A star British stockpicker has apologised for making too big a bet on Wirecard, the German payments group facing questions over its accounting practices.
Alexander Darwall, who quit UK asset manager Jupiter last year to set up his own fund business, at one point had more than 17 per cent of his £1bn investment trust in the high-flying payments company that was propelled into Germany’s prestigious Dax index in 2018.
A person close to Jupiter, which until last year was a top-five shareholder in Wirecard, said the fund manager’s executives had confronted Mr Darwall over the size of the holding in the months before his departure.
“Wirecard I got wrong in two senses,” Mr Darwall said in a video posted on his new company’s website. “One is clearly the share price performance has been disappointing. And I must apologise to people for having too much in it, which is a fault I accept.”
Mr Darwall’s new business, Devon Equity Management, replaced Jupiter as the fund manager of the FTSE 250 European Opportunities Trust. Wirecard is still the fund’s largest holding but has dropped to 10 per cent of the portfolio because of the fall in its share price over the past 12 months.
Wirecard has lost about a fifth of its market value since January last year, when the Financial Times reported that a senior executive was suspected of using forged and backdated contracts in a string of suspicious transactions.
Wirecard commissioned an accounting probe by KPMG after the Financial Times in October published documents that appeared to indicate a concerted effort to inflate sales and profits fraudulently. The company has categorically denied impropriety and said the conclusions drawn by the FT about the files were incorrect.
Mr Darwall said he remains a supporter of the Germany company.
“Wirecard is a great company and if I continue to be correct in that work, we will get rewarded in the stock price in due course,” Mr Darwall added in the video. “All I need now is a bit of patience and I’m sure we are going to do well.”
Mr Darwall was able to make such a big commitment to Wirecard because of the investment trust structure — rules governing open-ended funds prevent managers investing more than 10 per cent of their portfolio in one entity.
The trust is up close to 21 per cent over the past 12 months, having fallen in the weeks following the original FT report.
When Mr Darwall announced he was leaving Jupiter, analysts at UBS predicted that clients representing up to £3bn of the company’s £45bn in assets could follow him out of the door, triggering a drop in the group’s own share price.
The two portfolio managers Jupiter brought in to replace Mr Darwall sold more than £500m of Wirecard shares from the group’s flagship European funds late last year. Jupiter confirmed it was no longer an investor in Wirecard.
In the video, Mr Darwall revealed that another client had joined him at his new venture.
He also hinted that a third former client could soon sign up. “We might well have a very small institutional [fund] in the new year,” he said in the video. “We’ll probably do that because we have a very old client who is insistent that we provide some way for them to invest.”
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