For years, H2O Asset Management was a star of European bond investing. Then came the revelation of a large, hard-to-sell exposure tied to German financier Lars Windhorst — and one of the most heavily documented scandals in European asset management. Here is a factual, sourced summary of what happened, who was sanctioned, and where the case stands.
TL;DR
- The trigger: in June 2019, the Financial Times reported that H2O funds held up to about €1.4bn in illiquid bonds linked to Lars Windhorst’s businesses.
- The freeze: in 2020, amid a liquidity crunch, funds were suspended and hard-to-sell assets moved into closed “side pockets”.
- The French fine: in December 2022, France’s AMF imposed a record €93m in penalties (€75m on H2O AM, €15m plus a five-year ban on CEO Bruno Crastes, €3m on CIO Vincent Chailley).
- Upheld: on 13 June 2025, the Conseil d’Etat dismissed the appeals and confirmed the sanctions.
- The UK settlement: in 2024, H2O agreed to make about €250m available to investors to conclude the FCA’s investigation, which cited due-diligence failings and more than 50 undisclosed gifts.
Background: a high-flying manager and a risky bet
H2O Asset Management, a UK-authorised firm historically backed by France’s Natixis (which later sold its stake), built its reputation on bold, high-conviction bond strategies led by chief executive Bruno Crastes and chief investment officer Vincent Chailley. Part of that conviction, however, rested on securities tied to Lars Windhorst, a German entrepreneur whose ventures were later grouped under the Tennor umbrella.
These holdings offered attractive yields but were difficult to value and even harder to sell. That mismatch — between funds that promised near-daily liquidity and assets that could not be sold quickly — sits at the heart of the affair.
How an open-ended fund gets trapped
An open-ended fund lets investors buy and redeem regularly, which works only if the underlying assets can be sold at short notice near their stated value. When the Financial Times quantified H2O’s Windhorst-linked exposure at up to roughly €1.4bn in June 2019, investors rushed to withdraw. Facing a wave of redemptions and no ready buyers for the illiquid bonds, H2O suspended several funds in 2020 and ring-fenced the problem assets in closed side pockets — trapping part of investors’ money with no clear exit date.
The AMF sanctions: €93 million
In late December 2022, the Enforcement Committee of France’s Autorité des Marchés Financiers (AMF) imposed penalties totalling €93m: €75m on H2O AM LLP, €15m and a five-year ban on Bruno Crastes, and €3m on Vincent Chailley. According to the regulator, the breaches concerned liquidity-risk management, holdings deemed inconsistent with fund prospectuses and applicable rules, and excessive exposure to the Tennor universe. The AMF pointed to the seriousness of the breaches, management’s involvement, and the harm to investors whose savings were frozen.
France’s top administrative court upholds the fine
H2O AM, Crastes and Chailley challenged the decision. On 13 June 2025, the Conseil d’Etat — France’s highest administrative court — dismissed their appeals and confirmed the sanctions as proportionate to the seriousness of the breaches, closing the administrative-law challenge to the AMF ruling.
The UK angle: the FCA and the €250m settlement
Because H2O is authorised in the United Kingdom, the Financial Conduct Authority (FCA) ran its own investigation. It found that between 2015 and 2019 H2O failed to carry out adequate due diligence on high-risk, Tennor-linked investments that proved “highly illiquid”. The FCA also described a “close personal relationship” between Crastes and Windhorst and identified more than 50 instances of undisclosed gifts and hospitality — including use of a private jet and a superyacht. In August 2024, to conclude the case, H2O agreed to make about €250m available to investors whose money had been trapped since 2020.
A note on interpretation: the French penalty (punitive) and the UK redress scheme (compensatory) reflect two distinct regulatory logics applied to the same matter. The findings describe regulatory and professional failings and undisclosed benefits; on their own they do not amount to criminal findings, which would fall under separate proceedings.
Why it matters
The H2O affair has become a case study in liquidity risk within open-ended funds. Three signals stand out: the consistency between a fund’s liquidity promise and the nature of its assets; the concentration of exposure on a single issuer or ecosystem; and governance, especially the management of conflicts of interest and the transparency of ties between managers and counterparties.
FAQ
What is a “side pocket” and why did H2O create them?
A side pocket is a closed compartment used to ring-fence illiquid assets so they can be wound down gradually without disadvantaging remaining investors. H2O created side pockets in 2020 to isolate Tennor-linked securities, which immobilised part of investors’ savings.
How large was the AMF fine, and who was targeted?
In late 2022 the AMF imposed €93m in total: €75m on H2O AM LLP, €15m plus a five-year ban on Bruno Crastes, and €3m on Vincent Chailley. France’s Conseil d’Etat upheld the sanctions on 13 June 2025.
What did the FCA find?
The FCA cited due-diligence failings on Tennor-linked investments between 2015 and 2019, a close personal relationship between the CEO and Lars Windhorst, and more than 50 undisclosed gifts and hospitality items. In 2024, H2O agreed to make about €250m available to affected investors.
Did investors get their money back?
A redress scheme of about €250m was set up under the 2024 FCA settlement. The timing and terms fall under that scheme, and the amount each investor recovers depends on their situation. This article is not investment advice.
References
- FCA, “H2O will pay €250 million to investors following FCA investigation”, August 2024 — fca.org.uk
- AMF Enforcement Committee news release, December 2022 — amf-france.org
- “Illiquid assets, side-pockets and a record fine: the H2O timeline in full”, Citywire Selector — citywire.com
- “H2O to Repay Investors €250 Million to End Windhorst Scandal”, Bloomberg, August 2024 — bnnbloomberg.ca
- H2O Asset Management, Wikipedia (context) — en.wikipedia.org
By Patrick Lancier — News
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