H2O Asset Management faces investor lawsuits due to the support of German financier Lars Windhorst’s business empire, which plunged the once senior flight manager into a crisis two years ago.
Collectif Porteurs H2O, a group of investors that includes insurance companies and wealthy individuals, said it would ask a French court to appoint an independent expert to review the company’s investments in illiquid bonds linked to Windhorst.
Founded in 2010 and with a record of excellent returns, H2O faced an exodus of investors in 2019 when a Financial Times investigation reveals the extent of its investment in securities related to Windhorst. The 44-year-old has a checkered career and business interests ranging from shipping to football.
Although the London-based H2O was able to cope with the crisis and comply with € 8 billion redemption requests, French regulators stopped a series of funds at the group last year over ‘valuation uncertainties’ stemming from their significant share of assets which is linked to Windhorst.
The asset manager had to write down the value of the bonds by as much as 60 percent and then put it in newly created “Side-pocket” funds. Investors have raised more than € 1 billion in these funds.
Dominique Stucki, partner at the law firm Cornet Vincent Ségurel representing the investors, said in a statement that the attempt to seek a court-appointed expert ‘was part of an initiative to seek constructive liability in a matter involving a large number of professionals and individuals, in France and abroad ”.
In addition to trying to “quantify” the losses they have invested in the H2O funds, the group wants a court expert to call so-called repurchase agreements executed by H2O the value of assets in the side pockets as well as commissions. investigation. paid to brokers.
H2O declined to comment.
The FT reported earlier how H2O uses “buy and sell back” transactions to reclassify some of the troublesome securities outside its main portfolio shares.
The auditing firm KPMG warned earlier this year that accounts of six of H2O’s funds exist “Impossible to certify”, referring to a number of valuation uncertainties and rule violations.
Windhorst agreed last year to buy back the illiquid bonds, but an initial plan to do so through a vehicle called Evergreen Funding collapsed. German authorities investigate or Evergreen operated banking services without the necessary licenses and violated German law. Windhorst denies wrongdoing and said he offered his help to authorities.
The financier breathed a sigh of relief in May when Tennor, its major investment firm, agreed to restructure its debt with H2O and set a new repayment date for January.
The French bank Natixis, the majority owner of H2O since the inception of the asset manager, said last November that this would happen trying to sell his stake in the asset manager.