Milwaukee Metropolis Employes’ Retirement System filed a lawsuit towards Allianz International Traders, alleging mismanagement of hedge funds the agency managed for the $5.four billion pension fund.
The lawsuit, filed Oct. 16 in U.S. District Court docket in New York, alleges Allianz International Traders was negligent in its administration of its Construction Alpha methods, leading to losses in February and March totaling $286 million for the pension fund, in line with the court docket submitting.
The pension fund was invested within the supervisor’s Structured Alpha 1000 Plus and Structured Alpha U.S. Fastened Earnings 250 methods. The numerical values within the technique names correspond to the quantity of alpha in foundation factors above a corresponding index the technique is predicted to realize.
The Allianz structured alpha methods traditionally have been designed to determine “areas of systematic disagreement with choice costs in regards to the likelihood distribution of future index strikes,” in line with a September 2016 AllianzGI presentation.
After excessive losses by the 2 methods during which it was invested in February and March, the pension fund terminated funding within the methods efficient March 26.
The lawsuit, which incorporates claims of negligence, breach of fiduciary obligation and breach of contract, alleges that AllianzGI “deserted the hedging methods that it was imagined to have in place to supply structural threat protections to the alpha funds in any market atmosphere.”
An AllianzGI spokeswoman stated in an emailed assertion that whereas the losses in February and March have been disappointing, the pension fund’s allegations are “legally and factually flawed, and we are going to defend ourselves vigorously towards them.”
“As was absolutely disclosed, the structured alpha funds concerned dangers commensurate with these increased returns. CMERS, and its funding guide (Callan), decided that the structured alpha portfolio match with its general funding objectives and threat tolerances,” the spokeswoman stated.
Avi Josefson and Hannah Ross, each companions at Bernstein Litowitz Berger & Grossman, the Milwaukee fund’s legal professional, couldn’t be instantly reached for remark.