H2O AM has been dealt another blow. On August 7, the asset management company announced that it had reached an agreement with the FCA to end the UK regulator's investigation into the company. This investigation concerned the relationship between H2O AM and German financier Lars Windhorst's company Tennor Holding between 2015 and 2019.
As part of this agreement, H2O AM "has secured an amount of €250 million to finance an offer proposed to all holders of the hived-off funds on an equal basis from the fourth quarter of 2024", according to a press release.
"We note the FCA's conclusions on the investments made by H2O AM LLP in private securities between 2015 and 2019," says Loïc Guilloux, the group's chief executive since January 2023.
Heavy Penalty Avoided by H2O
The company is also waiving €320 million representing "its rights to fees and investments" and has agreed to close its UK operations by the end of the year.
In a statement, the FCA said that "between April 2015 and November 2019, H2O failed to carry out due diligence on investments related to the Tennor group of companies owned by Lars Windhorst, or other companies he introduced. The investments were very risky and difficult to sell."
"The FCA also found that H2O had not put in place adequate policies or procedures and had not exercised due skill and care to manage potential conflicts of interest. The FCA identified more than 50 instances where H2O employees received hospitality that was not properly declared, including the use of a superyacht and a private jet.
"H2O also provided the regulator with false and misleading statements and documents, such as fabricated minutes and minutes of meetings."
"The FCA would have imposed a substantial fine on H2O for its serious breaches," the regulator added. The agreement announced today avoids such a penalty for the management company, but nonetheless represents a severe punishment for H2O AM.
Contacted for further details on the consequences of this departure from the UK, H2O AM was not immediately available for comment.
Legal Action in France
This agreement comes at a time when thousands of aggrieved investors in France have taken legal action against the management company.
The management company and its managing director, Bruno Crastes, had already been heavily sanctioned by the AMF in January 2023 for investing in illiquid assets, revealing major failings in terms of risk management and control.
The special notice published by the FCA sheds new light on these failings and the special relationship between H2O AM's directors at the time and Lars Winhorst and his holding company.
Towards an Exit from Natixis?
"This step is good news in that it brings closure for investors in the hived-off funds, who will finally be able to recover part of their investment. However, the outcome needs to be qualified: the net asset value of the funds had plummeted in the period leading up to the suspension, so the total performance over the holding period remains disappointing for some investors", says Mara Dobrescu, Morningstar's Global Head of Bond Research.
"This agreement also means that H2O is giving up local authorisation for its funds, which de facto puts an end to its development in the UK," adds Mara Dobrescu.
"These developments could finally speed up the timetable for Natixis to exit H2O's capital. However, there are still other obstacles to overcome. In 2023, H2O was taken to court in France by groups of investors who estimated their losses at €674 million - it remains to be seen whether the compensation paid to date, together with the fees H2O has agreed to waive, will be enough to make up for these losses.
- This article was originally published in French and translated using AI
