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Darwall: Wirecard was my mistake but I will carry on

6 July 2020

European Opportunities fund manager Alexander Darwall apologises to shareholders for holding a large position in Wirecard, the Germany payments processor that collapsed in a massive accounting scandal last month.

Alexander Darwall has apologised to European Opportunities (JEO ) shareholders for continuing to hold a large stake in Wirecard, the Germany payments processor that collapsed last month after its accounts were discovered to have been fraudulent.

In his first personal comment on Wirecard since the discovery that €1.9bn (£1.7bn) of cash was missing, prompting Darwall to dump the trust’s position which at the end of May had stood at 10.3% of assets, the fund manager said: ‘Our poor performance in June was due to the demise of Wirecard. I made a mistake, for which I apologise.’ 

He added: ‘I was wrong about the honesty of the company’s management and I was wrong to trust the past audited financial information published by the company. On 18 June the facts changed conclusively and I sold the holding in its entirety.’

Darwall promised further information on Wirecard’s plunge into insolvency would be contained in the trust’s annual report, due in September.

‘We are currently working with the board on the annual report for the financial year ended 31 May which will contain further analysis of recent events,’ he stated.

He also claimed the scandal had not damaged his morale. ‘Our long-term track record continues to be one of outperformance and recent events have not diminished my enthusiasm for investment,’ he said.

Darwall disclosed last sold shares in Wirecard in 2017 and 2018 under pressure from the board, whose policy on investment holdings stipulates that no single position shall exceed 10% of the trust’s total assets at the time of investment.  

The position in Wirecard was not affected by this policy as the long-standing holding grew beyond 10% to reach a peak of 17% last year, prompting the fund manager in January to say that such a large single exposure would not occur again. 

The decline in the trust’s weighting to Wirecard was due to the fall in its share price as the Financial Times reported on growing evidence that much of its business in Asia was fictitious.

Darwall said his firm, Devon Equity Management, which he launched after leaving Jupiter Asset Management last year, was ‘re-examining the due diligence and risk controls which are embedded within our investment process and oversight function’.

Earlier this year the hired a senior analyst, Charlie Southern as senior analyst, to help Darwall and co-fund manager Luca Emo. 

The company is chaired by Simon Troughton, former deputy chairman of Standard Life Aberdeen (SLA), and is assisted by independent risk advisers at Novatus Advisory, it said.

However, Darwall’s approach will remain concentrated on the ten or so stocks about which he has most conviction, although he said these would be ‘diversified across a series of uncorrelated businesses’.  

European Opportunities has fallen nearly 9% in the past month, taking its decline this year to 13% with the former top-performer slipping down the Europe investment trust sector with its shares trading at a 10% discount, around double the average of the past year.

Over five years its total shareholder return of 40.4% lags the average Europe trust sector return of 53.4%, though over 10 years it remains in the lead with 293% compared to a sector average of 229%, according to Morningstar data.

Darwall and the trust appear reluctant to use share buybacks to reduce the widened gap between the stock price and net asset value but indicated they could be undertaken in future. 

The fund manager stated: ‘we are focused on performance as being the most sustainable means of improving the discount rating of the company’s shares over time.’

However, he added: ‘We and the board of European Opportunities Trust PLC are committed to ensuring good liquidity in their shares in the market on the London Stock Exchange,’ suggesting buybacks were not off the agenda completely and the board would act as a buyer of last resort if investor demand continued to falter.


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