H2O Asset Management has cut its exposure to what it calls “private bonds”, while marking down the valuation of its remaining holding, in an attempt to stem the investor outflows that have hit the €30bn bond fund manager.
The London-based subsidiary of Natixis saw €1.4bn of outflows across six of its funds, according to data up to Thursday, after the Financial Times revealed the scale of its holdings of illiquid bonds linked to a controversial German financier.
The fund manager, which has €30bn of assets under management, 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.
On Monday, H2O announced that it has sold a portion of its “non-rated private bonds” and “marked down the balance” based on a valuation from international banks. Natixis separately confirmed it was not one of these banks. H2O says its aggregate value is now below 2 per cent of its assets under management.
In efforts to stem investor outflows, H2O has also introduced “swing pricing”, where a fund provider prices their fund at a discount in order to pass trading fees on to clients that want their money back. The fund manager said these discounts would be between 3 and 7 per cent of the net asset value of their funds.
H2O also removed all entry fees across its funds, reversing a measure it took in December when it hiked “introduction fees” on five of its funds.
Natixis said in a statement that it supported the measures taken by H2O. In a move it said is aimed at “restoring confidence” in H2O, the French bank said it had brought forward a “periodic audit” of the firm, which it began on Friday.
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. They were up 2.6 per cent in early Paris trading on Monday.
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.
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