The pension fund for dentists in Berlin, Bremen and Brandenburg, Versorgungswerk der Zahnärztekammer Berlin (VZB), is weighing a potential damages claim against former management after investment decisions appear to have breached legal limits.
The fund is also working to rebuild a coherent investment strategy after what it describes as years of structurally unsound practices.
VZB told IPE it is cooperating with the supervisory authority and external experts to assess the scale and causes of the losses and to determine whether a case can be made for damages on behalf of members.
Claims against former and expelled officials deemed potentially responsible for losses are under review, although VZB said it is too early to speculate on whether further legal action will follow or who might be targeted.
Members have already approached Berlin’s supervisory authority – as well as the city’s departments for health and economic affairs – seeking disclosure of the fund’s investments in order to understand the scale of losses that could ultimately lead to pension cuts.
According to VZB, legal requirements and investment rules were significantly exceeded in the past.
Ongoing investigations and special audits show the current market value of the fund’s assets is at least a “high three-figure million-euro sum” below the book values reported in the 2023 financial statements.
The former management had “for many years significantly violated” investment regulations, VZB said.
Capital was steered into direct stakes in individual companies and specialised real estate projects instead of being diversified with adequate liquidity buffers. Loans were also granted without appropriate interest rates or required collateral.
Guidelines stipulate that investments should be restricted to assets with investment-grade ratings. Instead, VZB said most of the capital ended up in “dubious investments with lower creditworthiness”, undermining the core purpose of securing members’ pensions.
Restructuring to take years
The fund is trying to avoid pension cuts – a step it was forced to take in the early 2000s, when entitlements were reduced by 16% following heavy losses on Argentinian government bonds.
VZB warned that the restructuring will take several years. “Restoring a legally compliant investment structure is only possible gradually and with financial diligence,” it said.
The existing investment approach was “structurally flawed” and lacked coherence, according to the fund. Investigations point to a “heterogeneous collection” of investments with no clear concept, insufficient oversight and inadequate internal expertise.
Looking forward, VZB aims to align its portfolio more clearly with legal requirements, building a transparent structure with an appropriate risk profile to support long-term financial sustainability.
“To this end, we are establishing robust governance and control structures that ensure comprehensible strategy development, expert decisions, and effective oversight,” the pension fund said.
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