and continued to look at options to maximise shareholder value, amid talk a rival could bid for the firm as part of an industry consolidation trend.

COMPETITIVE EDGE

GAM announced the appointment of Sanderson as chief executive as of Sept. 1, replacing Jacob, who will become chairman. Sanderson's predecessor Alexander Friedman had left last November after agreeing with the board the company would be best served by new leadership.

Sanderson, a Briton born in 1978, served at BlackRock as head of financial services consulting, EMEA; co-head of multi-asset investment solutions in EMEA; and chief operating officer for BlackRock Solutions in EMEA.

"At GAM, he will be focused on further simplifying the business and concentrating on areas of recognised expertise where GAM has competitive edge in order to put the business back on a growth trajectory," it said in a statement.

Shares in GAM were up 7.5% by 0928 GMT.

As already flagged this month, GAM posted a net loss of 13.6 million Swiss francs (11.27 million pounds) in the first half on an IFRS basis. Net fee and commission income fell to 171.1 million from 287.7 million a year earlier as a result of substantially lower levels of assets under management.

Net outflows in investment management amounted to 7.6 billion in the first half, partly offset by positive net market and foreign exchange movements of 3.6 billion.

Separately, Zuercher Kantonalbank said it was buying four Swiss precious metals funds from GAM with assets under management of 1.8 billion francs, and GAM's money market funds domiciled in Luxembourg with assets under management of approximately 400 million francs.

The purchase price of 14 million francs corresponds to around 0.6% of the acquired assets.

(Reporting by Michael Shields in Zurich and Simon Jessop in London; Editing by John Miller and David Holmes)

By Michael Shields and Simon Jessop