The curse of illiquidity has stepped across the Channel to France from the UK as Natixis moved to issue a strong statement of support for its H2O affiliate in the wake of reports into holdings of illiquid bonds that raised investor concerns and hit the market value of its owner, BPCE and Natixis - all of which comes some weeks after news of illiquid holdings precipitated UK manager Woodford into gating investors.
H2O's decision to sell non rated bonds and mark down the value of the balance to comply with Ucits regulations saw Natixis shares fall from some €3.95 on Wednesday 19 June to around €3.45 by Monday 24 June. This came about after acknowledgement of some €1.4bn of illiquid bonds, distributed across some six H2O funds. (Ostrum AM, another Natixis affiliate holds 50.01% of the shares in H2O, with H2O's 11 partners owning the remaining 49.99%; Natixis Investment Managers is 100% owned by Natixis, the corporate, investment management and financial services arm of Groupe BPCE, the second largest banking group in France.)
Natixis issued a statement on Monday 24 June, relating to topics of liquidity of securities and the removal of fees. It noted that the bonds in question make up 2% of the funds affected.
Natixis stated that "the liquidity of the securities is ensured and will allow to face potential additional withdrawals, if some clients decide to partially sell their funds due to a concern about the media coverage associated with these securities. In addition, the long-term performance drivers of H2O funds, which have been proven over numerous years to the benefit of our clients, remain unaffected as they are not related to this type of investment".
Natixis continued to say that "H2O AM has announced the implementation, in 2017, of swing pricing rules with a view to protecting the security holders remaining in the funds from the payment of fees incurred by investor exits. Such fees will therefore be borne by those investors requesting the buyback of their securities."
Natixis also decided to bring forward the periodic audit performed on this affiliate, by implementing it as of 21 June 2019. "By way of reminder, the General Inspection of the bank performs an audit of all the affiliates of Natixis Investment Managers on a regular basis" said the company in its earlier statement.
More information on this topic is available from our sister website: https://www.investmentweek.co.uk/investment-week/news/3077658/update-natixis-takes-measures-to-reassure-h2o-investors