H2O’s Reach for Yield Sounds an Industry-Wide Alarm
Regulators are absolutely right to focus their attention on liquidity before the next financial crisis.
Another place where liquidity is short.
Photographer: FRANCK FIFE/AFP/Getty Images
Enter the phrase “reach for yield” into Google, and the search engine will return 335,000 results in less than a second. So no-one should be blindsided by the revelation that investment managers have been tempted to boost returns by buying riskier securities in recent years. Regulators should still be asking hard questions right now of the portfolio managers they oversee.
H2O Asset Management, a unit of French bank Natixis SA, is seeing billions of euros head for the door after the Financial Times reported last week that the fund had bought a bunch of bonds linked to entrepreneur Lars Windhorst.