Allianz Sets Aside $4.2B to Handle Probes, Lawsuits After Collapse of Investment Funds. Mr Tournant and Mr Taylor worked together well over a decade ago when they were at Structured Alphas predecessor, Options Management, which had a similar strategy. Instead of employing the usual formula for hedge-fund fees the 2 and 20 mix of management charges and a cut of profits they were compensated for one thing alone: performance. To avoid disruptions to these funds and for the protection of the fund investors, the SEC will allow a brief transition period solely to transition these services to another investment adviser.. The 55-year-old investment manager now faces up to 40 years in prison on five separate counts of fraud and conspiracy to obstruct justice. Notably, as markets got more volatile, the funds could get more profitable, Allianz told clients, while warning that all investments entail risks. During the first quarter of 2020, five Structured Alpha funds lost between 49% and 97% of their value, performance that investors contend in legal filings was far worse than similar strategies. The Department stands ready to keep bringing these kinds of charges to assure the public thatno one is above the law.. Email notifications are only sent once a day, and only if there are new matching items. It turns out that Tournant and other fund managers behind Structured Alpha including longtime colleague Trevor Taylor previously ran into trouble during the 2008 financial crisis, with strategies that also involved options. "Greg Tournant has been unfairly targeted despite the fact that he was on extendedmedical leave during thesemarket events, and the funds had thrived under his leadership for the previous 14 years. The insurer warned last month that ongoing probes by the Justice Department and SEC are at a sensitive stage and it couldnt yet predict the final price tag from regulatory settlements and private litigation. May 11 Allianz sets aside another 1.9 billion euros to settle litigation and any fines from U.S. regulators. In a parallel criminal proceeding, the U.S. Attorneys Office for the Southern District of New York today announced criminal charges for similar conduct against AGI US, Tournant, Taylor, and Bond-Nelson. It expects a final agreement in the coming weeks. Lead defendant in national fraud case has ties to Basalt, Roaring Fork Valley, And its far from the only time the defendants. Prosecutors say that although Mr Tournant assured big investors safety was his top priority, he secretly took huge, undisclosed risks. Mr Tournants group used equity-based options to market what he said was an all-weather strategy that would protect investors from losses in good times and bad. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. The Aspen Daily News has chronicled Tournants real estate dealings with Snowmass Club condominium properties in 2016, 2017 and 2019. Allianz Shares Sink on DOJ Investigation Into Structured Alpha Funds Hedges meant to protect investors against market falls didn't perform during March 2020 panic Allianz has been sued by. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. Allianz, which has denied wrongdoing, said earlier this month that independent advisers its hired to dig into what happened have thus far found no breaches of duty by the insurers management board. Taylor and Bond-Nelson also agreed to associational and penny stock bars. All structured data from the file namespace is available under the Creative Commons CC0 License; all unstructured text is available under the Creative Commons Attribution-ShareAlike License; additional terms may apply. The Arkansas pension fund makes an initial investment in Allianzs Structured Alpha funds. The result was a massive fraud that cost investors $US7 billion ($10 billion), they say. 149 (DLC), Conspiracy to commit securities fraud, investment adviser fraud, and wire fraud, 18 U.S.C. The SEC appreciates the assistance of the U.S. Attorneys Office for the Southern District of New York and the U.S. Gregoire Tournant, the former chief investment officer who created the now-defunct Structured Alpha Funds, accused the law firm Sullivan & Cromwell of helping Allianz, also a client, make him. At the center of the debacle is Greg Tournant, 55, an equity-options whiz and one-time McKinsey & Co. consultant. Subscribe to the City A.M. newsletter to have our top stories delivered directly to your inbox. The comments come after Allianzs $11bn Structured Alpha funds racked up $6bn in losses at the start of the pandemic, as its risky options strategy faltered in the face of stock market volatility at the start of Covid-19. <>stream read more. Careers have been upended. Thats the allegation both the U.S. Justice Department and the U.S. Security and Exchange Commission make in an indictment released Tuesday. At one point, Mr Tournant met Mr Taylor at a vacant construction site, where they discussed fund reports they manipulated and how to respond to SEC investigators, according to the SEC complaint. The litigation will be led by Timothy K. Halloran under the supervision of Melissa J. Armstrong. Megan Tackett is the editor for the Aspen Daily News. The trade proved disastrous for the Allianz fund managers when the index tanked in late February, and global markets experienced their largest single-week declines since the height of the 2008 financial crisis, the board claimed. By December 2019, Structured Alpha had grown to more than $10 billion, according to a person familiar with the matter. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. Regulatory filings show that both Greg Tournant and Stephen Bond-Nelson were removed from their positions as managers of Allianz Global Investors Structured Alpha hedge funds in December for 'violation of firm policies designed to ensure compliance with industry regulations and standards relating to the preparation and provision of client communications', and 'violation of firm compliance . Investors are also told chief fund manager Tournant had been ill for weeks, according to lawsuits. French-American citizen Gregoire Tournant earned $60m from his role as Chief Investment Officer at Allianz, as he lied to investors and misled them as to the risk of investing in the Structured Alpha funds. Investigators said the misrepresentations began in 2014, and helped Allianz generate more than $400 million of net profit. NEW YORK/MUNICH, May 17 (Reuters) - Germany's Allianz SE (ALVG.DE) agreed to pay more than $6 billion and its U.S. asset management unit pleaded guilty to criminal securities fraud over the collapse of a group of investment funds early in the COVID-19 pandemic. Investor lawsuits and settlements have piled up. But when the pandemic hit, everything went haywire. Between 2014 and 2020, Gregoire Tournant, the defendant, was the Chief Investment Officer of a set of private funds at AGI known as the Structured Alpha Funds. The transition period will be ten weeks for the US mutual funds that AGI US sub-advises and four months for the US closed-end funds that AGI US advises. The board alleged that when the pandemic started fueling wild volatility in February, Structured Alpha made a fateful bet against further market declines. News on Tuesday that the US unit of the German insurance giant was admitting guilt over the collapse of its Structured Alpha group of hedge funds leaves many questions unanswered, including a big one: Will Mr Tournant, who had told investors Structured Alpha would do well whether markets went up or down, end up in prison? Our Standards: The Thomson Reuters Trust Principles. Structured Alpha 1000 and Structured Alpha 1000 Plus targeted returns of 10 per cent above three-month US Treasury bills. It occurred at a very profitable component of AGI one that accounted for 25% of AGIs revenue in recent years, which amounted to hundreds of millions of dollars. July 20 Arkansas suit is filed with the U.S. Southern District of New York claiming $774 million in losses. Be the first to know what's happening as it's happening. Tournant faces charges of conspiracy, securities fraud and obstruction of justice charges. Russia takes its war with Ukraine to Londons High Court as battle begins over a soured $3bn bond deal, Worlds top insurers to face aircraft leasers in High Court mega trial over planes seized by Russia. As alleged, Gregoire Tournant and his co-conspirators lied to investors and secretly exposed them to substantial risk in order to line their own pockets and those of their employer, AGI, said U.S. Attorney Williams. (Reporting by Tom Sims; editing by Tomasz Janowski). Two of his colleagues have worked with him since the group's founding. Tournant himself was heavily invested in the funds he managed and lost money along with clients, according to a person familiar with the matter. The other two portfolio managers - Stephen Bond-Nelson, 51, of Berkeley Heights, New Jersey; and Trevor Taylor, 49, of Miami - agreed to plead guilty to fraud and conspiracy, and cooperate with prosecutors. A lock (LockA locked padlock) or https:// means youve safely connected to the .gov website. Other corporations should take note that the results here are driven in part by the fact that this company failed to self-report their crimes. The case has been assigned to U.S. District Judge Colleen McMahon. Allianz is one of the worlds largest financial services companies and one of the worlds largest insurance companies. Those investors included pension funds for teachers, clergy, bus drivers, engineers and others, the vast majority of whom live and work in the United States.. Investors were told the funds employed options that included hedges to protect against market crashes, but prosecutors said the fund managers repeatedly failed to buy those hedges. It further alleges that, with assistance from Co-Lead Portfolio Manager, Trevor L. Taylor, and Portfolio Manager, Stephen G. Bond-Nelson, Tournant manipulated numerous financial reports and other information provided to investors to conceal the magnitude of Structured Alphas true risk and the funds actual performance. Structured Alphas troubles continued after his departure. You have permission to edit this article. Even when, in 2017, internal auditors uncovered red flags, they assigned product specialists whose pay was tied to the groups performance to follow up. A dual U.S.-French citizen, he arrived at Allianz Global Investors in the early 2000s by way of Oppenheimer Capital. Former colleagues have turned on him, as has Allianz. United States v. Gregoire Tournant, 22 Cr. The insurer warned last month that ongoing probes by the Justice Department and SEC are at a sensitive stage and it couldnt yet predict the final price tag from regulatory settlements and private litigation. Additional reporting by Luc Cohen in New York To avoid disruptions to these funds and for the protection of the fund investors, the SEC will allow a brief transition period solely to transition these services to another investment adviser. Get Free Insurance Industry News Updates Delivered to Your Email! Allianz, which also owns bond powerhouse Pacific Investment Management Co., has resolved some of its legal woes, including a February settlement with a majority of investors for undisclosed terms. While regrettable, the losses are not the result of any crime, they said. Follow the topics, people and companies that matter to you. As a consequence of the guilty plea, AGI US is automatically and immediately disqualified from providing advisory services to U.S.-registered investment funds for the next 10 years, and will exit the business of conducting these fund services, the SEC press release explains. 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