German dentists’ pension fund loses nearly half its assets, raising concerns over governance, oversight, and risk management in Germany’s profession-based pension system

A German pension fund managed by a group of Berlin dentists has lost nearly half of its €2.2 billion (around $2.6 billion) in retirement savings, casting a harsh spotlight on Germany’s profession-based pension system and raising concerns over governance and regulatory oversight.

The fund, run by a committee of six dentists and oral surgeons, heavily invested in private loans, unlisted companies, and real estate, accounting for over 70% of its assets. Many of these ventures—including a California plastic recycling firm, a northern German shrimp farm, and a Berlin-based insurance startup—struggled or failed. Court filings reveal that in some cases the fund even injected more money into struggling firms to help them meet existing debt obligations.

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In an effort to recover some losses, the Berlin-based pension fund, known by its German acronym VZB, has initiated legal proceedings against its former auditor, advisers, and elected committee members, including ex-chairman Ingo Rellermeier. Ralph Wohltmann, a former director involved in investment decisions, has resigned. Legal representatives for Rellermeier have rejected the allegations to Bloomberg News, while Wohltmann’s lawyers declined comment due to ongoing litigation.

The VZB collapse is estimated to have cost roughly €1.1 billion, highlighting weaknesses in oversight and controls at profession-based pension funds—commonly run by members of the profession rather than seasoned investors. Many such funds are fragmented, operate under state-level supervision, and have limited professional investment staff, leaving them exposed when markets shift or interest rates rise.

Despite VZB’s dramatic losses, industry defenders argue it is an exception. Yet other funds—from a northern German pharmacists’ pension to Munich-based BVK, the country’s largest profession-based pension group—have collectively faced billions in losses after pursuing higher-yield investments during periods of low or negative interest rates.

“These losses are what happens when a lot of money is managed by people without investment expertise,” Peter Mattil, a Munich-based lawyer representing members seeking more transparency, told Bloomberg News.

Profession-based funds under the microscope

Profession-based pension funds, known as Versorgungswerke, manage approximately €300 billion, surpassing Germany’s largest corporate pension schemes. Established along state lines for certain professions such as doctors, notaries, and architects, they traditionally followed a risk-averse investment strategy, relying on highly rated debt and generating low-single-digit returns. Yet from 2021 to 2024, average returns hovered around 3.2%, below the median of 7% assumed by US public pension plans.

VZB made several high-profile private market investments directly. Notably, it invested in rPlanet Earth, a California firm aiming to eliminate plastic waste, first in 2015 and later with a $5 million loan. As rPlanet faltered against cheaper global competition, VZB had to write down €126 million—93% of its original investment.

Thomas Schieritz, the new head of VZB’s administrative committee, said the scale of losses revealed the need for stronger governance. “We need more independence and competence in decisions and controls,” he told Bloomberg News, pledging reforms.

Other smaller pension funds have also reported losses on real estate and alternative assets, while Germany’s largest supplementary public-sector pension fund, VBL, leveraged its scale to restructure investments and minimize damage. Many funds relied on advisers and intermediaries who earned significant fees from deals, raising questions about conflicts of interest.

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The episode has reignited debate over supervision. Vocational funds are currently overseen by state ministries rather than the national financial regulator, BaFin. Critics argue this fragmentation allows riskier strategies to go unchecked. BaFin head Mark Branson acknowledged an “accumulation of unfortunate cases” but said bringing these funds under federal oversight would require political approval.

Chancellor Friedrich Merz has signaled pension reforms this year aimed at strengthening sustainability and shifting more emphasis toward private and corporate pension pillars. Meanwhile, industry representatives stress that while individual losses are painful, the profession-based pension system remains largely solvent and capable of meeting obligations.

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