Questions around the governance of German fintech had prompted some managers to distance themselves. Others, especially in Germany and among passive managers, have burned their fingers there.
The fall of Wirecard does not end. The portfolio managers still exposed to German fintech are therefore seeking to limit the damage. DWS, the asset management subsidiary of Deutsche Bank, and Union Investment, two of Wirecard’s main investors, have already indicated their intention to file a complaint against the company. But the two German managers are far from the only ones to have continued to trust the German company after the first warning signs.
“It was a tempting trap for many managers: a high-growth technological value, such as we rarely see in Europe”, emphasizes a professional. Member of the DAX since 2018, the flagship index of the Frankfurt Stock Exchange, Wirecard was found at the end of 2019 in many portfolios, including that of the very virtuous Norwegian sovereign wealth funds and Japanese public pension funds (GPIF).
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1 billion euros invested
Tim Albrecht, the architect of the DWS bet on Wirecard, has announced that he is giving up his bonus following the outbreak of the scandal. The management company had invested up to 1 billion euros in fintech, a large part of which was in the wake of the “Financial Times” revelations. In the UK, another star manager, Alexander Darwall, has had to make amends in recent days. Wirecard was the main position of two of its funds, around 10%. Like the Alken AM management store, also very exposed, and DWS, it sold all of its stake at the end of last week.
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In France, Comgest had significantly reduced its exposure in April 2019. “It was an accumulation of doubts about governance and financial transparency that alerted us”, indicates Laurent Dobler, general manager of the management shop. The company sold its last securities in May, held in an offensive fund, following the publication of the KPMG report. Others had been even more considerate.
Sycomore, a French specialist in responsible investment, had thus taken Wirecard out of its funds in 2016 after meeting its founder Markus Braun, while the first allegations were circulating. Unconvinced by his explanations, the management company had “Strongly degraded the value on the criteria of governance, financial communication and accounting risks”, specifies Bertille Knuckey, manager at Sycomore.
Responsible ETFs concerned
Vanguard, BlackRock, Amundi and BNP Paribas AM were also among the fintech investors, mainly because of their index management activity. More surprisingly, certain listed index funds (ETFs) with a “responsible” label found themselves shareholders of Wirecard. And for good reason, these funds apply a filter on the stocks that emit the most carbon or those involved in controversial activities such as the production of unconventional weapons.
In the absence of a specific filter on governance issues, the title fell through the cracks. One more illustration of the need for any investor to take an interest in the construction of these responsible indices.
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