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H2O punished by $6.64bn in outflows

The Natixis-owned affiliate was hit hard in Q2 for holding some illiquid assets, while the parent group reported a plunge in its overall net profit.

H2O, the Natixis-owned affiliate, reported $6.64bn (€6bn) in net outflows in the second quarter, driven by investor concern over funds that hold illiquid assets.

In June, the firm was fell under scrutiny after news reports said it appeared to hold €1.4bn in bonds issued by financial vehicles linked to controversial German financier Lars Windhorst across six of its funds.

Morningstar also questioned the “the appropriateness and liquidity” of some bond holdings and downgraded the firm’s Allegro fund.

At the end of June, H2O’s total AUM was at €26bn, according to the Natixis statement. “H2O fund flows have normalised quickly – positive net inflows in July,” it said, without giving further details.

The Natixis group as a whole reported a down quarter.

Second quarter overall revenues fell 3% year-on-year to €2.28bn and net income (group share) plunged 32% year-on-year to €346m.

Despite H20’s troubles, one bright spot was the parent group’s active asset management net revenues were up 11% to €900m in the second quarter, compared to the same period in 2018, and up 4% in the first half, the firm said. Revenues were driven by performance fees of €138m in Q2.

Pre-tax profit for the division was up 20% quarter-on-quarter.

“In asset and wealth management, our multi-boutique model demonstrated its robustness,” said François Riahi, Natixis CEO, in the statement. “Revenues and assets under management both continued to rise despite outflows at H2O and with net flows in the United States turning back positive.”

H20 has eight funds authorised for sale in Singapore, according to FE. Two fixed income funds, Allegro and Multibonds, plunged in June, but seem to have recovered.

H20 fixed income funds vs category average, YTD 

Source: FE. In US dollars, year-to-01 August.

The firm’s two funds in the hedge/structured products category vs the peer average YTD

Source: FE. In US dollars, year-to-01 August

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