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2 Firms To Rep Investors Of Allianz Funds Rocked By COVID

February 22, 2022 

By Emilie Ruscoe | Law360 (February 16, 2022) — Scott + Scott Attorneys at Law LLP and Silver Golub & Teitell LLP will work together to represent a consolidated class of investors in New York federal court who claim Allianz Global Investors failed to protect certain investment funds from “catastrophic loss” as the markets went haywire at the beginning of the coronavirus pandemic.

In a Monday order, U.S. District Judge Katherine Polk Failla combined two actions against Allianz Global, designating the two firms interim co-lead counsel for the proposed class.

Ahead of the consolidation order, Scott + Scott had represented six investors, including four pension funds, and Silver Golub & Teitell represented four institutional investors making similar claims against the adviser.

The 10 investors in the consolidated class action are among several entities suing the Allianz unit over the early pandemic performance of the funds among the company’s “Structured Alpha” hedge funds. Allianz Global faces more than a dozen suits filed by entities including an individual investor, a financial consulting group and Lehigh University.

In the latest version of the suit brought by the Scott + Scott clients, the investors said they filed their claims because of the “evaporation, almost overnight, of over a billion dollars of its investors’ money.”

According to the investors, Allianz Global’s pitch for the three funds at issue was that they were designed to outperform specific indexes “whether equity markets are up or down, smooth or volatile.” Allianz Global even said it would use sophisticated hedging strategies to protect the funds’ assets if there were a market crash.

“Indeed, in 2020 — just weeks before the [funds] imploded — AllianzGI specifically assured the investors that the funds were ‘as prepared as ever in the event of a severe market dislocation’ and that the relevant portfolio was actually ‘positioned for a strong improvement’ in the event of a ‘violent correction and volatility surge.'”

But when the pandemic upended the markets, the investors claimed, the company departed from its normal rules for the funds and “recklessly ‘rolled the dice’ in the hope that adverse market trends would quickly reverse course before the Alpha funds would have to recognize devastating losses.”

Ultimately, the investors said, the gamble didn’t pay off, and the funds saw losses as great as 75% in one case. Allianz Global later liquidated the funds.

In June, the Judicial Panel on Multidistrict Litigation decided against consolidating the cases against Allianz Global, shooting down a San Diego-based pension fund’s request to combine the suit it had pending in federal court in Southern California with the suits in New York.

On Monday, Judge Failla tasked the newly formed class action legal team with coordinating with the plaintiffs in the other suits “as contemplated by the court’s prior case management orders covering this action and various related non-class actions.”

Representatives for the parties did not immediately respond to requests for comment Wednesday.

The investors in the consolidated class action are represented by William C. Fredericks, Donald M. Broggi and Zachary M. Vaughan of Scott + Scott Attorneys at Law LLP, and David S. Golub, Steven L. Bloch and Ian W. Sloss of Silver Golub & Teitell LLP.

Allianz Global is represented by Robert J. Giuffra Jr., Stephanie G. Wheeler, Kathleen Suzanne McArthur, Ann-Elizabeth Ostrager and Hilary M. Williams of Sullivan & Cromwell LLP, and Robert A. Skinner, Amy D. Roy, Mary Elizabeth Brust and Cole A. Goodman of Ropes & Gray LLP.

The case is In re” AllianzGI Structured Alpha Class Action Litigation, case number 1:20-cv-07154, in the U.S. District Court for the Southern District of New York.

— Additional reporting by Dean Seal and Dorothy Atkins.