U.S. pension funds sue Allianz over coronavirus losses

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The Metropolitan Transportation Authority (MTA), which operates the New York subway, and the Arkansas Public School Teachers Retirement Fund are among the investors seeking damages from Allianz Global Investors for losses totaling more than $ 3 billion, according to court records.

At least six separate complaints requesting a jury trial have been filed against Allianz (ALIZF) in the Southern District of New York since July. Allianz denied the wrongdoing and said the lawsuits were without merit.

Pension funds, which have invested in Allianz hedge funds under assurances of being protected against a stock market crash, claim in court documents that the asset manager mismanaged the funds by abandoning its stated investment strategy without informing its customers.

The “careless and reckless” actions meant that the “hard-earned pension funds” of essential workers were “decimated,” said the MTA, which employs more than 70,000 workers in the New York City transportation system, in court documents.

Market turmoil linked to the coronavirus pandemic wiped billions of dollars from global stock markets in March and hammered investment portfolios. While stocks have since rebounded, Allianz Global Investors has been forced to liquidate two of its hedge funds due to large losses, which has sparked investor litigation.“Due to Allianz’s violations, a significant part [the pension plan] the assets intended to provide retirement security for thousands of employees and their beneficiaries have been wiped out, ”according to the lawsuit filed by health plan provider, the Blue Cross and Blue Shield Association. , lost over $ 2 billion in Allianz funds.

The Teamsters Union, which represents truckers, has made similar allegations, as has Lehigh University in Pennsylvania. Pension funds for the police, firefighters and employees of the city of Fairfield, Connecticut, also filed a lawsuit.

In each case, pension fund managers have said in court documents that they receive promised returns regardless of market direction and volatility, as well as protection against sudden and extreme market declines. They allege that Allianz strayed from its investment mandate and made decisions as the markets collapsed, which exposed the funds to further losses.

A spokesperson for Allianz Global Investors said the allegations made by the plaintiffs are “legally and factually wrong.”

The applicants are professional investors who “bought these hedge funds knowing they were looking to generate substantial returns,” the spokesperson told CNN Business. “As was fully disclosed, the funds involved risks commensurate with those higher returns. ”

An internal review of Allianz concluded that the fund portfolio was at all times being managed “according to design,” according to a report posted on the company’s website in July.

“While the losses suffered in the portfolio are deeply disappointing, our analysis to date confirms that these losses were not the result of a failure of the portfolio’s investment strategy or risk management processes,” said he declared.

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