Allianz Quarantines €5.6 Billion in Expected Legal Settlements Over Collapse of Structured Alpha Funds

Posted on 05/12/2022

Germany-based Allianz Group (Allianz SE) set aside another €1.9 billion to cover expected legal settlements with U.S. investors and regulators over the demise of its Structured Alpha funds. On February 18, 2022, Allianz revealed they set aside €3.7 billion to cover expected settlements, with further expenses expected. Allianz is in talks with both the U.S. Department of Justice and the U.S. Securities and Exchange Commission (SEC). The rapid implosion of a US$ 15 billion set of investment funds during the COVID pandemic market turmoil in early 2020 has impacted the firm’s credibility with U.S. pensions.

“Allianz SE is seeking a timely resolution to the governmental proceedings in ongoing discussions with the U.S. Department of Justice and the U.S. Securities and Exchange Commission. Our provision estimate is likely to cover all, but settlements have not been concluded, although the progressing discussions have allowed us to book a provision,” the statement said.

U.S. public pensions and other pensions sued Allianz Global Investors in 2020 for alleged mismanagement of the enhanced-return strategy. These plaintiffs include Arkansas Teacher Retirement System, Milwaukee City Employees’ Retirement System, Blue Cross Blue Shield’s national employee benefits committee, Raytheon Technologies Corporation, and others.

For example, Arkansas Teacher Retirement System had US$ 1.6 billion in three Structured Alpha funds at the end of 2019 and stated in its July 2020 lawsuit that it had lost at least US$ 774 million due to “negligent mismanagement” of the funds. Arkansas Teacher Retirement System secured a settlement of US$ 642 million, according to minutes of a board meeting.

Get News, People, and Transactions, Delivered to Your Inbox