Several institutional investors in the Baltics, including Lithuanian pension funds SEB and Swedbank, Estonia's two largest pension managers, have invested in Baltic Cap, the Baltic countries' largest private equity firm, and in particular one of its infrastructure funds. affected by the issue.
In 2017, BaltCap had the European Investment Bank (EIB) invest €20 million in one of its infrastructure funds, and other pension funds in the region followed suit. However, late last year, Baltic Cap had to fire one of its fund managers for allegedly embezzling at least 27 million euros from an infrastructure fund.
Although BaltCap continues to manage the funds, the incident has damaged savers' confidence in local pension plans. For example, in response to angry voices from pension savers, the Central Bank of Lithuania felt it necessary to issue a press release and explain that “Baltic Cap is not a pension fund.”
The Baltic states' main pension providers, Swedish banks SEB and Swedbank, were also quick to point out that the €80 million infrastructure fund investment was only a small part of their pension funds' investment portfolios.
“The impact is minor as we invest the assets of the Baltic SEB Pension Fund globally and have a diversified portfolio,” the bank said in a statement to IPE.
“Investments in our funds represent approximately 0.6% of Baltic SEB pension fund assets.” SEB manages €4.5 billion in second and third pillar pension funds in the Baltic states.
Swedbank responded to IPE as follows: “Baltic Cap's investment in funds totals less than 1%. Therefore, price cuts will not have a significant impact on the portfolio.”
It is not yet clear how much investors have lost on their investments in BaltCap's infrastructure funds, but SE B said BaltCap “has stated that it will compensate for all losses.”
Meanwhile, the European Public Prosecutor's Office (EPPO) took over the criminal case opened by the Lithuanian District Prosecutor's Office in Vilnius and requested the arrest of Sarunas Stepkonis, a former partner of the Baltic Cap Infrastructure Fund.
The European Union's interest lies in supporting the BaltCap Fund under the EIB's European Investment Plan. Supporting local infrastructure development was one of the goals of the fund. Supporting the “revitalization of local economies” is also one of the motivations for local pension funds to invest, Swedbank noted.
“Internal and external investigations are ongoing” at BaltCap, the company said in a statement.