Natixis H2O Funds Lose $1.3 Billion as Asset Slump Deepens

(Bloomberg) -- A group of Natixis SA fund assets dropped by 1.1 billion euros ($1.3 billion) on Thursday, a day after Morningstar Inc. raised concerns about one of the investment pool’s holdings and suspended its rating.

The H2O Allegro fund’s assets, managed by Natixis-backed H2O Asset Management, declined by 225 million euros, according to the company’s website. That’s on top of a 113 million-euro fall on Wednesday, when the research and rating company published its report on that fund, data compiled by Bloomberg show. Three other funds, Adagio, Multi Aggregate and Multibonds, also saw their assets decline, bringing the combined one-day drop to more than 1 billion euros.

New data show growing investor unease around H2O funds after Morningstar raised concerns about the “liquidity and appropriateness” of some corporate-bond holdings as well as potential conflicts of interest. Some of H2O’s funds, which allow clients to make daily withdrawals, hold rarely traded bonds issued by companies linked to controversial German financier Lars Windhorst.

Morningstar’s decision to suspend the fund’s rating came after the Financial Times wrote about H2O’s exposure to the bonds.

H2O’s assets have doubled to $37.6 billion since 2017, according to an investor letter seen by Bloomberg. A spokesman for H2O declined to comment.

To contact the reporters on this story: Nishant Kumar in London at nkumar173@bloomberg.net;Lucca de Paoli in London at gdepaoli1@bloomberg.net;Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net

To contact the editors responsible for this story: Shelley Robinson at ssmith118@bloomberg.net, Josh Friedman, Melissa Karsh

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