By Tom Sims
FRANKFURT (Reuters) -Allianz has dismissed two asset managers who oversaw a group of investment funds that collapsed after racking up massive losses when the spread of coronavirus triggered wild market swings, according to regulatory filings.
The downfall of the $15 billion Structured Alpha funds has landed the German insurance company in hot water with the U.S. Department of Justice (DOJ) and Securities and Exchange Commission, which are both investigating what went wrong.
The funds were run by portfolio manager Greg Tournant, who had been with Allianz Global Investors since 2002, according to a profile that used to be on Allianz’s website.
“(Tournant) was discharged for violation of firm policies designed to ensure compliance with industry regulations and standards relating to the preparation and provision of client communications,” according to a filing on Dec. 13 by the U.S. Financial Industry Regulatory Authority.
Reuters reported in October that the DOJ was looking into possible misconduct by managers of the Structured Alpha funds and the misrepresentation of risk to investors.
Tournant did not immediately respond to a LinkedIn message seeking comment and has not responded to multiple previous efforts by Reuters to contact him. Allianz declined to comment.
A second Allianz employee, Stephen Bond-Nelson, was “discharged for violation of firm compliance policies”, according to a separate filing. Reuters was unable to reach Bond-Nelson for comment.
Investors in the funds, which were predominantly U.S. public pension funds, have sued Allianz for a total of $6 billion in damages, though settlements have now been reached with some.
The Allianz funds used complex options strategies to generate returns but when the coronavirus pandemic sent stock markets into a tailspin in February and March 2020, they plummeted in value, in some cases by 80% or more.
In their lawsuits, investors alleged Allianz had strayed from its stated investment strategy of hedging to limit potential losses.
The funds catered in particular to normally conservative U.S. pension funds, including those for labourers in Alaska, teachers in Arkansas and subway workers in New York.
Last week, Allianz announced a 3.7 billion euro ($4.2 billion) provision to deal with the fallout, pushing the company into a fourth-quarter loss and resulting in a cut in pay for its chief executive and other board members.
In a 2016 video reviewed by Reuters, Tournant likened Structured Alpha’s strategy to insurance.
“Our strategies are not race cars looking to speed their way to high returns. They’re four-wheel drive vehicles designed to tackle rough terrain,” he said in separate marketing material.
($1 = 0.8817 euros)
(Reporting by Tom Sims; Editing by David Clarke)