Raytheon Technologies Corp., Waltham, Mass., and Blue Cross Blue Shield's national employee benefits committee dropped lawsuits against Allianz Global Investors that alleged mismanagement of enhanced-return strategies the firm managed.
Sean W. Gallagher, partner at Bartlit Beck, attorney for the plaintiffs, said in an emailed statement the lawsuits were dropped following settlements with AllianzGI.
"We are happy to say that we reached a settlement with Allianz, which is good for our clients, but we cannot comment on the terms of the settlement," Mr. Gallagher said.
Two other lawsuits against AllianzGI that were dropped Monday in U.S. District Court in New York as a result of settlements were one filed by the Finance Committee of the Board of Directors of Blue Cross Blue Shield of Michigan and the Blue Cross Blue Shield of Michigan Foundation, and one filed by the wider Blue Cross and Blue Shield Association organization.
The four court filings Monday cited a “settlement disposing of all claims,” but did not provide further information. John Wallace, AllianzGI spokesman, said in an email Tuesday that the manager “has reached settlements with investors in Structured Alpha representing a substantial majority of the litigation exposure. As the terms of the settlements are confidential, there is no more I can say on the matter.”
The lawsuits were all filed as a result of losses incurred by AllianzGI's Structured Alpha strategies in February and March 2020 during the extreme market downturn that greeted the beginning of the COVID-19 pandemic.
The Allianz Structured Alpha strategies historically have been designed to identify "areas of systematic disagreement with option prices about the probability distribution of future index moves," according to a September 2016 AllianzGI presentation.
Raytheon filed its lawsuit in April 2021, alleging AllianzGI breached its fiduciary duties in its management of its strategies that resulted in losses totaling $280 million for the Raytheon Master Pension Trust, according to the original court filing.
The losses were incurred before the closing of the merger of Raytheon Co. and United Technologies Corp. in April 2020. The pension trust was invested in the manager's Structured Alpha U.S. Equity 500 strategy.
The numerical values in the strategy names correspond to the amount of alpha in basis points above a corresponding index the strategy is expected to achieve.
The lawsuit claimed AllianzGI was guilty of using prohibited transactions by managing the plan's assets in its "own self-interest" and to maximize its own fees. Rather than putting hedges in place "at all times" to cap the downside risk of the strategy, the lawsuit claimed Allianz worked in its own self-interest by constructing its portfolio to be largely unhedged in the first two months of 2020, and adding more risk to its portfolio to "chase return (and thus fees) rather than safeguarding the trust's investment."
Blue Cross Blue Shield's national employee benefits committee filed a lawsuit in September 2020 against both AllianzGI and its investment consultant, Aon Investments USA, charging both with breaches of fiduciary responsibilities and breach of contract regarding more than $2 billion in losses in the insurer's defined benefit plan trust.
The BCBS employee benefits committee's lawsuit alleged that AllianzGI had taken "reckless actions" in the management of three Structured Alpha strategies, according to the original court filing.
As of Jan. 31, 2020, before the market downturn, the National Retirement Trust of the Blue Cross and Blue Shield Association had a total of $2.9 billion invested in the AllianzGI Structured Alpha Multi-Beta Series I, AllianzGI Structured Alpha Emerging Markets Equity 350, and the AllianzGI Structured Alpha 1000, according to the trust's 2020 Form 5500 filing.
Further information on the lawsuits filed by the Finance Committee of the Board of Directors of Blue Cross Blue Shield of Michigan and the Blue Cross Blue Shield of Michigan Foundation, and the wider Blue Cross and Blue Shield Association organization, was not immediately available.
