Allianz seeks speedy resolution to Structured Alpha investigation

Allianz will press for the earliest possible resolution to the ongoing investigation into its Structured Alpha funds – but it won’t set a damages target yet, chief financial officer Giulio Terzariol told an investor call today (Wednesday Nov 10).

“We give high priority to resolution in this case and we would like to put it behind us as soon as possible, but, on the other hand, we need to be cautious as we wish to get a good outcome from an economic point of view,” Terzariol said.

“I can’t tell you when we will do a [provision] booking. I can’t imagine before year-end,” he said.

The US Securities and Exchange Commission (SEC) launched an investigation into the Structured Alpha Funds in 2020 after pension funds said Allianz had failed to safeguard their investments throughout the financial volatility caused by the pandemic.

The US Department of Justice (DOJ) later began its own investigation, with Allianz having received requests from both government bodies for documents and information relating to the Funds. Analysts have suggested the cost of the investigation could exceed $3 billion.

Operationally, Allianz said it feels relatively well protected from any potential fall-out from the scandal, in part as the product is a niche business for a non-core clientele at the asset management unit Allianz Global Investors (AGI).

Terzariol said he sees no reason to fret that any larger client segments will take flight or that damages would impede Allianz business capacity.

The affected institutional client base “is not really crucial” to the unit and the Structured Alpha product “is a really specific strategy,” Terzariol said. Terzariol suspects “a potential risk” that advisors could push other clients to rivals, but several billions worth of inflows in August and positive flows in September suggest that hasn’t happened, he noted.

The scandal is further unlikely to keep Allianz from meeting its efficiency targets for the asset management unit.

“I don’t think this is a primary driver for the cost to income [ratio] at AGI moving forward,” Terzariol said.

Allianz’s rough working goal for the unit’s cost to income ratio is 62-63 percent and a dip to just over 57 percent in Q3 shows “we have the capacity to operate lower than that.”

Potential settlements won’t derail Allianz ability to grow its business or keep the money flowing towards shareholders, Terzariol likewise insists, citing nearly 30 percent points of surplus capital versus regulatory requirements. “As long as we speak of normalized capital deployment, there is no restriction at all.”

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