H2O clients seek forensic expert to investigate Lars Windhorst related investments
H2O Asset Management is facing legal action from investors over its support for the business empire of German financier Lars Windhorst, which plunged the once high-profile fund manager into crisis two years ago.
Collectif Porteurs H2O, an investor group that includes insurance companies and high net worth individuals, has said it will 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 stellar returns, H2O faced an investor exodus in 2019 when a Financial Times investigation revealed the scale of its investments in Windhorst-related securities. The 44-year-old has a checkered career and business interests ranging from shipping to football.
Although London-based H2O was able to weather the crisis and respond to € 8 billion in buyback requests, French regulators froze a series of group funds last year due to “uncertainties of valuation “resulting from their substantial holdings of Windhorst-related assets.
The asset manager had to write down the value of the securities by up to 60 percent and then transferred them to newly created “pocket” funds. Investors have more than 1 billion euros trapped in these funds.
Dominique Stucki, partner of the Cornet Vincent Ségurel law firm representing investors, said in a statement that the search for a forensic expert was “part of an initiative to constructively seek responsibility in a case that has involved harm to a large number of professionals and individuals, in France and abroad ”.
In addition to trying to “quantify” the losses suffered by those who have invested in the H2O funds, the group wants a forensic expert to investigate the so-called repo agreements signed by H2O, the value of the assets in the side pockets as well. than commissions. paid to brokers.
H2O declined to comment.
The FT previously reported how H2O used “buy and sell” transactions to reclassify some of the problematic stocks out of its core holdings.
Audit firm KPMG warned earlier this year that the accounts of six of H2O’s funds were “unverifiable,” citing 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 has collapsed. German authorities are investigating whether Evergreen engaged in banking activities without the necessary licenses and violated German law. Windhorst denies any wrongdoing and said he offered help to the authorities.
The financier found a breather in May when Tennor, its main investment firm, agreed to restructure its debt with H2O, setting a new repayment deadline for January.
French bank Natixis, majority owner of H2O since the inception of the asset manager, announced last November that it would seek to sell its stake in the asset manager.