Diary Of An Investor: Paradise lost
As our co-investment partners PensionKøbenhavn found recently, unexpected risks can turn round and bite you.
Last year, we had a seminar on reputational risk management with Lars and Paul, our management consultants. Katrine, the CEO of PensionKøbenhavn also joined.
She was there to talk about her fund’s experiences last year when they were caught up in a Danish media storm to do with the so-called Paradise Papers.
This is important to our trustees because a few years ago we signed a deal with PensionKøbenhavn to invest in private markets and real assets.
This huge cache of leaked legal documents implicated many wealthy individuals involved with dubious tax avoidance strategies in offshore jurisdictions. Unfortunately Danish pension funds were named, including PensionKøbenhavn. Our co-investments were not involved.
‘Although we did nothing wrong we really had to fight to prove our case in the Danish media,’ Katrine said. ‘We felt it was a case of guilty until proven innocent. Anything to do with offshore tax is so loaded with negative associations these days that it can be guilt by association.
‘There is nothing wrong with our underlying structures, but we are not sure if our members really believe that.’
Lars and Paul looked pleased. Lars showed a graph, in which he had plotted public satisfaction statistics for various companies before and after a reputational crisis. ‘This is the crucial time,’ he said, pointing at a part of the chart he had shaded in red. ‘The post-crisis period is the BTP, or Building Trust Period.’
Paul then stepped forward and pitched a new service from his com pany, called ReputationWatch. Wasserdicht’s culture is traditionally conservative – after all we are water engineering and flood management specialists. Somehow I don’t think Lars and Paul will have much difficulty getting our trustees to sign on the dotted line.
Pieter Mullen is investment director at Wasserdicht Pension Funds