San Diego City Employees' Retirement System terminated Allianz Global Investors from its $77 million investment in a structured alpha U.S. equity S&P 500 strategy, an absolute-return/return-enhancing strategy that seeks to find excess return opportunities in the options market.
The $9 billion pension fund's board voted at its May 8 meeting to approve the termination of the manager based on the recommendations of Chief Investment Officer Elisabeth Crisafi and Steve Voss, senior partner at Aon Hewitt Investment Consulting, the pension fund's investment consultant, a webcast of the meeting shows.
The portfolio had about $282 million in assets as of Dec. 31. However, the strategy lost about 75% in value during the market sell-off in March, Ms. Crisafi said.
Mr. Voss said Aon recommended termination for the portfolio, which now has about $77 million in assets, because of the "systematic breakdown in their investment process."
He also cited Aon's concern about a "failure of risk management, and what struck us most profoundly was the lack of any independent risk assessment or risk controls put into place which we had understood to be a cornerstone of the investment strategy."
He added that Allianz had not responded to inquiries about the performance of the strategy in March.
Robin Pertusi, spokeswoman for Allianz Global Investors, could not be immediately reached for comment.