German financial supervisory authority BaFin, consumer watchdog Stiftung Warentest and lawyers are stepping up scrutiny of Deutsche Finance Group (DFG) investment funds.
In June, BaFin appointed a special representative to oversee compliance with an order requiring Deutsche Finance Investment, a subsidiary of DFG, to provide information and documents for an assessment of the management of its closed-end public funds.
The appointment of a special representative generally represents an escalation after a company’s response to supervisory requests has proved insufficient, IPE understands.
Following BaFin’s order, Stiftung Warentest published an analysis of 21 Deutsche Finance alternative investment funds (AIFs), either currently active or in the process of liquidation, identifying eight “concerning weaknesses”.
Among these, the consumer organisation said annual financial statements for 2024 were available for only four AIFs, while the remaining 17 had published accounts only for 2023.
AIFs are required to publish annual financial statements in Germany’s Federal Gazette no later than nine months after the end of the financial year.
Stiftung Warentest told IPE that, based on the latest available figures, all of the AIFs analysed were underperforming, with the combined net asset value, distributions already received by investors and tax credits remaining below investors’ total contributions.
Recent developments surrounding Deutsche Finance have also prompted law firms Mattil and Greger & Collegen to establish Interessengemeinschaft Deutsche Finance, an interest group intended to gather information from investors, demand greater transparency, monitor legal developments and assess potential claims, according to a statement issued by the firms.
Magdalena Nicola, specialist in banking and capital markets law at Mattil, said she is analysing Deutsche Finance’s funds using the annual financial statements currently available.
“Now that BaFin has appointed a special representative, hopefully, things will move forward with these annual financial statements,” Nicola added.
Deutsche Finance Group did not respond to a request for comment.
The group says on its website that its investors include 50 Versorgungswerke, 375 Pensionskassen and 250 insurance companies, among others. However, neither BaFin nor Stiftung Warentest have said that institutional investors are affected by the supervisory measures or the issues identified in the consumer organisation’s analysis.
“A distinctive feature of Deutsche Finance Group was that institutional and private investors invested jointly in the same assets through various investment vehicles. We therefore assume that institutional investors are also affected [by the situation],” said Renate Daum, author of the Stiftung Warentest analysis.
Earlier this year, Deutsche Finance came under the spotlight in connection with US real estate investments made by Bayerische Versorgungskammer (BVK).
BVK said it invested €1.6bn with Deutsche Finance Group and real estate developer Shvo in projects in Los Angeles, New York and Miami, as well as the extensive renovation of the Transamerica Pyramid in San Francisco, which has since been sold to Cyprus-based investment firm Yoda.
The pension fund for lawyers in the German state of Hessen has written down €57.9m invested alongside BVK in the Transamerica Pyramid project.
Deutsche Finance has denied responsibility in relation to the US investments.
