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A Natixis SA macro fund that sent fresh tremors through Europe’s financial industry this week saw assets fall by a record on the day Morningstar Inc. raised concerns about its holdings.

The H20 Allegro fund slumped by 113 million euros ($128 million) Wednesday, when the research and rating company published its report, according to data compiled by Bloomberg. That was its biggest one-day drop since it was started in 2011. At least two other funds also saw assets fall the most since inception that day.

Morningstar suspended its rating on the Allegro fund, which is run by Natixis-backed H20 Asset Management, over concerns about the “liquidity and appropriateness” of some corporate-bond holdings as well as potential conflicts of interest. The fund, which allows clients to make daily withdrawals, holds rarely traded bonds issued by companies linked to controversial German financier Lars Windhorst. H20 founder Bruno Crastes sat on an advisory board of Windhorst’s investment vehicle Tennor Holding.

H20 Asset Management as a whole saw clients pull about 600 million euros this quarter through June 20, the bank said today. It didn’t say how much of that came after the Morningstar report, but available fund data suggests much of it was pulled this week.

Apart from the Allegro fund, H20’s MultiAggregate and Adagio funds saw their biggest one-day declines Wednesday, adding up to a one-day slump of 325 million euros in the three investment pools combined. The figure reflects performance and client redemptions or subscriptions. A spokesman for H20 declined to comment on the drop in assets.

The rating suspension and outflows come as a blow for one of Natixis’s most successful investment boutiques in Europe. Natixis Chief Executive Officer Francois Riahi and Jean Raby, who oversees the bank’s investment-management activities globally, moved to contain damage, asking Crastes to leave the Tennor board. He will be replaced by H20’s Chief Investment Officer Vincent Chailley, according to a spokesman for the firm.

Natixis fell as much as 6.3% in Paris trading after Thursday’s 12% loss. H20’s woes are adding trouble for Riahi after a slump in trading revenue in the first quarter and losses on Korean derivatives announced in December.

H2O, which runs more than a dozen funds that allow clients to invest or exit on a daily basis, has seen rapid growth over the past few years. Assets have doubled to $37.6 billion since 2017, according to an investor letter seen by Bloomberg. Growth over the past two years has boosted its funds to near full capacity, a level beyond which many funds stop taking fresh money for fear of harming returns. The firm instead imposed an entry fee of as much as 5% on some of its funds to curb inflows, according to its website.

In a push to diversify its business, H2O has also started buying into external hedge fund managers. In 2017, the firm took a stake in Hong Kong-based startup Poincare Capital Management. It also acquired a majority stake in systematic investment firm Arctic Blue Capital started by former Millennium Management money manager Jean-Jacques Duhot.

H2O Allegro, a global macro fund with 2.26 billion euros in assets as of Wednesday, returned 10% through June 19 this year on top of a 28% gain last year. That’s better than over 90% of peers, according to data compiled by Bloomberg, and even beats some of the best known macro hedge funds in the world.

“The team and strategy are not for all investors,” said Richard Philbin, chief investment officer of Wellian Investment Solutions, which helps clients allocate about 1.7 billion pounds ($2.2 billion). Still, “the issues surrounding the Allegro fund are not necessarily contagious to other funds within the group offerings.”

Woodford, GAM

Morningstar’s decision to review the fund’s rating added to growing jitters in the fund management industry about liquidity. Neil Woodford, one of the U.K.’s most famous stock pickers, froze redemptions from his flagship equity fund, LF Woodford Equity Income, this month amid an investor exodus following months of poor performance. Swiss money manager GAM Holding AG is still in the process of unraveling hard-to-sell securities from a bond fund it froze last year.

European investment rules require funds to have no more than 10% of their capital in less liquid securities. In the case of H2O, which invests in corporate borrowings, the line between illiquid and liquid is more difficult to draw, according to Matias Mottola, the analyst who covers H2O’s funds at Morningstar.

When it comes to the liquidity of bonds, “it is a question of interpretation. We can’t make a final judgment,” Mottola said.

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