Lawyers from Wilson Sonsini Goodrich & Rosati have accused a German asset management company of pursuing a risky investment strategy that caused J. Paul Getty Trust to lose more than $71 million it invested.
The 11-count lawsuit, filed Thursday in Manhattan federal court, claimed that Allianz SE and its subsidiary Allianz Global Investors U.S. in early 2020 abandoned a core hedging strategy meant to protect against market downturns and volatility.
The complaint was surfaced by Law.com Radar.
Getty, the world’s wealthiest art institution, said in the 75-page complaint that it had invested in AllianzGI’s so-called Structured Alpha fund to grow its endowment based on assurances that the firm would pursue a “risk-controlled return profile.”
Getty said in the filing that AllianzGI’s hedging strategy, advertised as a “cornerstone” of its fund, was meant to cap losses at a “defined maximum” amount by relying on a series of hedges, regardless of market conditions. But the complaint alleged that those protections had disappeared by February and March 2020 when volatility spiked amid the early days of the COVID-19 pandemic.
Instead, the filing said, Allianz actually sold off the hedges, and then added more risk-bearing positions in an apparent bet that the market would recover—an approach that Getty’s attorneys likened to “picking up pennies in front of a steamroller.”
“AllianzGI’s reckless actions, both in constructing the portfolio to bear excess, undisclosed risk and in restructuring the portfolio to chase returns rather than preserve investor capital, reveal that AllianzGI placed its own interests in generating performance fees ahead of its duty to safeguard investors’ assets against undue risk,” the filing said.
Getty said that its $71 million in losses equaled about 97% of its investment. The institute is represented in the case by Wilson Sonsini partners John Flynn and Matthew Macdonald.
Counsel for the defendants had not yet entered an appearance in Manhattan federal court.
A representative for Allianz did not immediately respond Friday to a request for comment.
The case, which is captioned J. Paul Getty Trust v. Allianz Global Investors, has not yet been assigned to a judge from the U.S. District Court for the Southern District of New York.
It includes claims for breaches of contract and fiduciary duty, as well as negligence, federal securities violations, common-law fraud, misrepresentations, unjust enrichment and violations of California’s corporate code.