Millions Dodged Wirecard Wipeout in Close Shave for NN Romania

Romania’s largest pension fund disposed of its stake in Wirecard AG weeks before the scandal around the payment company broke, a narrow escape for 2 million Romanians already reeling from the economic devastation of the coronavirus pandemic.

NN Pensii, a unit of NN Group NV, by early May sold a stake in the German firm equivalent to 0.6% of the fund’s total assets at the end of December. The disposal meant that NN Pensii, which still took a loss on the shares, was spared the worst of the collapse after an audit revealed that more than $2 billion went missing from Wirecard’s accounts.

Romania has suffered one of the worst hits from the virus in the European Union’s eastern wing. Two months of a strict lockdown battered its economy, hurting the savings of 7.5 million Romanians whose mandatory benefits are managed by private pension funds. NN Pensii said the disposal was part of its regular asset review process.

“Wirecard shares were no longer in our portfolio at the beginning of May. Exposure on each foreign or local issuer -- and therefore its price volatility -- is limited in the overall fund portfolio,” Chief Executive Officer Andreea Pipernea said in a phone interview on Friday.

Millions Dodged Wirecard Wipeout in Close Shave for NN Romania

Under the Romanian mandatory pension plan, funds need to invest the bulk of their holdings on local markets, with only a smaller share allowed in foreign equity for diversification.

With more than $5 billion in mandatory savings under management, NN Pensii first invested in Wirecard in 2018 and gradually increased its stake to 0.6% of total assets, its largest foreign equity exposure at the end of last year.

However, while there are limits on the type of investments, concerns have appeared about the lack of disclosure of individual holdings.

Financial regulator ASF didn’t immediately respond to Bloomberg’s request for comments. NN said the performance of a pension fund must be analyzed on its entire portfolio over a longer time horizon. The Romanian pension funds association also responded by pointing to its members’ strong long-term returns in a volatile market.

Wirecard was also one of the most popular foreign stock choices for Polish mutual funds according to data for the end of last year. In contrast, Poland’s pension funds mostly managed to avoid investing in Wirecard, including the local NN unit.

©2020 Bloomberg L.P.

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