Securities Lawyers Blog
The investment attorneys with Gana Weinstein LLP are investigating investors who were inappropriately recommended the Allianz Structured Alpha 1000 and Structured Alpha 1000 Plus Funds. Investors may have potential legal remedies due to unsuitable recommendations by their broker to invest in these speculative and volatile investment offerings. Allianz Global Investors told investors that they are liquidating the two hedge funds after they took heavy losses due to COVID related stock volatility on the portfolios stock-options trades.
The Structured Alpha 1000 and Structured Alpha 1000 Plus apparently had been net buyers of puts, or options giving the holder the right to sell an asset at a predetermined price in the future. These put investments were designed to hedge against losses the funds might endure in a market downturn. However, the strategy did not work and as the market continued declining the funds were forced to lock in losses.
The 1000 in the Structured Alpha Fund names refers to their return targets: 1,000 basis points, or 10 percentage points, above their benchmarks. However, the Funds advertised themselves as relatively safe and stable investments that were specifically designed to perform well during market downturns.
The Funds’ three-pronged investment objective is to (1) profit during normal market conditions; (2) protect against a market crash, hedging against extreme downside market moves; and (3) navigate as wide a range of equity market outcomes as possible. In fact the fund advertised that volatile markets would be beneficial to the strategy and that the higher volatility levels would enable increased outperformance potential and better risk control. The Funds claimed that a protracted bear market is a highly favorable environment for the strategy.