Updated: Alexander Darwall trust rebounds as large Wirecard holding is chucked
Alexander Darwall’s chunky weighting in Wirecard delivered an 11.3% hit to the European Opportunities Investment Trust’s share price on Thursday due to an accounting scandal at the payments business.
The German company’s auditor did not sign off its accounts because it could not confirm the existence of €1.9bn (£1.7bn) in cash balances. Shares in the business fell 69.3% on Thursday.
The European Opportunities Investment Trust is the only portfolio in the Association of Investment Companies universe to hold Wirecard in its top-10 positions, according to FE Fundinfo. At 10.34%, it was the largest weighting in the European Opportunities Investment Trust followed by Experian, Novo Nordisk and RELX, which represent between 9.46% and 9.96%.
Darwall announced in July last year that he would be leaving Jupiter to form his own investment boutique. In October, the European Opportunities Investment Trust board confirmed they would be following him to his new business Devon Equity Management.
In January, several months after the trust had transitioned to his new firm, Darwall (pictured) pledged to not to let weightings to a single stock get so high. At the time, Wirecard had represented 10.8%, only slightly higher than its current weighting, although it had reached even higher levels than that representing 17% of the portfolio at one point.
Only one fund in the Investment Association holds Wirecard, the Barings German Growth Trust, which has a 3.32% weighting, according to FE Fundinfo.
Wirecard delivers for short seller Barry Norris
One person profiting from the company’s fall is Barry Norris, fund manager of the Argonaut Absolute Return fund. Wirecard is the fund’s biggest short position and Norris claims the company could be insolvent by the weekend.
“What has amazed us is how the Wirecard share price has been so impervious to substantiated accusations of wrong-doing for so long,” Norris said.
“Even today Wirecard’s long standing CEO Marcus Braun has brazenly tried to portray the company as a victim of fraud and instead tried to focus investors on apparently strong reported revenue growth.”
Norris argued short sellers were “uniquely motivated” to unmask fraudulent management and exposure poor business models and described them as “market vigilantes”.
NMC was another short that benefited Norris this year, helping him to perform strongly in March as other funds got battered by the coronavirus sell-off. After anomalies were found in its financial statements it went into administration, falling out of the FTSE 250 and being replaced by the Allianz Technology Trust.
