Several Baltic institutional investors – including Lithuanian pension funds and SEB and Swedbank, the two largest pension managers in Estonia – have been affected by the troubled BaltCap, the largest private equity firm in the Baltic States, specifically by one of its infrastructure funds.
In 2017, BaltCap saw the European Investment Bank (EIB) invest €20m in one of its infrastructure funds and other pension funds in the region followed suit. However, late last year BaltCap had to fire one of its fund managers for allegedly embezzling at least €27m from its infrastructure fund.
BaltCap continues to manage funds but the case has damaged savers’ trust in the local pension systems. Reacting to angry calls from pension savers, for example, the central bank of Lithuania issued a press release in which it felt necessary to explain that “BaltCap is not a pension fund”.
The main pension providers in the Baltics – Swedish banks SEB and Swedbank – were also quick to point out that the investments in the €80m infrastructure fund only made up a small portion of pension funds’ investment portfolios.
“We invest Baltic SEB pension fund assets worldwide and have diversified portfolios, and therefore the impact is minor,” the bank told IPE in a statement.
“Our investment in the fund is approximately 0.6% of Baltic SEB pension fund assets.” The SEB is managing €4.5bn in second and third pillar pension funds in the Baltics.
Swedbank replied to IPE saying: “Investments in BaltCap’s funds total less than 1%. Hence, the markdown has no significant impact on the portfolio.”
It is not yet certain how much investors have lost from investing in BaltCap’s infrastructure fund, but SEB said that BaltCap “has stated that it will compensate all losses”.
Meanwhile, the European Public Prosecutor’s Office (EPPO) has taken over the criminal case initiated by Lithuania’s Regional Prosecutor’s Office in Vilnius and has requested the arrest of Sarunas Stepukonis, former partner of BaltCap Infrastructure Fund.
The European Union’s interest lies with the support of the BaltCap fund by the EIB under its “Investment Plan for Europe”. It was one of the goals of the fund to help develop local infrastructure. And helping to “stimulate the local economy” was also one of the incentives for local pension funds to invest, Swedbank noted.
At BaltCap, “internal and external investigations are ongoing”, the company noted in a statement.