VZB admits financial distress after high-risk investments

Versorgungswerk der Zahnärztekammer Berlin (VZB), the €2.2bn pension fund for dentists in Berlin, Bremen and the state of Brandenburg, has acknowledged it is in a state of financial distress following a series of high-risk investments.

In a statement issued after its general meeting on 12 July, VZB said “a significant share of investments are acutely at risk”.

The fund cited unusual, high-risk, and disproportionate allocations to private equity, start-ups, real estate and unsecured loans as the primary reasons behind its current financial difficulties.

This marks the first time VZB has publicly acknowledged the scale of its problems. Until now, the fund had either denied any financial instability – asserting it remained able to meet its statutory benefit obligations – or had downplayed the situation, describing it as merely “challenging”.

The admission follows renewed scrutiny from members after recent insolvencies among portfolio companies raised fresh concerns about the fund’s investment decisions and future strategy.

VZB has blocked the disbursement of what it described as a risky loan to EV Digital Invest, a crowdfunding and mezzanine finance platform that has filed for insolvency. The pension fund characterised the investment as “highly speculative” and said the move was intended to safeguard member assets.

The fund has also been impacted by the insolvency of insurtech start-up Element Insurance. According to its 2023 financial statement, VZB wrote off €64.93m in 2023 and €45.98m in 2022.

Earlier this year, the fund dismissed its director amid controversy over its investment decisions. At the July meeting, it appointed a new deputy chair, Alexander Klutke.

The meeting followed the release of an interim report prepared by three law firms tasked with reviewing the fund’s governance and operations. The investigation revealed breaches of duty, violations of statutory and internal investment guidelines, and a failure of control mechanisms, the fund said.

VZB stated it is now undertaking structural reforms to protect liquidity and restore long-term performance.

It has embarked on a “fundamental change of course” involving a revised investment strategy focused on regulatory compliance, professionalisation and transparency, as well as broader diversification and a balance between liquid assets and private and real assets.

The fund has also suspended issuing member pension entitlement statements until its 2024 annual financial statements are complete, in an effort to ensure factually sound and reliable information.

“There is no alternative to the change of course started, against enormous resistance, towards complete clarification, professionally supported structural renewal and open communication,” the fund said.

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