A German pension fund whose foray into private markets led to losses that totaled half of the fund’s assets has begun legal proceedings against its former auditor, an adviser and its own managers to recover the damages.
The fund known by its German acronym VZB is suing Dusseldorf-based Apobank, the German unit of Forvis Mazars in Hamburg, the Berlin city government as well as nine former managers, according to a court filing seen by Bloomberg News.
VZB, which caters to more than 10,000 dentists in and around Berlin, has said it’s facing losses of about €1.1 billion ($1.3 billion) after many of its investments — including backing a shrimp farm — went bad. It had about €2.2 billion in assets under management at the end of 2024.
The loss is the starkest example yet of a slow-burning crisis engulfing several German pension funds that poured money into opaque and risky corners of finance to prop up returns eroded by years of ultra-low interest rates. Some of those strategies have suffered large losses since rates have risen.
The fund had hired Apobank to advise it on investment risks but the lender violated these duties, the pension fund claims. Forvis Mazars audited the fund and provided VZB with “sham opinions” on assets, according to the filing.
VZB is seeking to hold the city of Berlin liable because the government failed to supervise the fund’s operations as required. It has asked a Berlin appeals court to rule that lawsuits against all 12 defendants can be heard at a tribunal in the German capital.
A spokesman for the Berlin court declined to comment in the case, which was filed in December. As a general rule, tribunals only disclose filings once they’ve been shared with all parties, he added.
Spokespeople for Forvis Mazars and the Berlin government said they weren’t aware of any court filing. Apobank said that while it cannot comment on client matters it rejects allegations the lender was responsible for any VZB losses.
Shrimp Farm
As well as the shrimp farm, VZB made investments that included debt and equity stakes in hotels, vacation resorts and startup companies including digital insurer Element Insurance AG.
Insolvencies of companies that VZB invested in led to losses of €274 million, while separate write-offs on the top dozen investments totaled €791 million, according to an internal presentation seen by Bloomberg.
Roughly a third of VZB’s assets under management were in direct loans and so-called Schuldschein debt, which the pension fund said was illegal due to the lack of collateral or their lack of creditworthiness.
Forvis Mazars and ApoBank, hired to carry out risk analysis, should have raised red flags, argue lawyers for VZB.
“Had the auditor carried out even a few random checks on the large number of loans, it would have noticed immediately and directly, because it was obvious, that the granting of these loans was inadmissible,” VZB lawyers wrote in the document.
ApoBank listed the bulk of these loans as investment grade but never independently verified these ratings or checked whether any writedowns were needed, VZB said.
An ApoBank spokesperson said that as a matter of principle, the bank does not issue ratings or evaluate investments in the area of equity investments, illiquid investments or alternative investments.
“If such investments are held by a client in their fixed assets or free assets, we report the investments, ratings and prices in accordance with the client’s specifications,” the spokesperson said in an emailed statement to Bloomberg News.
Topics Lawsuits Profit Loss
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