Wednesday, September 27

Arkansas teachers settle with Allianz over fund debacle

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FRANKFURT — A pension fund for teachers in Arkansas has settled with Allianz and dropped its lawsuit over losses in a multibillion-dollar trading debacle at the German asset manager’s funds arm, according to a court document.

The Arkansas Teacher Retirement System was the first lawsuit lodged against Allianz in 2020 after the downfall of the $15 billion Structured Alpha funds, a saga that has dogged the German insurer and asset manager for two years.

The pension fund is among a number of big investors that have in recent days filed to confirm that they have settled and withdrawn their suits.

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Allianz, which declined to comment, is still bracing for the outcome of US regulatory investigations by the Department of Justice and the Securities and Exchange Commission.

Allianz said last month that it had settled with a number of fund investors, but it didn’t provide details about who. At the time, it said that it set aside 3.7 billion euros to deal with the lawsuits and investigations.

Arkansas teachers, which had $1.6 billion in three Structured Alpha funds at the end of 2019, said in its July 2020 lawsuit that it had lost at least $774 million due to “negligent mismanagement” of the funds.

The filing, dated March 2, disclosed “a settlement disposing of all claims” but didn’t announce financial details.

The Allianz funds used complex options strategies to generate returns but when the coronavirus pandemic sent stock markets into a tailspin in February and March 2020, they plummeted in value, in some cases by 80% or more.

Investors in the funds, which were predominantly US public pension funds, then sued Allianz for a total of $6 billion in damages.

In their lawsuits, investors alleged Allianz had strayed from its stated investment strategy of hedging to limit potential losses.

(Reporting by Tom Sims Editing by Miranda Murray, William Maclean)