Prosecutors in Munich carried out a raid at Deutsche Finance, according to a spokeswoman for the office. She declined to specify what investigators are seeking or the focus of the inquiry, but said they will disclose more details "in a few days."
Deutsche Finance manages over $12 billion for its clientele. The firm offered no quick reply when asked for comment.
Months ahead of the raid, pension fund group Bayerische Versorgungskammer said it could face losses after working with Deutsche Finance on U.S. real estate investments totaling €1.6 billion, including San Francisco's Transamerica Pyramid. BVK said the vehicle used for those investments could lose up to €853 million and declined to comment when contacted about Tuesday's development.
In June, German financial regulator Bafin appointed an envoy to Deutsche Finance Investment, a subsidiary of the group, to oversee adherence to its directive requiring the provision of information and records. A Bafin spokesman said the watchdog is not taking part in the Munich raids.
Financial statements tied to Deutsche Finance's retail funds have been overdue for an extended period. Scope Fund Analysis GmbH first suspended its rating after not receiving required information and later withdrew the rating earlier this year.
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A raid by prosecutors, a pension fund flagging large potential losses, and a withdrawn rating put a spotlight on disclosure and funding risks around Deutsche Finance's vehicles. The bottom line: watch for what officials "in a few days" reveal about the probe and how quickly retail fund reporting catches up, because transparency and liquidity drive real estate valuations and the risk premium investors demand.
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