Lawyers investigating the troubled US real estate investments of Germany’s Bayerische Versorgungskammer (BVK) are preparing legal action aimed at recovering losses and holding pension fund managers to account.
Lawyers Peter Mattil and Stephan Greger plan to push BVK – which manages €117bn for Bavaria’s professional pension funds – to pursue damage claims over losses incurred on its US investments.
“We want BVK to use the possibility to claim for damages,” Greger said during a webinar held this week to explain the legal situation to members.
Greger pointed to the case brought by Mubadala, the sovereign wealth fund of the government of Abu Dhabi, against insolvent Austrian real estate group Signa as a possible blueprint.
Mubadala is entitled to more than €700m in compensation following a ruling this week by an arbitration tribunal of the International Chamber of Commerce in Switzerland, according to the Austrian association for the protection of creditors Creditreform.
Mubadala accused Signa and its founder, René Benko, of violating financial agreements, the association said.
Mattil and Greger have set up an interest group (Interessengemeinschaft Versorgungswerke) to seek greater disclosure from BVK on its US investments and other holdings.
They will also examine whether insurance policies exist to cover investment-related losses and assess potential claims against all parties involved.
According to Greger, BVK’s US investments were not subject to sufficient critical review.
The lawyers also intend to seek a special audit to determine whether losses disclosed so far are “only the tip of the iceberg”, and are preparing legal action if BVK refuses to cooperate, Mattil said.
Mattil pointed to collective legal actions, similar to class actions (Musterklageverfahren) or “pilot lawsuits”, as possible routes to pursue claims against BVK, potentially targeting pension fund managers, the state of Bavaria and auditors.
Both lawyers previously worked on collective litigation against board members, auditors and other parties following the collapse of payments group Wirecard.
Complex investment structure
BVK, Germany’s largest public-sector pension group, operates under a different legal framework.
The pension institution, which is supervised by Bavaria’s interior ministry, has 2.7m members across 12 professional pension funds, with assets managed by Universal Investment.
Since 2018, BVK invested in three US real estate projects via the Luxembourg-based Elektra 2 fund, alongside Deutsche Finance and real estate developer Michael Shvo, according to a response by BVK to an inquiry from Green Party MPs in the Bavarian parliament.
“It is a complex investment structure with fund of funds (Dachfonds), target fund (Zielfonds), this is how investments are made [by BVK] in real estate in the US,” Greger said.
BVK has blamed post-pandemic market corrections, rising construction costs, higher interest rates and underperforming project partners for the risk of losses on its US real estate holdings.
The pension fund said it had established an effective risk management system, with individual real estate investments representing a very small share of total assets, adding that members’ benefits would not be cut.
Mattil and Greger dispute this assessment, arguing that BVK is downplaying losses that could amount to as much as €830m.
