H2O Asset Management saw €1.4bn of outflows across six of its funds, after the Financial Times revealed the scale of its holdings of illiquid bonds linked to a controversial German financier.
The London-based subsidiary of Natixis has been plunged into crisis after FT Alphaville reported that H2O’s latest filings collectively listed investments in more than €1.4bn of illiquid bonds linked to Lars Windhorst, a flamboyant entrepreneur with a history of legal troubles.
Data published on the fund manager’s website shows that those same six funds — Adagio, Allegro, Moderato, Multibonds, Multistrategies and Vivace — collectively saw more than €1.4bn of investor money withdrawn between Tuesday and Thursday.
The data suggest that the scale of investor withdrawals is larger than previously reported. French bank Natixis’s chief executive François Riahi held a conference call with analysts and investors on Friday morning in which he said H2O’s funds had seen €600m of net outflows since the beginning of the second quarter. But he added that as this figure included inflows from the start of the period there were “no doubt more” outflows over the past few days.
H2O declined to comment.
Natixis’s share price fell 15 per cent over two days as concerns around H2O intensified, shaving close to €2bn off the bank’s market value. Morningstar, whose assessments are used as a key guide for investors, suspended its rating of an H2O fund the day after the FT’s report, citing liquidity concerns.
H2O’s chief executive Bruno Crastes on Friday appeared in a video from French website H24 Finance in which he addressed “an article in the Financial Times”. The 54-year-old French fund manager said that “there is no question about the liquidity of H2O” and also defended his relationship with Mr Windhorst.
“The journalist in the UK is saying he is rather a sulphurous character, but we know him quite well now,” said Mr Crastes. “He is extremely talented.”
Mr Windhorst relaunched his investment company Tennor Holding last month in a bid to turn the page on several difficult years, which saw him and his firm — formerly called Sapinda — engaged in legal battles involving at least €220m with several investors, including Ukraine-born billionaire Len Blavatnik.
A teenage prodigy and poster boy for entrepreneurship in his native Germany, the financier went on to preside over several insolvencies, a personal bankruptcy and received a suspended jail sentence in 2009.
Mr Crastes joined a new advisory board at Mr Windhorst’s Tennor last month, but stepped down this week after Morningstar said the role raised “the risk of a potential conflict of interest”. Both Natixis and H2O have insisted there was nothing wrong with the arrangement, however, and the fund’s chief investment officer and co-founder Vincent Chailley has now taken Mr Crastes’ place on the board.
Jean Raby, the head of Natixis’ fund management arm, confirmed to investors on Friday that their holding in bonds related to Mr Windhorst now stood at “a little above €1bn”.
Mr Raby also justified H2O’s investments in these bonds. He described the range of holdings as “quite diversified” adding that the portfolio included “even a luxury good company in Italy”, in reference to La Perla — the Italian lingerie maker Mr Windhorst purchased in 2018 after settling a legal dispute with its previous owner, Italian entrepreneur Silvio Scaglia.