The Metropolitan Transportation Authority, the Teamsters, and pension funds for police, firefighters, and city employees in Fairfield, Connecticut, are among the groups that have filed six separate complaints against Allianz Global Investors. The suits allege that the German asset manager deviated from its investment mandate without informing clients and mismanaged funds.
The complaints, filed in the Southern District of New York, say Allianz promised returns regardless of market direction and volatility.
“As a result of Allianz’s breaches, a substantial portion of [the pension plan] assets meant to provide retirement security to thousands of employees and their beneficiaries was wiped out,” a lawsuit filed by health plan provider the Blue Cross and Blue Shield Association said. The MTA, in its filing, said “negligent and imprudent” actions by Allianz had “decimated” the savings of essential workers.
A spokesperson for Allianz said the allegations were “legally and factually flawed” and the claimants were professional investors who “bought these hedge funds in the knowledge that they sought to deliver substantial returns.”
“As was fully disclosed, the funds involved risks commensurate with those higher returns,” the spokesperson.
At the end of March, Allianz liquidated two hedge funds and an offshore feeder fund amid steep losses. In April, Morningstar downgraded the remaining funds citing, “failure in risk management protocols and the uncertainty.” Allianz, in an internal review, said the losses were not the result of failures in its investment strategy or risk-management process.
“In the midst of the market downturn, the portfolio management team took active steps to reduce the portfolio’s risk, including by replacing then-existing positions with more conservative ones — a restructuring process implemented in past market downturns,” the company said in a report on its Structured Alpha Portfolio performance.
Allianz disputed Morningstar’s downgrade.
Investors in one of the funds lost 97%, according to one lawsuit. Two of the funds had sought returns of 1000 basis points of alpha.