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). In question, “uncertainties of valuations” 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 gendarme of the financial markets this time communicated on his intervention. The French supervisor and his British counterpart took a keen interest in these assets for many months . The flagship fund of the H2O range, Multibonds, is one of the suspended products. Nearly 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%. Morningstar rating agency later 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 shares, 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.
Serial difficulties at H2O
Natixis, which holds the majority of the capital of H2O through its management subsidiary, indicated its support for the measures taken by its affiliate. “It is a decision taken in the interest 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 outperformance 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 funds to unlisted securities linked to Lars Windhorst caused a movement of panic among its investors in June 2019, causing more than 8 billion euros of outflows in a few weeks.
Management of the risks involved
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, compared to € 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 for sell part of its securities unlisted, 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.