Allianz’s top asset-management executive is in talks to leave the company, according to people familiar with the matter, as it navigates a Justice Department probe into a group of investment funds that suffered steep losses last year.
Jacqueline Hunt joined Allianz in 2016 to oversee its asset management and US life insurance businesses, which include investment arms Allianz Global Investors and Pacific Investment Management Co.
Her contract was renewed in 2019 and was due to expire in 2022. Instead, Hunt will likely leave earlier than planned, the people said.
In a statement, the company said that it is “considering an acceleration of its succession planning” on its management board, of which Hunt is a member.
“These considerations are longstanding and strategic in nature, but also relate to the asset management division, which is facing specific challenges at the moment because of the Structured Alpha matter in the US,” the statement said, referring to a suite of Allianz investment funds at the center of the DOJ investigation.
A person familiar with the talks says Hunt said she wanted to leave earlier this year before the DOJ notified Allianz about the investigation. She cited clashes over a corporate culture that had accumulated over time, the person said.
Chief executive Oliver Bäte in August said the DOJ had “looked at some additional items” since May.
The two sides haven’t yet agreed on a departure date, the people said. A person familiar with the company said there is a successor in place who must be approved by the German regulator.
The Munich-based company, one of the largest asset managers in the world with nearly 2.4tn euros under management, equivalent to $2.81tn, said in August that the Justice Department was investigating Allianz Global Investors’ Structured Alpha funds that caused the losses.
The company said its future earnings could be materially hit by the investigations, which include the DOJ’s inquiry as well as a probe launched by the U.S. Securities and Exchange Commission last year. The insurer said it couldn’t estimate the size of any potential fines and therefore hasn’t set aside provisions.
Several large investors, including the Blue Cross Blue Shield Association and the Arkansas Teacher Retirement System, sued the insurer over billions of dollars of losses. Allianz has said it would defend against the allegations from various lawsuits.
Allianz said last month it was cooperating with the investigations and had launched its own review. The company in a statement said the review is focused on risk and compliance proceedings related to the Structured Alpha funds.
Allianz Global Investors’ Structured Alpha funds were a big trader of stock options that effectively sold insurance to other investors seeking protection against short-term market declines. The company’s managers told their clients that the funds hedged against their own potential losses by buying longer-term options. The strategy produced a steady income, as the fund collected premiums from investors hedging against a downturn.
When options contracts swung dramatically in March 2020, the Allianz managers scrambled to restructure the trades. They struggled to keep up. Stocks fell sharply that month as investors responded to the news on the economic impact of the coronavirus, with market volatility reaching a record high.
Allianz shut two of its most aggressive Structured Alpha funds, locking in huge losses. The two funds managed close to $2.3bn. Other Structured Alpha funds, including those held by US pension plans, were sitting on year-to-date losses well in excess of their benchmark indexes.
Bäte last month defended Allianz, saying “the event does not have anything to do with the performance ability, culture or the ethics of Allianz Group.” He said the case hinged on whether the products performed as they had promised, and whether everything went right in the management of the fund.
People familiar with the relationship between Hunt and Bäte said tensions had been building over the past couple of years. A person familiar with the talks said Hunt and others felt the environment had become less hospitable for disagreements and challenges.
In a statement, the company says it surveys employees about corporate culture annually, including on whether they believe they can report unethical conduct without fear of retribution. The company said third-party experts consider the results last year along these questions to be “best in class.”
Allianz’s supervisory board will discuss changes to the management board at its next meeting on 30 September, the company said.
This article was published by Dow Jones Newswires