Investments with Macquarie ‘difficult to imagine’ amid investigation, Danish pensions say

Updated to include statement from MIRA

Danish pension trio ATP, PFA and PKA have told Sydney-based asset manager Macquarie that investments with the group in the near term have been threatened by a German prosecutor’s investigation into dividend trading.

The Cologne Prosecutor’s Office has opened an investigation into a number of banks surrounding dividend trading, wherein a bank loans a stock in a way that makes it briefly appear that both it and the eventual buyer are the owner, allowing both to claim a dividend tax rebate. The practice is thought to have cost Germany billions of euros in lost taxes.

CPO will be interviewing Macquarie Group’s outgoing chief executive Nicholas Moore and his replacement Shemara Wikramanayake as part of its questioning, causing the Danish investors to examine their relationship with the firm.

“With regard to new investments with Macquarie, there are a number of questions we need to have answered,” Christian Hyldahl, chief executive of ATP, told Danish broadcaster DR. “It’s difficult to imagine that we can be part of new collaborations with them in the short run.”

ATP confirmed to Infrastructure Investor that Hyldahl was speaking on behalf of all three of the pension schemes.

Earlier this year, the three pensions teamed up with Macquarie to buy Copenhagen-based telecoms firm TDC in a deal worth Dkr40.3 billion ($6.7 billion; €5.4 billion). The pension funds each bought about 16.7 percent, with Macquarie’s MEIF5 fund taking a 50 percent share. Hyldahl said he does not regret the deal, but questions remain about the future relationship.

“I would like partners who operate properly,” he explained. “Now we must see how they relate to these questions. If they cannot do it in a good and sober way, we will not be able to collaborate with them in the future.”

‘Persons of interest’

Macquarie Group acknowledged the investigation in a statement at the end of last month and said it has previously cooperated with authorities surrounding claims of German dividend trading. It also noted that legal advice in the past has led it to believe Macquarie Bank was acting lawfully, adding that it has since withdrawn from this trading market. The investigation is part of wider claims across Europe of tax evasion amounting to about €55 billion across the continent, according to investigative research group Correctiv.

“We understand the CPO will want to interview the individuals involved in the transaction, which may number up to 30 people [at Macquarie],” Macquarie’s statement said. “This is expected to include staff involved in the approval process, among them the Macquarie Group chief executive officer and the CEO designate. In order to interview all these individuals, they are likely to be formally classified under German law as persons of interest or suspects.”

Hyldahl described the allegations as “deeply shocking” and said the pension funds are “strongly distanced” from the scandal.

Macquarie Infrastructure and Real Assets said it continues to engage with partners and investors, although denied elements of the allegations.

“We believe that some of the media coverage in Denmark has mischaracterised the situation by using materials taken out of context or relating to transactions that did not occur,” a spokeswoman said. “To be clear, Macquarie did not trade Danish equities, did not make withholding tax claims in Denmark, did not lend to funds trading Danish shares and has no knowledge of funds making any withholding tax claims in Denmark. We acknowledge that in certain jurisdictions, tax rules have changed and where that is the case we have worked with governments to ensure there has been no lasting impact to their fiscal position.”

Infrastructure Investor revealed last month that MIRA had hired Philip Mikkelsen, previously director at DWS, as a managing director in its investor solutions group responsible for leading MIRA’s coverage of Nordic institutional investors. The hire was believed to be the first of several planned by MIRA for the region.