Members of Bayerische Versorgungskammer (BVK), which manages €117bn for Bavaria’s professional pension funds, are preparing legal action to obtain information and potentially compensation over failed US real estate investments.
German law firms Mattil and Greger & Collegen have set up an interest group, Versorgungswerke – Interessengemeinschaft Versorgungswerke, to seek disclosure from BVK on its US investments and other holdings, Mattil told IPE.
The law firms have asked BVK “several times” to provide information but have received no response, he said.
According to Mattil, a lawsuit is needed first to force disclosure, and in a second step to pursue compensation for losses incurred by members. The interest group is ready to file the case in Munich, where BVK is based, if the pension fund is not willing “to lay everything on the table”, he added.
BVK has ruled out any impact on members’ pensions, arguing that potential losses are offset by gains elsewhere within its broadly diversified asset allocation.
“We reject the accusations made by the interest group. The responsible handling of contributions from members and beneficiaries is our highest priority,” a BVK spokesperson told IPE.
The spokesperson said BVK keeps its governing bodies informed about investment-related issues.
“However, due to pending legal proceedings in the US and existing confidentiality obligations and agreements with our shareholders, we cannot provide specific information to individual members, or the public,” the spokesperson added.
BVK said it has introduced a series of measures, including strengthening standards for cooperation with external partners, tightening compliance rules and organisational structures, and launching the search for an external manager to head its real estate investment division on an interim basis, to address issues linked to the US investments.
The appointment follows the departure of Norman Fackelmann, former head of the real estate capital investment division, and Rainer Komenda, former head of the real estate investment management department.
Expected losses
The interest group founded by Mattil and Greger, both members of the lawyers’ pension fund – one of the 12 schemes managed by BVK – is mobilising colleagues to take action against BVK and those it considers responsible for the losses.
BVK has so far disclosed write-downs of €163m for the 2024 financial year and has warned of the risk of a further €690m in losses linked to development and renovation projects.
The pension fund has invested €820m in “three particularly risky” development projects and one renovation project – the Transamerica Pyramid in San Francisco – in addition to €770m invested across three existing projects.
Total exposure to US real estate, including investments alongside Deutsche Finance Group and real estate developer Michael Shvo, is estimated at around €1.6bn, BVK said in a statement.
Deutsche Finance Group has rejected responsibility in connection with BVK’s US real estate investments.
The group said in a statement that neither Deutsche Finance America nor any other affiliated company acted as a target fund manager for the US investments, or had discretionary decision-making authority over the selection or execution of those investments.
