H2O to pay £215mln to trapped investors, shut UK operation

H2O AM Group said the €250 million (£215.21 million) comes on top of €229 million (£197.14 million) already repaid, with unit holders that accept the offer receiving an enhanced and earlier payment from the fourth quarter, compared with non-participating unit holders

Asset manager H2O has voluntarily offered to pay €250 million (£215.21 million) to investors trapped in funds since 2020 and will shut its UK operation, escaping a fine for failing to make sufficient checks on risky investments, Britain's financial regulator said on Wednesday.

H2O in 2019 became the subject of market and regulatory concern over its investments in illiquid bonds issued by several firms related to German entrepreneur Lars Windhorst, who owns Tennor.

Between April 2015 and November 2019, H2O failed to carry out proper due diligence on investments relating to the Tennor group of companies, or other firms Windhorst introduced, Britain's FCA said.

The FCA said H2O also lacked adequate procedures to manage conflicts of interest.

The FCA identified more than 50 instances where hospitality had been received by H2O employees but was not properly declared, including the use of a superyacht and private jet, the watchdog said in a statement.

The FCA would have imposed a substantial fine on H2O for its serious violations. However, the FCA has agreed the firm will make €250 million (£215.21 million) available to all those whose investments remain trapped, the Financial Conduct Authority said.

H2O AM Group said the €250 million (£215.21 million) comes on top of €229 million (£197.14 million) already repaid, with unit holders that accept the offer receiving an enhanced and earlier payment from the fourth quarter, compared with non-participating unit holders.

Investors who cashed out when the funds reopened in October 2020 after a near two-month suspension would recover between 87% and 93% of the value of their total investment at the time of suspension, the firm added.

Over the last few years, we have significantly improved and consolidated our organisation and strengthened our risk management and compliance teams, governance and internal procedures, Loic Guilloux, Chief Executive Officer of H2O AM Group, said in a statement.

Those accepting the offer relinquish their rights to bring claims against H2O AM Group or any third party in connection to the Tennor-related investments, the firm said.

Finally, adapting to the consequences of Brexit, H2O AM Group has gradually transferred its portfolio management team to continental Europe. In line with this move, H2O AM LLP will voluntarily apply to cancel its UK permissions by the end of 2024, the firm added.