Investing in Structured Alpha, Mr Tournant assured investors, was very, very different than if I had my own hedge fund firm where in some form or fashion I can overrule just about anything. At the center of the debacle is Greg Tournant, 55, an equity-options whiz and one-time McKinsey & Co. consultant. Neil Weinberg, Alex Wittenberg and Will Louch, Analysis And those lower strike prices provided less protection to investors in the event of a short-term market drop.. 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. 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. This case once again demonstrates that even the most sophisticated institutional investors, like pension funds, can become victims of wrongdoing. 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. July 20 Arkansas suit is filed with the U.S. Southern District of New York claiming $774 million in losses. 275.206(4)-8 (Count Four), Conspiracy to obstruct justice, 18 U.S.C. 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. Taylor and Bond-Nelson both entered guilty pleas, but the man allegedly at the head of the years-long fraud Tournant, former chief investment officer of Allianz is fighting the charges, according to national reports. 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. Information is just a click away. 2007 Arkansas' pension fund for retired teachers - which would later be the. Email notifications are only sent once a day, and only if there are new matching items. The board alleged that when the pandemic started fueling wild volatility in February, Structured Alpha made a fateful bet against further market declines. In addition, as alleged, in the summer of 2020, after the onset of the pandemic and in order to cover up the fraudulent scheme, Tournant attempted to obstruct an investigation by the U.S. Securities and Exchange Commission (SEC) into the circumstances that led to the losses in March 2020. STAY CONNECTED 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. Deep-pocketed investors piled in. Allianz also accepted a $675 million civil fine from by the SEC, one of that regulator's largest penalties since Enron Corp and WorldCom Inc imploded two decades ago. "The victims of this misconduct include teachers, clergy, bus drivers, and engineers, whose pensions are invested in institutional funds to support their retirement. ", Investors "were promised a relatively safe investment with strict risk controls designed to weather a sudden storm, like a massive collapse in the stock market," he said. 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 . 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. Defendants reduced losses under a market crash scenario in one risk report sent to investors from negative 42.1505489755747% to negative 4.1505489755747% -- by simply dropping the single digit 2. 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. 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. Allianz Sets Aside $4.2B to Handle Probes, Lawsuits After Collapse of Investment Funds. At the same time, the firm has argued that its clients were sophisticated investors who knew what they were getting into. Perfect Sunday reading. According to an initial report by Bloomberg, the trio used to manage structured alpha hedge funds, but all left the company in December 2021, according to company filings. The fund managers were not the only ones at fault. Two years after the spectacular collapse of the insurance giants Structured Alpha hedge funds, a low-profile business registered in Florida, 5,000 miles from the Munich headquarters, the shock waves continue to reverberate. Why AI tools, like GPT, are now at the frontline of the Citys talent war? Pensions funds for so many retirees, religious organizations and essential workers from laborers in Alaska, to teachers in Arkansas, to bus drivers and subway conductors here in New York City invested with AGI because they were promised a relatively safe investment with strict risk controls. 80b-6 & 80b-17 (Count Three), Investment adviser fraud, 15 U.S.C. Allianz also assured investors that it was backstopping Structured Alphas risk-management processes. L@IW$',Bt^[J[>}+$"j|\,/cmhyqyRdY'yD,1. R&qr`$."Eb+[#iw}|`9 pT(G!t'm Taylor and Bond-Nelson have agreed to the entry of partial judgments against them in which they consent to injunctive relief with monetary relief to be determined by the court in the future. The demise of the Structured Alpha funds is just the latest illustration of the outsized damage an obscure trading operation can wreak on an A-list financial institution. March 3 Arkansas drops its lawsuit after settling for $642 million, according to a court document and board meeting minutes. Instead of laddering with strike distances from -10% to -25% as represented to investors, the portfolio management team, at Tournants direction, generally purchased cheaper put options with significantly lower strike prices, the SEC complaint notes. Miami resident Trevor Taylor, 49, now faces 30 years in prison after pleading guilty to three counts of fraud and conspiracy to commit fraud, while New Jersey resident Stephen Bond-Nelson faces 35 years after submitting a guilty plea on four counts including conspiracy to obstruct justice. The scheme alleged was an egregious, long-running and extensive fraud that went undetected for years. That change was not disclosed to investors, prosecutors allege. 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. The funds writedown will put a costly end to what Allianz once described as a third way for investors to harvest sustainable alpha.. 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. A dual U.S.-French citizen, he arrived at Allianz Global Investors in the early 2000s by way of Oppenheimer Capital. Instead of being part of the companys planned expansion to waterfront offices, Frenkel ended up helping liquidate the business. NEW YORK, Sept 15 (Reuters) - A U.S. judge on Thursday set a 2024 trial date for former Allianz SE (ALVG.DE) executive Gregoire Tournant, citing the complexity of allegations he defrauded investors out of billions of dollars by understating the risks of what they bought. Structured Alphas performance was solid. The insurer continues to pick up the pieces. Instead of being part of the companys planned expansion to waterfront offices, Frenkel ended up helping liquidate the business. 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. But AGI, the master cop that Tournant claimed was watching over his shoulder, making sure that he adhered to his promises, was asleep on the beat. Official websites use .gov Be the first to know what's happening as it's happening. As star performers at Allianz Global Investors US, Mr Tournant and Mr Taylor each earned $US51.3 million from 2016 to 2020 and Mr Bond-Nelson made $US12 million, according to the SEC. 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 . endstream 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. Secure .gov websites use HTTPS The SEC said projected losses in one market crash scenario were changed to 4.15% from the actual 42.15%, simply by removing the "2.". Investors allege Allianz and Structured Alpha abandoned risk controls and turned a challenging situation into a disaster by doubling down on a bad strategy. % of people found this article valuable. For the discerning eye, the latter number is exactly half of the former. 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. All rights reserved. "The governments attempt to characterize them as such is not only unfairly damaging to Gregs reputation and livelihood, but extremely dangerous to the market as a whole," they continue. 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