U.S. probes conduct of Allianz fund managers

The U.S. Department of Justice (DOJ) investigation into German insurer Allianz is looking at possible misconduct by fund managers and misrepresentation of risk to investors, Reuters reports.

The probe, disclosed by the company on Aug. 1, is focused on Allianz funds that used complex options strategies to generate returns but racked up massive losses when the spread of COVID-19 triggered wild stock market swings in February and March 2020.

The DOJ is looking into whether managers at Allianz Global Investor’s Structured Alpha Funds abandoned a strategy to provide protection against market crashes and how they communicated the amount of risk to investors, the report said.

The U.S. Security and Exchange Commission (SEC) launched a probe into the demise of the funds last year, Allianz disclosed after the Arkansas Teacher Retirement System filed a lawsuit in July 2020 seeking $774 million in damages.

Since then, at least 25 investor lawsuits, predominantly by U.S. public pension funds, including those for New York subway workers and city of Milwaukee employees, have been filed against Allianz for a total of about $6 billion in damages.

The company is seeking to have the lawsuits dismissed arguing that it is not liable for the investors’ losses.

The DOJ launched its probe after a referral from the SEC while German financial regulator BaFin has also been looking into the demise of the Structured Alpha Funds, Reuters reported this week.

In addition to its insurance business, the German company is one of the world’s biggest money managers with 2.4 trillion euros ($2.9 trillion) in assets under management through fixed-income investment giant PIMCO and Allianz Global Investors.