one of the legacies of the recent financial crisis has been acute sensitivity of investors to anything that smells of liquidity risk.
This sensitivity has been fully perceived in France in the last two days, where Natixis (PA: NMC) has plummeted nearly 12% after reporting a bigger exposure than it seems to be wise on corporate bonds are illiquid, issued for the most part by companies related to Lars Windhorst, a German financial the past in a grid pattern.
The investment bank and asset manager in france was down 2.3% in late morning in Paris on Friday, the worst performance of all european banks, after a conference call with investors during which the management tried to assuage their fears, apparently without much success.
In contrast, the benchmark CAC 40 rose 0.5%, recording a new high for the year, ahead of all the other european indices, with the exception of the Spanish IBEX 35. All markets have followed the U.s. on the rise since the Fed has demonstrated its willingness to lower interest rates if the u.s. economy was slowing further.
The problems of Natixis have begun Wednesday, when the Financial Times announced that its division of fund management H2O had raised 1.4 billion euros (1.56 billion) of bonds issued by companies controlled by Windhorst, spread over several funds. The situation worsened Thursday when the consulting company Morningstar has suspended its rating on any of these funds, Allegro, due to concerns regarding the liquidity of some of its positions.
The amounts may seem modest – H2o Allegro Eur-r C 2.26 billion euros of assets under management, according to data collected by but the news comes at a bad time. There are only two weeks, Neil Woodford, a stock-picker leading british, has been forced to “secure” one of its funds the headlights to protect them against a scourge of the assets enabling it to cope with the redemption requests. Woodford had also done a paris unsuccessful on assets that are difficult to sell.
It is also less than a year that GAM (SIX: GAMH), an asset manager based in Switzerland, has been separated from Bank Julius Baer, the fund manager fired, Tim Haywood, and has wound up his fund Abolute Return Bond Fund after similar errors.
But the real reason why the market is concerned that after such incidents is the memory of 2007, when two funds obscure managed outside of France have suddenly experienced liquidity problems, forcing the ECB to inject emergency liquidity into the money market and marking the beginning of the process that ended with the collapse of Lehman Brothers a year later.
There is nothing to indicate that the problems of Natixis have a systemic dimension. But the reaction to the incident is a reminder sober of the fragility of the atmosphere, and the u.s. S&P 500 reached a new record Thursday.
