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H2O Asset Administration will make a €70mn reimbursement to traders who’ve had their funds trapped on the as soon as high-flying asset supervisor since 2020, because it continues to make restricted progress in returning €1.6bn it invested in illiquid property.
As soon as a star of European funding that oversaw greater than €30bn at its peak, H2O was plunged into disaster in 2019 after the Monetary Instances revealed it had substantial publicity to illiquid securities tied to the controversial financier Lars Windhorst.
H2O froze €1.6bn of investor funds the next yr after the French monetary regulator raised considerations in regards to the valuations of its hard-to-sell property. The Autorité des Marchés Financiers levied a file €75mn nice towards H2O final yr as punishment for “critical” rule breaches associated to the illiquid investments whereas banning the agency’s co-founder Bruno Crastes from managing funds for 5 years.
H2O mentioned the roughly €70mn could be paid within the “coming weeks” to traders that had had their cash frozen in funds set as much as home the illiquid securities.
The cost would be the second to those traders after H2O mentioned final yr that it had acquired a €250mn reimbursement from Windhorst’s funding agency Tennor Holding. Traders later acquired a smaller distribution of about €144mn, nonetheless, and fund disclosure then confirmed that a good portion of the €250mn was repaid with new bonds relatively than money.
The announcement of a second cost comes per week after an FT investigation revealed the extent of the agency’s former chief govt Crastes’s private entanglements with Windhorst, which included occurring a household vacation to the Caribbean with the financier on his superyacht. It additionally revealed that H2O’s chief funding officer and co-founder Vincent Chailley strongly objected to most of the Windhorst-linked investments for years earlier than the agency was plunged into disaster.
H2O mentioned that the deliberate distribution had led to an “upwards” revaluation of its so-called “aspect pocket” funds, which have been beforehand marked all the way down to lower than €200mn on the finish of November. The asset supervisor cautioned that “valuation uncertainty” remained, nonetheless, and that “solely liquidation will permit an actual valuation”.
Regardless of the gradual progress on returning cash to the side-pocket traders, H2O’s core funds — which primarily spend money on authorities bonds and currencies — have strongly outperformed their benchmarks lately. H2O just lately instructed traders that its flagship fund ended 2023 up about 26 per cent, which it described as “virtually equivalent” to its 2022 efficiency regardless of a “radically completely different market context”.
In December, H2O was hit with a lawsuit filed by greater than 6,000 aggrieved traders claiming €700mn in damages in relation to the illiquid asset scandal. The investor group argues that H2O, in addition to its former majority proprietor Natixis Funding Managers, the auditor of its funds KPMG, and the funds’ custodian CACEIS, are collectively responsible for the losses that traders incurred.
H2O earlier this month mentioned that the lawsuit contained “arbitrary, unfounded and even fabricated allegations” and that “we are going to proceed to defend ourselves, with conviction and with out artifice”.
Windhorst has spent a lot of the previous yr battling a contemporary raft of lawsuits in London’s Excessive Court docket from aggrieved collectors. In the summertime of 2023, he was present in contempt of courtroom, hit with a €150mn freezing order and conceded beneath cross-examination that it was “tough” to say whether or not he was solvent.
A number of companies underpinning H2O’s investments in Windhorst-linked illiquid securities have just lately skilled monetary difficulties, with a UK courtroom in November ordering the liquidation of the holding firm of Italian luxurious lingerie model La Perla.
Windhorst final week instructed the FT: “It stays a precedence of Tennor Group to repay its money owed and Tennor Group and myself stored making funds to collectors together with H2O in the course of the previous yr and intends to proceed paying down its money owed in the course of the coming weeks and months as we’re assured in regards to the growth of our international companies for this yr and past.”