German insurance firm Allianz SE has terminated the employment of two individuals who were responsible for administering a suite of hedge funds that reportedly cost investors billions of dollars and spurred regulatory investigations in the United States.
According to a profile previously discovered on the Allianz website, the funds were handled by portfolio manager Greg Tournant, who had been with Allianz Global Investors since 2002.
The impacted funds had difficulty during the market volatility that preceded the pandemic and were eventually liquidated. Allianz has already set aside 3.7 billion euros for the litigation as a result of investor lawsuits.
Tournant was fired for violating business policies aimed at "ensuring compliance with industry norms and standards" governing the creation and delivery of customer communications, U.S. filings .
The failure of the $15 billion Structured Alpha funds has left Allianz in deep trouble with the Securities and Exchange Commission and the U.S. Department of Justice, both of which are probing what went wrong.
According to Reuters, the DOJ began an investigation in October into suspected misconduct by managers of Structured Alpha funds and misrepresentation of risk to investors.
Tournant did not immediately respond to a LinkedIn message requesting comment, and Reuters has attempted to contact him numerous times previously. Allianz did not respond to a request for comment.
According to a separate complaint, a second Allianz employee, Stephen Bond-Nelson, was "discharged for violating business compliance procedures." Bond-Nelson could not be reached for comment by Reuters.
Investors in the funds, which were primarily public pension funds in the United States, sued Allianz for a total of $6 billion in damages, while some have reached settlements.
The Allianz funds generated returns using complex option techniques, but when the COVID-19 crisis threw stock markets into a tailspin in February and March 2020, their value plunged, in some cases by as much as 80% or more.
Investors asserted in their claims that Allianz had deviated from its declared investing strategy of hedging to mitigate potential losses.
The funds catered specifically to traditionally conservative U.S. pension funds, such as those for Alaskan workers, Arkansas teachers, and New York subway laborers.
Allianz declared a 3.8 billion euro ($4.3 billion) provision last week to deal with the impact, putting the company into a fourth-quarter deficit and necessitating a pay cut for its CEO and other board members.
After learning about the growing concerns with Structured Alpha, Allianz appointed Andreas Wimmer as its new head of asset management in October.
