The Arkansas Teacher Retirement System, or ATRS, has filed a lawsuit against Allianz Global Investors to restore over $774 million in losses allegedly suffered due to negligence, fiduciary and contractual breaches of duty.
The suit claims that instead of safeguarding against a market downturn that was easily forecasted by numerous people, including Allianz’s chief economist, the company positioned the funds’ portfolio in a way that “all but guaranteed substantial losses” once a downturn arose.
“AllianzGI made a risky attempt to profit by selling volatility protection to investors,” the complaint stated. “In other words, AllianzGI was effectively selling expensive insurance to other investors seeking to protect themselves from large market swings. This strategy—undertaken with the assets of ATRS in the Alpha Funds—was a gamble that the expected market tsunami would turn out to be a drizzle.”
Continuing, the compliant details that Allianz allegedly doubled down on its imprudent strategy after incurring losses at a time where they should have taken more conservative positions against market volatility. In response to the filed suit, Allianz Global Investors plan to fiercely defend themselves and their reputation against the allegations, indicating that the premise of the lawsuit is “simply incorrect and without foundation.” Consequently, lawsuits like these can severely damage a company’s reputation, sending fiduciaries scrambling to get these accusations under control.
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