H2O’s Star Funds Sink to Worst Among Peers in Just One Month
H2O’s Hottest Funds Fall Victim to Panic With Losses Up to 29%
(Bloomberg) -- Natixis SA-backed H2O Asset Management has fallen prey to panicking global markets after three of its most profitable strategies in 2019 topped a ranking of the past month’s worst performers.
The funds, which manage about 2 billion pounds ($2.6 billion) between them, are at the bottom of more than 500 tracked by Kepler Partners that use hedge fund-type tactics to make money. They were blindsided by the turmoil that’s rocking the world’s markets after bets on oil and volatility backfired.
In the past 30 days, H2O’s Vivace, a global macro fund, slumped about 29%. The firm’s Allegro strategy has declined 19% over the same period, while its MultiReturns fund lost almost 17%, according to data compiler Kepler.
The losses contrast with a stellar performance last year when the three funds gained between 17% and 40%. The strategies, which allow investors to exit on a daily basis, have also fared significantly worse than macro hedge funds, which on average gained about 1.5% last month, according to data compiled by Hedge Fund Research Inc.
Global markets from stocks and commodities to currencies and bonds are in a tailspin as the world scrambles to prevent the spread of the coronavirus which has infected 109,000 people and killed over 3,800. Teamed with the threat of a full-blown price war in crude, the growing crisis threatens to tip the global economy into recession.
| Name | 1M Return | YTD | 2019 |
|---|---|---|---|
| H2O Vivace | -29.4% | -27.6% | 30.1% |
| H2O Allegro | -19.4 | -16.8 | 39.6 |
| H2O MultiReturns | -16.8 | -16.3 | 16.9 |
| H2O Global L/S Opportunities | -6.5 | -12.0 | -1.0 |
| H2O Adagio | -5.6 | -4.7 | 7.6 |
| H2O Fidelio | -2.3 | -5.2 | -1.1 |
| Source: Kepler | |||
London-based H2O, which manages about $34 billion, said in a letter to clients last week that its funds lost all their year-to-date gains after mid-February amid the “brutal flight to quality that ensued post the coronavirus outbreak.” But it expressed optimism that central bank interventions would ease pressure on markets.
“The current excess pricing by markets of an impending global recession will be corrected at some point,” it wrote in the letter seen by Bloomberg. Instead, the sell-off worsened.
H2O went short on volatility across U.S. and European equities as well as commodity and currency markets on February 28, according to the letter, betting that the wild swings would subside. Earlier this month, portfolios were positioned long commodities, including oil.
Wall Street’s fear gauge, the CBOE Volatility Index, is still soaring, while oil has since tumbled.
H2O, led by Bruno Crastes and Vincent Chailley and part owned by Natixis SA, was under the spotlight last year for investing in thinly traded bonds linked to Lars Windhorst. When Morningstar Inc. suspended its rating on one of the firm’s funds, clients pulled $8 billion in a matter of two weeks.
A spokesperson 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
To contact the editors responsible for this story: Shelley Robinson at ssmith118@bloomberg.net, Chris Bourke, Patrick Henry
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