Allianz Global Investors U.S. LLC
A securities class action has been filed n the USDC, E.D.N.Y. against Allianz Global Investors U.S. LLC (“AGI”) Structured Alpha Mutual Fund (AGI) on behalf of a class consisting of all persons or entities who purchased or otherwise acquired an interest in the (1) AllianzGI Structured Return Fund; (2) AllianzGI PerformanceFee Structured US Equity Fund; (3) AllianzGI PerformanceFee Structured US Fixed Income Fund; (4) AllianzGI U.S. Equity Hedged Fund; and (5) Nationwide Multi-Cap Portfolio Fund between January 1, 2015 and liquidation, and on behalf of all persons or entities who purchased or otherwise acquired an interest in the AllianzGI PerformanceFee Structured US Equity Fund between January 1, 2015 and liquidation.
The Complaint alleges that the Defendants intentionally or recklessly failed to disclose numerous material facts, the omission of which rendered Defendants’ prior representations false and misleading. This includes, but not is not limited to:
a. Directional Bets. Defendants knowingly or recklessly failed to disclose that, by 2019, it had structured (or restructured) the Funds to bet on market directionality. Defendants, as investment manager, also had a duty to monitor the Funds’ delta, gamma, and vega values and the attendant risks. Defendants knowingly or recklessly failed to disclose to investors that the negative gamma values for the Structured Alpha Mutual Funds had increased substantially as a result of its change in strategy. In addition, vega values reflected that the portfolio was very sensitive changes in the S&P 500, the VIX, and the VXX. In failing to make these material disclosures, Defendants intentionally or recklessly concealed from investors that Structured Alpha Mutual Funds were no longer market neutral and positioned to protect against market risks contrary to the express representations by the Defendants. Indeed, beginning at least as early as Q3 2019, the Structured Alpha Mutual Funds portfolio had a net-short equity put position and was net-short volatility.
b. Put Options. Defendants knowingly failed to disclose that the Structured Alpha Mutual Funds AGI did not have the put options in place to provide downside protection because, among other things, the puts AGI did purchase were too far out of the money and in duration to be effective, contrary to Defendants’ representations.
c. Risk Exposure. As the Structured Alpha Mutual Funds investment manager, Defendants were responsible for monitoring the Structured Alpha Mutual Funds’ risk exposure, and Defendants therefore knowingly or recklessly failed to disclose to Plaintiff and the Class that, as a result of its undisclosed change in strategy (i) the Structured Alpha Mutual Funds’ downside risk greatly exceeded the risks represented and (ii) the Structured Alpha Mutual Funds were highly correlated to movements in their respective market indexes, which rendered the Funds much more exposed to market fluctuations than the investment strategy represented.
d. Risk Management. In addition to the failure to properly monitor the values of the “Greeks,” and the concealment of the abandonment of change in investment strategy revealed by those measures, Defendants knowingly or recklessly failed to disclose that AGI never conducted stress tests for a multi-day market decline contrary to representations of risk monitoring and oversight to assess portfolio risk and operational risk.
Furthermore, the Complaint alleges that the Defendants breached their fiduciary duty by:
- ignoring and/or disregarding warning signs of increased market volatility during the first quarter of 2020 and then taking on additional risk by shorting volatility to earn premium revenue;
- failing to conduct stress tests, risk assessments and/or monitor portfolio positions in real-time to ensure that the Structured Alpha Mutual Funds could endure a rapid market downturn and/or low market liquidity, or by disregarding the results of those tests;
- restructuring the Structured Alpha Mutual Funds’ investments in a way that locked in and exacerbated the losses suffered by the Structured Alpha Mutual Funds; and
- acting out of self-interest in attempting to salvage its own incentive, performance-based fees to the detriment of investors in the Structured Alpha Mutual Funds.
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