Dhe investors in the German Mittelstandsleihenfonds were confronted with bad news this week. The support partner of the fund managed by KFM Deutsche Mittelstand AG, IP Concept, has suspended the issue and redemption of shares. IP Concept is a subsidiary of DZ Privatbank.
The reason is that a proper valuation of the Securo Pro Lux bond, also known as Verius 1, is no longer guaranteed. This bond is secured by shares in a real estate financing fund of Verius Capital, which finances real estate transactions. The calculation of the net asset value and the unit certificate transaction for this fund were discontinued at the beginning of December due to “significant uncertainties in the valuation of the fixed assets”. According to KFM, the reason for this was that “due to the challenging market conditions”, in particular due to the interest rate increases by the ECB, the underlying values of the fund had to be revalued. Since then, the price determination of the bond has also been suspended.
According to the announcement, the SME bond fund invested five million euros or around 3.8 percent in the Verius bond. The tolerance threshold for the portion of the “non-calculable fund volume” is 0.5 percent, based on the influence on the net asset value of the fund. The valuation uncertainty makes it necessary to suspend the share transaction.
KFM is optimistic: There is currently no information that would raise doubts about the bond being repaid at the beginning of 2024. It is assumed that the price of the bond will fall below par with the revaluation of the fund portfolio. However, the bond would have to be redeemed at 100 percent of the nominal value at the end of the term. After the revaluation, the share business for the SME bond fund will be resumed.
The fund’s share value has fallen by more than 10 percent over the past five years. Taking the distributions into account, the return for this period is currently around 16 percent or around 3.2 percent per year.