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08/07/2019

H2O Communication


Dear investors,

These last fifteen days were a constructive experience for the team at H2O Asset Management. Following significant and, in many cases, deeply-unfair media interest in a small portion of our assets (about 3.7% of our total AuM at the time), we suffered significant redemptions that reached approximately 8 billion euros. We are now recovering and receiving new subscriptions, with 869 million euros gross in total since 18/06/2019.

Questioning the liquidity of our funds is equivalent to ascertaining the incapability of a bank to refund its deposits, with the devastating consequences which economic history has already taught us.
To be clear, 95% of our strategies were, and remain, perfectly liquid. In addition, there is no relationship between the daily liquidity of our funds and our business with Tennor Holdings.

Why such rampage?

First and foremost, to dispute the liquidity of a fund creates a major risk of convexity, an important "snowball effect", especially in today's over-mediated world.
Furthermore, a large number of investors, concerned by the recent freeze of withdrawals in other UK Asset Management firms, feared the possibility of a similar event.
Finally, the remarkable performance of our funds rendered the possibility to exit at a gain, an easy option for our investors.

What lessons have we learnt during these past weeks?

You all know our ability to offer performance over the medium-term. This is demonstrated by our recognized thirty-year track record. The variety of our Global Macro range allows for the possibility to choose the funds which offer the best risk/return profile for everyone. We cannot promise to repeat past performance; however, our willingness to preserve our performance driver is unshakable. It is a guarantee of the durability of our yields.

You all appreciate our Client Services, its transparency, its management reports and detailed feedback. We shall strive to make them even better. 

The sales team of Natixis IM and H2O will continue to accompany you with the same dynamism, closeness and an even stronger due diligence. 

Our commitment to the daily liquidity of our funds was known and has just been put to the test. Our portfolios are built in order to face all liquidity scenarios. We favour assets with stable liquidity for a high overall liquidity score. Our teams and our management model have demonstrated great resilience. We are one of the few asset management companies to have been able to test such an extreme scenario with no damage: we have lost more than 30% of our outstanding UCITS funds and have been forced to lower the value of certain securities in the wake of market commotion. Despite these events, our performance remains close to its peak, driven by a good understanding of the macroeconomic environment and financial markets, which has always been the core of our aptitude to generate performance.

Notwithstanding that we remain convinced that we have made the right choices in our strategies, and that we must continue to be contrarian to perform, we are however realistic and will be able to adapt. In this respect we will carefully study the recommendations of the ongoing audits.

Performance, liquidity, transparency: these three values have been, since its inception, at the heart of H2O AM's management philosophy. We are more than ever determined to defend these in the interest of our clients.

We thank you for your trust.

Edited in London on Monday 8th July 2019