It all came crashing down in the early, panicked days of Covid-19, when wild market swings upended an options strategy that was marketed as aiming to generate alpha regardless of market waves.. March 31 One of the funds held by Arkansas loses 78% in the first quarter, compared to a 22% drop of its benchmark. Long before the pandemic, their small investment firm on Miamis Brickell Avenue, aka, Wall Street South, collapsed when its trades went bad, according to two former employees there foreshadowing what was to come. He was arrested in Colorado though not by local authorities, according to officials from the Pitkin County Sheriffs Office, Aspen Police Department and Basalt Police Department and subsequently released on $20 million bond, per reporting from Bloomberg. Gregoire Tournant, 55, Trevor Taylor, 50, and Stephen Bond-Nelson, 51, all were charged with . Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. Allianz Fires 2 Asset Managers Who Ran Group of Collapsed Investment Funds Follow us for breaking news and latest updates, The Trend Micro Cybersecurity Knowledge Hub, 10 services and companies to help grow your business, Bank of England wont cut interest rates until Christmas but UK to avoid recession, Shares in Royal Mail owner jump 7 per cent after pay deal with union, UK inflation poised to slip out of the double digits for first time since last summer, Graham Linehan, AKA Glinner, banned from Twitter Again, No firms charged with failure to prevent tax evasion in 6 years heres why. endstream Instead of being part of the companys planned expansion to waterfront offices, Frenkel ended up helping liquidate the business. Allianz on Tuesday announced plans to sell the bulk of the US piece of its Allianz Global Investors business to Voya Financial. It did so by selling options that would pay out for the purchasers, and hurt Structured Alpha, if the S&P 500 plunged, the pension said. Help using this website - Accessibility statement. Your article was successfully shared with the contacts you provided. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. But prosecutors said it was barely functional. A conference has been scheduled for today at 3:00 p.m. before U.S. District Court Judge Loretta A. Preska, at which time AGI is expected to plead guilty to an information pursuant to the agreement. I previously warned that the Department of Justice would crack down on corporate crime, without regard to size, salary or other privilege, said Deputy Attorney General Lisa O. Monaco. Alpha Matheseos Arithmetica Theorica & Practica (in Latin), Vilnius, 1733.jpg 500 820; 118 KB Basas sirdies pas Pona Diewa Szwciausy Marya Panna yr szwntus danguy karalaujencius, szaukancios par giesmes (in Lithuanian language) by Prancikus rubauskis, Vilnius, 1790.jpg 1,002 1,433; 269 KB Tournant faces charges of conspiracy, securities fraud and obstruction of justice charges. 1 Twitter 2 Facebook 3RSS 4YouTube Editor's note: This article has been updated to include the statement from Gregoire Tournant's legal team. Feb. 28 A number of big investors file to end their lawsuits. As alleged, Tournant and his co-conspirators also provided investors with altered documents that were sent to investors to hide the true riskiness of the funds investments, including that they were buying cheaper hedges. Share sensitive information only on official, secure websites. He was at the top of the class, and his work was excellent in all respects. Japan's Nissan Motor on Tuesday unveiled a new electric sport-utility vehicle (SUV) at the Shanghai auto show as it pledged its commitment to the Chinese auto market, which it said was likely to continue to pioneer the rise of electric cars. Also unsealed today are the guilty pleas of Trevor Taylor and Stephen Bond-Nelson in connection with their respective roles in the scheme. % of people found this article valuable. See here for a complete list of exchanges and delays. Another investor, the board of a pension fund run by the International Brotherhood of Electrical Workers, filed a lawsuit in 2020 that purported to identify what went wrong. Additional reporting by Luc Cohen in New York :7iH#+w|R42>/.Y/V_^h"XX>.2XGCcp. 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. Because AGI, a registered investment adviser, failed to provide meaningful oversight, Tournant and his co-conspirators were able to deceive investors about the risks they were taking with their money. How Do I Establish My Value with Prospects? In March 2020, following the onset of market dislocations brought on by the COVID-19 pandemic, the funds lost in excess of $7 billion in market value, including over $3.2 billion in principal, faced margin calls and redemption requests, and ultimately were shut down. Prosecutors and regulators revealed new details of how they say Mr Tournant, Mr Taylor, and Mr Bond-Nelson duped investors, consultants, colleagues and auditors. Investors are also told chief fund manager Tournant had been ill for weeks, according to lawsuits. Tournant, the chief investment officer at Miami-based Structured Alpha, spent years "smoothing" performance data, lying about hedges against market downturns, and pretending risk managers at Allianz Global Investors US were carefully monitoring his every move, prosecutors charged in an indictment. Every single time we greatly benefited from the higher levels of volatility and were able to generate much higher returns in the following two or three months after the draw-down, Tournant said in a 2016 marketing video. 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. Inbounds slide triggered at Snowmass; no one believed to be caught, FAA official: Changes needed at Aspen airport, Roaring Fork Valley Republican aims to unseat Boebert in primary, Mother Lode commercial space sells for $7M, Yogis and city of Aspen sign on the dotted line. 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.. The insurer continues to pick up the pieces. June 30 The Arkansas funds board votes to sue Allianz. filed with the Department of Justice which did not return an inquiry for comment by presstime Tuesday the U.S. subsidiary of the Germany-headquartered Allianz SE (among the worlds largest financial-advisory and insurance companies) essentially cost mostly American investors more than $5 billion in March 2020. Covers German finance with a focus on big banks, insurance companies, regulation and financial crime, previous experience at the Wall Street Journal and New York Times in Europe and Asia. See here for a complete list of exchanges and delays. Tournant and Taylor prospered at Allianz during the long bull market that followed the Great Recession. Instead, U.S. authorities say, Tournant sold lies to investors that cost customers, and now Allianz, billions of dollars, and resulted in a guilty plea to federal charges of securities fraud by Allianz Global Investors US. Tournant and Taylor declined to comment. At the center of the debacle is Greg Tournant, 55, an equity-options whiz and one-time McKinsey & Co. consultant. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. "From at least January 2016 through March 2020, the defendants lied about nearly every aspect of a highly complex investment strategy they marketed to institutional investors, including pension funds managing the retirement savings of everyday Americans. Also known for its insurance operations, Allianz is among Germany's most recognizable brands and an Olympic sponsor. An email has been sent to with a link to confirm list signup. For the second time in under a month, the Department has brought charges in connection with a sophisticated Wall Street scheme that cost victims billions of dollars. It did so by selling options that would pay out for the purchasers, and hurt Structured Alpha, if the S&P 500 plunged, the pension said. Id like to thank and commend our staff for their excellent forensic work that uncovered this fraud and held the wrongdoers accountable.". Arkansas Structured Alpha holdings reach a market value of $1.6 billion at the end of 2019, a significant portion of the $18.3 billion fund. U.S. Attorney Damian Williams for the Southern District of New York and Inspector-in-Charge Daniel B. Brubaker of the New York Office of the U.S. April 6 The Arkansas funds board votes to exit the Allianz funds and park the proceeds with BlackRock. His attorneys said the charges are an ill-considered attempt by the government to criminalise the impact of the unprecedented, COVID-induced market dislocation of March 2020. Allianz was confident enough in Tournants team that it let them charge a performance fee alone of 25% to 30% of net capital appreciation above a benchmark. The complaint further alleges that Tournant, Taylor, and Bond-Nelson then made multiple, ultimately unsuccessful, efforts to conceal their misconduct from the SEC, including false testimony and meetings in vacant construction sites to discuss sending their assets overseas. A spokesman declined to comment. The fund managers were not the only ones at fault. Allianz spokesman John Wallace said Mr Tournant and his two lieutenants engaged in isolated but serious wrongdoing that led the company to pay billions of dollars in settlements. Deep-pocketed investors piled in. 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. Instead of being part of the companys planned expansion to waterfront offices, Frenkel ended up helping liquidate the business. 1 auto market, Exclusive: Airbus advises airlines of 2024 delays, keeps output goals, Polestar to start production in South Carolina from 2024, says CEO, C.Suisse to move forward Q1 earnings, report before UBS, Norway wealth fund welcomes government request on unlisted equities. Greg Tournant, Stephen Bond-Nelson and Trevor Taylor no longer work for AllianzGI, a spokesperson has confirmed to Citywire Selector. Tournant and Taylor declined to comment. Once with more than $11 billion of assets under management, the Structured Alpha funds lost more than $7 billion as COVID-19 roiled markets in February and March 2020. "Our strategies are not race cars looking to speed their way to high returns. read more. Deep-pocketed investors piled in. Allianz Global Investors U.S. LLC Also Charged with Securities Fraud, Agrees to Plead Guilty. Mr Tournant, the chief investment officer at Miami-based Structured Alpha, spent years "smoothing" performance data, lying about hedges against market downturns, and pretending risk managers. The portfolio managers then used manipulated numbers to justify exorbitant fees to line their own pockets to the tune of $550 million between 2014 and 2020. An official website of the United States government. 2007 Arkansas' pension fund for retired teachers - which would later be the. The Commission stands ready to use all appropriate tools to protect investors, including upholding prohibitions against certain activities by the guilty parties. Allianz is still grappling with the fallout. Two of his colleagues have worked with him since the group's founding. In the complaint, the SEC describes Tournant as a resident of Miami, Florida except he also is a resident of Basalt, per reports in the Washington Post and The (Colorado Springs) Gazette. Megan Tackett is the editor for the Aspen Daily News. What goes up, must come down unless a portfolio manager simply fudges the numbers, sometimes simultaneously with comically simple math and a dizzying number of decimals. An Allianz lawyer entered the guilty plea at a hearing before U.S. District Judge Loretta Preska in Manhattan. All quotes delayed a minimum of 15 minutes. At the center of the debacle is Greg Tournant, 55, an equity-options whiz and one-time McKinsey & Co. consultant. But Tuesdays indictments are indicative of a harder line from the Justice Department regarding high-level fraud schemes. 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. Even when, in 2017, internal auditors uncovered red flags, they assigned product specialists whose pay was tied to the groups performance to follow up. Allianz was confident enough in Tournants team that it let them charge a performance fee alone of 25% to 30% of net capital appreciation above a benchmark. <>stream Neil Weinberg, Alex Wittenberg and Will Louch, Analysis In the complaint, the SEC describes Tournant as a resident of Miami, Florida except he also is a resident of Basalt, per reports in the Washington Post and The (Colorado Springs) Gazette. Bloomberg Intelligence analysts predicted Feb. 18 that the insurers 3.7 billion euro provision wont likely be sufficient and that its legal costs might approach $6 billion. Mr Tournant, 55, now faces charges that are upending his career and could send him to prison for a decade or more if he is convicted. Those funds ultimately collapsed, leading to billions of dollars of investor losses. But when the pandemic hit, everything went haywire. $L% x-GU f*na"WHn^>EmI`*f@eKh rH}={q3P3B"27Uh*_.~IJ@2H_,@S.)(|s vwA\r[9S8R`'ow\5&Lx`LUC^-rHAeh0x*od{dt" {+PsCBjT0b1F|=]dK2D"`7e >a\!M/69TS.lKk`4.Gz6NEfI:LX.wS06;.>k"j7v1r.>0t`1VJ>?=[yE The U.S. In late 2015, Mr Tournant allegedly grew frustrated with the cost of hedging, which was eating into returns. Mr Tournant turned himself in to authorities in Colorado, where he lives, and faces trial in federal court in New York. While Mr Tournants funds might have sounded too good to be true, Allianz Global Investors US assured clients that its risk-management system had three lines of defence. Mr Tournant, the chief investment officer at Miami-based Structured Alpha, spent years smoothing performance data, lying about hedges against market downturns, and pretending risk managers at Allianz Global Investors US were carefully monitoring his every move, prosecutors charged in an indictment. See here for a complete list of exchanges and delays. End of the road: Why More Than will no longer sell car insurance as insurer RSA quits market, HSBC, SocGen and BNP Paribas raided in France as part of cum cum tax probe, Top City firms pledge to hike contributions to employees pensions pots amid concerns over looming savings crunch. 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. According to an initial report by Bloomberg, the trio used to manage the Structured Alpha funds, but all left the company in December 2021, per company filings. At the same time, the firm has argued that its clients were sophisticated investors who knew what they were getting into. Allianz also assured investors that it was backstopping Structured Alphas risk-management processes. Greg looks forward to vigorouslydefending himself in Court against these charges., Allianz told to pay $6bn after SEC charges three execs with fraud over Structured Alpha funds scandal. 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. It fired Tournant and another fund manager, Stephen Bond-Nelson, in December, accusing them of violating compliance policies, according to public records filed with the Financial Industry Regulatory Authority. Chief Judge Laura Taylor Swain of the Manhattan federal court scheduled Tournant's trial for Feb. 5, 2024, rejecting his lawyer's argument that it was premature to schedule a date. 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. In the finger-pointing that followed, some big investors accused the professional consultants they had hired to vet Structured Alpha of ignoring red flags and failing to understand what the funds were doing, according to lawsuits. Feb. 17 Allianz says it will set aside 3.7 billion euros ($3.90 billion) to deal with investigations and lawsuits. As alleged, one of the ways Tournant carried out the fraud was by marketing the fact that he worked for a well-respected financial institution, AGI, which is a part of the Allianz SE (Allianz) family. 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. 2723 0 obj Essentially, the Structured Alpha fund was sold as a bill of goods that would expose investors to the benefits of the S&P 500 index while protecting them from any sort of market crash by selling put options to hedge against a downturn. At Allianz Global Investors U.S., Tournant and his Structured Alpha team were . Postal Inspection Service. They were marketed in particular to typically conservative U.S. pension funds, from those . Pensions funds for so many retirees, religious organizations and essential workers from laborers in Alaska, to teachers in Arkansas, to bus drivers and subway conductors here in New York City invested with AGI because they were promised a relatively safe investment with strict risk controls. All quotes delayed a minimum of 15 minutes. Follow the topics, people and companies that matter to you. 80b-6 & 80b-17 (Count Three), Investment adviser fraud, 15 U.S.C. Feb. 3 Mohamed El-Erian, Chief Economic Advisor at Allianz, warns CNBC viewers not to buy the dip because the coronavirus crisis was without precedent. 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. "Greg looks forward to vigorouslydefending himself in Court against these charges.". In another example, defendants smoothed performance data sent to investors by reducing losses on one day from negative 18.2607085709004% to negative 9.2607085709004% -- this time by cutting the number 18 in half. a massive fraudulent scheme, as described in an SEC press release. At the same time, the firm has argued that its clients were sophisticated investors who knew what they were getting into. Investors lost billions of dollars, the SEC complaint details. Arkansas decides to build up its investment in the Allianz funds. Even so, the payout is close to twice the $3.3 billion in corporate penalties that the Justice Department collected for all of 2021. A dual U.S.-French citizen, he arrived at Allianz Global Investors in the early 2000s by way of Oppenheimer Capital. (Reporting by Tom Sims; editing by Tomasz Janowski). Tournant lawyers said: We have faith that the justice system will reject this meritless and ill-considered attemptby the governmentto criminalize the impact of theunprecedented,COVID-induced market dislocation of March 2020., 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 losses resulting from these market events were suffered by sophisticated institutional investors including Greg himself who had a considerable investment in the fund. They face long prison terms but could get far less time for their cooperation. The SEC's complaint, filed in the federal district court in Manhattan, alleges that Structured Alpha's Lead Portfolio Manager, Gregoire P. Tournant, orchestrated the multi-year scheme to mislead investors who invested approximately $11 billion in Structured Alpha, and paid the defendants over $550 million in fees. Allianz agreed to pay more than $6 billion in a settlement with U.S. authorities in May, and the German company's U.S. asset management unit pleaded guilty to securities fraud. As a result, Allianz plans to move about $120 billion of investor assets to Voya Financial Inc (VOYA.N) in exchange for a stake of up to 24% in Voya's investment management unit. The conviction carried a 10-year ban on Allianz Global Investors providing advisory services to U.S.-registered investment funds. 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. By December 2019, Structured Alpha had grown to more than $10 billion, according to a person familiar with the matter. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. Investors allege Allianz and Structured Alpha abandoned risk controls and turned a challenging situation into a disaster by doubling down on a bad strategy. July 21 Allianz publishes a paper saying that losses were not the result of any failure in the portfolios investment strategy or risk management processes. It has since been removed from the web. surge" that had occurred in February 2018, Allianz said that "Structured Alpha's option portfolio is positioned for a strong improvement in the event of another February 2018-type move." Unfortunately for ATRS, Allianz departed from the Alpha Funds' investment mandate and disregarded the risk management protocols it was required to . Every single time we greatly benefited from the higher levels of volatility and were able to generate much higher returns in the following two or three months after the draw-down, Tournant said in a 2016 marketing video. Tournant and Taylor prospered at Allianz during the long bull market that followed the Great Recession. Thats according to the Arkansas Teacher Retirement System, which in February settled a suit over its Structured Alpha losses for $643 million. See here for a complete list of exchanges and delays. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. 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. Another investor, the board of a pension fund run by the International Brotherhood of Electrical Workers, filed a lawsuit in 2020 that purported to identify what went wrong. Thats the allegation both the U.S. Justice Department and the U.S. Security and Exchange Commission make in an indictment released Tuesday. These settlements are subject to court approval. Its Alpha U.S. Equity 250 fund posted average annual returns of 10.9% between early 2005 and June 2018, compared with the S&P 500s 8.7% average annualized return over the same period, according to a 2018 marketing document. 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. Portfolio managers Greg Tournant, Stephen Bond-Nelson and Trevor Taylor no longer work for Allianz Global Investors, a spokesperson has confirmed to Citywire Selector. March 3 Arkansas drops its lawsuit after settling for $642 million, according to a court document and board meeting minutes. Gregoire Tournant, the former chief investment officer who created and oversaw the now-defunct Structured Alpha funds, was also indicted for fraud, conspiracy and obstruction, while two other . Assistant U.S. Aug. 1 Allianz publicly discloses the DOJ investigation and says it could take a financial hit. 371 (Count One), Securities fraud, 15 U.S.C. As alleged, Gregoire Tournant and his co-conspirators lied to investors and secretly exposed them to substantial risk in order to line their own pockets and those of their employer, AGI, said U.S. Attorney Damian Williams in a statement. Listen to free podcasts to get the info you need to solve business challenges! According to a law enforcement official, the only local legal interaction Tournant has experienced was in 2014, when he was issued a warning for failing to obey a traffic control device in Aspen. The board alleged that when the pandemic started fueling wild volatility in February, Structured Alpha made a fateful bet against further market declines. STAY CONNECTED Gregoire Tournant, the former chief investment officer who created and oversaw the now-defunct Structured Alpha funds, was also indicted for fraud, conspiracy and obstruction, while two other former portfolio managers entered related guilty pleas. Chief Executive Officer Oliver Baete expressed regret in February for Structured Alphas losses and said they will have a significant impact on the compensation of its directors. xXnF}Gn@@&Z+'>ihS R/.JWC]/6z%8_~qv)2/E~8ye&_?A_M$,'ic-M,a%RZ*xRlK7SDK?)]G9G v-A[;DnEjl9X"+u,a(\wDxZ*(#X=iU The case has been assigned to U.S. District Judge Colleen McMahon. It all came crashing down in the early, panicked days of COVID-19, when wild market swings upended an options strategy that was marketed as aiming to generate alpha regardless of market waves. 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. Error! Our Standards: The Thomson Reuters Trust Principles. Aug. 4 Allianz discloses that the SEC is investigating. He was arrested in Colorado though not by local authorities, according to officials from the Pitkin County Sheriffs Office, Aspen Police Department and Basalt Police Department and subsequently released on $20 million bond, per reporting from, We have faith that the justice system will reject this meritless and ill-considered attemptby the governmentto criminalize the impact of theunprecedented,COVID-. The funds writedown will put a costly end to what Allianz once described as a third way for investors to harvest sustainable alpha.. Investor lawsuits and settlements have piled up. 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