A New York U.S. District Court judge on Thursday ruled that some lawsuits filed by a dozen institutional investors alleging mismanagement related to an enhanced return strategy managed by Allianz Global Investors could range from before.
The plaintiffs alleged in the lawsuits that AllianzGI abandoned its investment and risk management strategies in managing its structured alpha strategies which subjected investors to “undisclosed risks and ultimately led to the massive losses that funds suffered in February and March 2020 “.
United States District Judge Katherine Polk Failla has dismissed some of AllianzGI’s motions to dismiss regarding certain claims in the various lawsuits. One of those denials was that she said the plaintiffs could go ahead by attempting to show that the manager violated the terms of a private placement memorandum for the Structured Alpha funds.
When responding to the allegations of three plaintiffs regarding the breach of the implied commitment of good faith and fair use as an alternative to their contractual claims, Ms Failla denied AllianzGI’s request to dismiss the claim due to ‘a failure to “identify the gaps” in the constituting documents. .
Ms. Failla rejected some claims based on state law. A spokesperson for AllianzGI said in an email that the court filing was an “early procedural decision in which the court did not make any decision on the merits of the plaintiffs’ complaints. We appreciate that the court has limited some claims and we will continue to vigorously defend ourselves in those actions. “
Allianz Structured Alpha strategies have historically been designed to identify “areas of systematic disagreement with option prices regarding the probability distribution of future index movements,” according to a September 2016 AllianzGI presentation, which added that the process investment was designed to be both long and short. volatility.
This involved taking limited spread positions, to sell options most likely to expire worthless (short volatility); hedged positions intended to protect against stock market crashes (long volatility); and directional spread positions designed to generate returns when stock indices rise or fall more than usual for periods of several weeks (long / short volatility).
The AllianzGI spokesperson said in an email in June 2020 that strategies suffered in the face of “unprecedented market turbulence” in March of the same year.
In March 2020, the largest five-day percentage change in the CBOE Volatility Index was 151.7%, higher than the largest five-day change in the VIX of 55% during the global financial crisis in the United States. 2008-2009 period.
However, the plaintiffs in the lawsuits said AllianzGI bought cover put options “farther from the money” than the manager represented in order to save costs, bought put options from hedge that expired earlier than the risky options it holds, bet against large increases in volatility by selling options on volatility indices and failed to perform adequate stress tests, according to the filing judicial Thursday.
Among the plaintiffs is Little Rock, Arkansas ‘$ 21.2 billion teachers’ pension system. had to have in place, ”according to his original court record.
ATRS lost $ 924 million in value in March 2020 on three structured alpha portfolios from Allianz, according to the system’s investment reports. The worst performing portfolio was the Allianz Structured Alpha Global Equity 500 strategy, which slumped to $ 206 million as of March 31 from $ 743 million a month earlier. Global Equity 350 portfolio assets fell to $ 196 million from $ 411 million, and the US Equity 250 portfolio fell from $ 172 million to $ 100 million.
Numeric values in strategy names correspond to the amount of alpha in basis points above a corresponding index that the strategy is expected to achieve.
The other plaintiffs include Raytheon Technologies Corp., Waltham, Mass., The $ 5.4 billion Milwaukee City Employee Retirement System, and the Blue Cross Blue Shield National Benefits Committee.