Natixis Shares Fall as Morningstar Questions Fund Volatility

Shares of Natixis Investment Managers slid Thursday after Morningstar placed under review a fund managed by a firm that Natixis owns.

Morningstar said in a report dated June 19 that it is reviewing H20 Asset Management’s Allegro Fund because of “concerns on the liquidity and appropriateness of several holdings in the fund’s corporate-bond sleeve.” H20 is majority-owned by Natixis.

Natixis shares, which are traded on Euronext Paris stock exchange, fell 11.76 percent Thursday to close at €3.48 ($3.93).

A spokesman for Natixis pointed to Morningstar’s concern that H20 chief executive officer Bruno Crastes was last month named a member of the advisory board of Tennor Holding, a recent holding company of German entrepreneur Lars Windhorst, and that Allegro was invested in bonds issued by Windhorst-backed companies. In a statement Thursday on its website, Natixis said that Morningstar’s note about the risk of a potential conflict of interest is “groundless.”

“These elements have absolutely no impact on the liquidity and performance of H2O’s funds,” Natixis said in the statement.

According to H20, Allegro’s exposure to non-rated corporate bonds is 9.7 percent as of Thursday.

“As a reminder, H2O’s positions are mostly financed through futures contracts and currency forwards, which makes a lot of cash available in the funds,” the firm said Thursday in a statement. “Also, in terms of commitment and risk consumption, these exposures are marginal in comparison with those generated by our global macro views on sovereign bonds and currency markets.”

Morningstar’s report cited concerns about the Allegro Fund’s high volatility, noting that its standard deviation was 15.4 percent between April 1, 2011 and July 31, 2018.  

“While not among the highest standard deviations in the category, it is still far above the category median of 5.1 percent and clearly higher than the 7 percent to 12 percent target range indicated in the fund's prospectus,” Morningstar said.

It’s the fund’s “macro-driven discretionary" investment process that can lead to high volatility, according to Morningstar. Because the fund is absolute-return oriented and discretionary, it regularly surpasses its volatility target range, the firm said in the report.

“While we think the process has the building blocks to achieve above-average returns, investors could benefit from a more structured approach to risk management,” Morningstar said.

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H20 Asset Management is led by CEO Crastes and chief investment officer Vincent Chailley, who oversee a team of 14 portfolio managers and analysts, according to the Morningstar report.

H20 Asset Management had $32.5 billion of assets at the end of last year, with about €2.2 billion managed by the Allegro fund at the end of May, according to the firm's website.