Allianz Global Investors Liquidates Two Hedge Funds -- Update
27 März 2020 - 8:57PM
Dow Jones News
By Justin Baer
Allianz Global Investors is liquidating two hedge funds after
they took heavy losses in recent weeks on stock-options trades.
An Allianz Global Investors spokesman said the two funds,
Structured Alpha 1000 and Structured Alpha 1000 Plus, had been net
buyers of puts, or options giving the holder the right to sell an
asset at a predetermined price in the future. The puts were
designed to hedge against losses the funds might endure from other
positions should the market decline.
They didn't work, in large part because the market sold off more
rapidly this month than it had during past downturns, including the
2008 financial crisis, a person familiar with the funds said.
This pace "had a particularly large impact on the options
positions held by Structured Alpha funds, particularly the two
highest target alpha private strategies," the spokesman said in an
email.
As the market continued its descent, the funds were forced to
lock in losses.
"The portfolios were restructured and de-risked significantly
during the course of this turmoil, but not without sustaining
significant realized losses," the spokesman said.
Allianz Global Investors, an investing arm of German insurer
Allianz SE, will also close a related offshore feeder fund.
"While markets will remain challenging, we believe the remaining
funds are now well positioned," the spokesman wrote. The firm has
27 Structured Alpha funds.
Structured Alpha 1000 and 1000 Plus were the most aggressive of
those funds. The "1000" in their names refer to their return
targets: 1,000 basis points, or 10 percentage points, above their
benchmarks.
U.S. stocks sold off sharply earlier this month as the
coronavirus pandemic upended everything from travel and commerce to
manufacturing and tourism.
While many hedge funds have reported losses this year, the group
has held up well relative to benchmark indexes. The HRFC Global
Hedge Fund Index is down 5.5% this year through March 13, besting
the S&P 500 index's 2020 decline of 19%.
Allianz Global Investors manages $569 billion in assets. Like
many large insurers, Allianz owns money-management businesses that
oversee its assets, as well as those of outside clients. Another
Allianz manager, Pacific Investment Management Co., is one of the
world's largest bond investors.
Write to Justin Baer at justin.baer@wsj.com
(END) Dow Jones Newswires
March 27, 2020 15:42 ET (19:42 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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