Multiple crises experienced in the past few years – from the COVID-19 pandemic to the war in Ukraine – and poor investment decisions are causing irreparable damage to German pension funds.
The interest rate hikes of the European Central Bank to tame inflation during the pandemic triggered losses in the property portfolio of the already troubled multi-employer pension fund Babcock Pensionskasse.
The pension fund struggled to recover, underfunding persisted, and the financial regulator BaFin decided to shut it down.
Investments in alternatives caused an estimated €1bn in losses for the pension fund for dentists in Berlin, Bremen and the state of Brandenburg, Versorgungswerk der Zahnärztekammer Berlin (VZB), out of €2.2bn total assets.
Auditors hired to look into investment decisions of the pension fund’s former management found serious negligence concerning capital allocation to start-ups and other companies.
The Berlin public prosecutor’s office is investigating the case on suspicion of corruption.
Many smaller occupational pension schemes hold a high share of alternative investments in their portfolios and are more likely to encounter risks, according to BaFin.
Pension funds of DAX-listed companies are set to ramp up their investments in private markets in parallel to the switch to defined contribution (DC) plans, and the use of semi-liquid fund structures.
Lower-risk strategies in private debt and core infrastructure remain in focus while caution persists in private equity.
In Switzerland, some pension funds are reviewing their exposure to US treasuries following the decision of asset managers to exclude US bonds, and while assessing concentration risks in the global bond market.
Other pension funds are reassessing how far to hedge their foreign currency exposures as they tilt further into risk assets and face a weaker US dollar.
Items to note:
- The IPE Real Estate Global Conference & Awards 2026 is taking place on Thursday, 21 May 2026, in Rome, at the Hotel Midas Roma & Villa Miani
Luigi Serenelli
IPE DACH Correspondent
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