The French gendarme of the financial markets asked the management company, a subsidiary of Natixis IM, to suspend several of its funds. In question, issues of valuation of unlisted assets, linked to the controversial German financier Lars Windhorst.
Hard blow for H2O AM. The star affiliate of Natixis suspended eight of its funds on Friday evening, including three at the direct request of the Autorité des marchés financiers (AMF). The cause is “valuation uncertainties” due to their exposure to unlisted securities linked to the controversial German financier Lars Windhorst.
The AMF has rarely imposed such measures on a management company. The policeman of the financial markets has this time communicated on his intervention. The French supervisor and his British counterpart had been closely interested in these assets for several months. The flagship fund of the H2O range, Multibonds, is one of the suspended products. Almost half of the management company’s outstandings are thus frozen, with illiquid securities representing around 15% of these assets. The regulations impose a limit of only 10%, which had already been crossed by some funds.
The H2O range of funds, popular with individuals, has long offered very high returns, among the best in the sector. But the coronavirus crisis did not spare her. The risky strategies of the management shop have been taken completely in reverse. Several funds recorded disastrous performances, with falls of up to 80%. The Morningstar rating agency subsequently criticized risk management within the management company.
H2O suspended sales and purchases of shares from 12:30 p.m. Friday for about four weeks, she said in a statement. This period should allow it to isolate the titles concerned. At the same time a new fund will be set up to collect the liquid assets.
The clients of H2O will ultimately have shares in a liquid fund, which will use the same management strategy, and other shares in funds holding restricted private assets, “the objective of which will be to sell these securities, in the best possible way. investor interest, ”the company said. The management company preferred this solution rather than selling off these assets, indicates a source familiar with the matter.
The AMF and the FCA take a close interest in the unlisted assets of H2O AM
Serial difficulties at H2O
Natixis, which holds the majority of H2O’s capital through its management subsidiary, has indicated that it supports the measures taken by its affiliate. “It is a decision taken in the interests of customers,” assured the new CEO of Natixis, Nicolas Namias, at Les Echos. “This cantonment offers the time horizon necessary to sell the assets under the best possible conditions,” he added.
The BPCE group’s investment bank has invested € 20 million in H2O AM funds. The management company has long generated significant profits for Natixis thanks to impressive performance fees. H20 thus represented 11% of the profits made by the bank in 2018, according to Moody’s.
But the difficulties have accumulated since last summer for H2O. The exposure of H2O’s funds to unlisted securities linked to Lars Windhorst caused panic among its investors in June 2019, causing more than 8 billion euros of outflows in a few weeks.
The woes of H2O funds embarrass Natixis
Management of the implicated risks
H2O currently represents only 2.3% of Natixis’ assets under management, compared to 4% two years ago. In the second quarter, H2O contributed only € 4 million to Natixis’ net income, against € 30 million for the full year 2019. “The suspension has no financial impact on Natixis neither in terms of balance sheet, nor in terms of results, ”said Nicolas Namias to Les Echos.
H2O had been looking for several weeks to turn the page Lars Windhorst. The company signed a contract a few months ago to sell part of its unlisted securities to a consortium of investors also linked to the German financier. But the execution of this “Evergreen” contract was delayed due to the coronavirus, explained H2O. It now leaves the choice to sell these securities outside of this contract.
H2O reduces its exposure to Lars Windhorst companies