Natixis has agreed to sell its majority stake in H2O to the latter’s management, as the French bank severs ties with an investment firm that brought both high returns and controversy.
The bank announced in November that it would end its relationship with H2O, a London-based asset manager that was founded in 2000 and has enjoyed the backing of Natixis since then.
While H2O, led by chief executive Bruno Crastes, delivered several years of outsized returns, the group has faced questions about its strategy and risk management since the Financial Times revealed in 2019 that it had put more than €1bn of investors’ money into illiquid bonds linked to Lars Windhorst, a controversial German financier.
Jean Raby, the chief executive of Natixis Investment Managers, told Bloomberg on Monday that “we agreed with management [of H2O] that we would part amicably in total agreement with management buying our stake in the company”.
Mr Raby added that the deal was “subject to regulatory approval, and we’re doing this in an orderly manner in a transition that has at the heart of it the interest of our clients”.
Natixis declined to give further details and H2O declined to comment.
The decision to exit H2O is part of a strategic reset by Nicolas Namias, the new Natixis chief executive, as he looks to cut costs, rein in risk and restore confidence in the group’s multi-boutique model, which takes majority stakes in smaller investment firms that continue to be run at arm’s length.
Mr Namias, who was appointed last year following consecutive quarterly losses at Natixis, faces a broader challenge of restoring confidence in the bank, which is majority-owned by French mutual group BPCE.
Natixis said in November that it had re-evaluated its equities derivatives business and had decided to pull out of the riskiest products, following a similar move by French rival Société Générale.
Scrutiny of H2O deepened last August when France’s market regulator took the rare step of temporarily suspending several of H2O’s funds over concerns about the valuation of the bonds linked to Mr Windhorst. H2O sequestered nearly €2bn worth of the securities into so-called side-pockets, which remain closed to redemptions.
H2O plans to sell these securities back to an investment vehicle associated with Mr Windhorst at a steep discount later this year, according to people familiar with the matter.
The liquid portion of the funds was reopened in October but suffered significant outflows. Several of France’s biggest life insurance companies, which formed a vital part of H2O’s domestic investor base, have since halted investments into H2O’s funds.
A group representing French investors in H2O is seeking compensation for any damages from their money being frozen in the funds.
While the group’s focus is H2O, Gérard Maurin, who is leading the action said, “we would not hesitate to pursue Natixis if we came to the conclusion that there were failures in their control measures”.
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