Embattled fund manager H2O Asset Management has taken a 60 per cent writedown on the value of illiquid securities that recently caused its funds to be suspended.
In late August the London-based subsidiary of Natixis was forced to temporarily shutter a series of its funds at the behest of the French regulator over valuation concerns relating to hard-to-sell bonds and shares linked to controversial businessman Lars Windhorst.
In a letter to investors on Wednesday, in which it addressed the funds’ risk exposure to the troublesome securities, H2O said it had discounted them by about 60 per cent from their nominal value. However, it admitted that estimates could be “significantly marked down” if the companies linked to Mr Windhorst were to face “major difficulties”.
The €22bn asset manager is preparing to segregate the illiquid assets into separate “side-pockets”, while shifting the remaining securities into newly created, liquid funds from which investors would be able to withdraw their investment on a daily basis.
A year ago, a Financial Times investigation revealed H2O — which had dazzled investors with its previously stellar returns — held more than €1bn in illiquid bonds linked to Mr Windhorst and his investment company Tennor. H2O vowed to reduce its exposure to these securities after panicked investors withdrew €8bn of their money.