The J. Paul Getty Trust, a nonprofit that oversees the Getty museum complex in Los Angeles, is suing the financial services firm Allianz Global Investors, alleging that the company “recklessly” mismanaged the trust’s investment fund, resulting in “significant losses” for the organization’s endowment.
In a filing in the U.S. District Court for the Southern District of New York from March 3, the Getty Trust, which oversees a $9.2 billion endowment, claimed that Allianz GI, a New York subsidiary of the German-based financial services firm Allianz SE, misrepresented and altered a “cornerstone” protection of its investment strategy. Doing so exposed the Getty’s investment to significant risks that resulted in “disastrous” financial losses, the suit claims.
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In 2016, the Getty invested $60 million into an Allianz “Structured Alpha” fund, a type of portfolio that the firm marketed as being safeguarded against major drops in the market. The Getty claims that this type of investment was also meant to allow the Trust to reap long-term returns. The Getty’s investment had grown to $73 million by the end of 2016. By early 2020, 97 percent of Getty’s investments with Allianz—roughly $71 million—had been lost “within a matter of weeks,” the Trust’s suit alleges.
The Getty claims that between 2019 and 2020, Allianz GI changed key aspects of its “hedging” strategy for the fund. According to the suit, in April 2019, Allianz stripped down parts of the fund’s structure that were initially set in place to protect it from being scoured in a steep market decline. The Getty claims Allianz made other adjustments “to gamble on the market’s direction” and “to chase returns rather than preserve investor capital.” The Getty also claims it was never notified of the changes.
Allianz is expected to pay out a $4.2 billion settlement with U.S. investors over the now-collapsed structured alpha fund scheme. Other investors, including Blue Cross & Blue Shield and New York’s Metropolitan Transportation Authority, are seeking an estimated €6 million ($6.5 million) in damages. Various suits allege that Allianz unlawfully changed its advertised strategy, which saw alpha funds plummet after the 2020 market downturn in the early phase of the pandemic. Allianz has said that investigations by the U.S. Department of Justice and Securities and Exchange Commission are ongoing. Oliver Baete, Allianz’s chief executive officer, said in a statement addressing the lawsuits in August that “not everything was perfect in the fund management.”
A representative for Allianz did not immediately respond to ARTnews’s request for comment on the Getty’s lawsuit.
In a statement to ARTnews, a spokesperson for the Getty said that “many other investors suffered major losses from their investments in Allianz’s Structured Alpha Funds,” adding that the Trust filed a lawsuit “in an effort to recover these losses.”
The Getty declined to comment on how the losses will affect its long-term financial strategy to grow the museum’s endowment. Over a decade, the Getty’s endowment has grown substantially from its 2012 total of $5.3 million.
Source: artnews.com