Allianz Global Investors, the asset management group owned by Germany’s largest insurance group, is liquidating two hedge funds that suffered huge losses during the March market rout.
Structured Alpha 1000 and Structured Alpha 1000 Plus, both of which ran a derivatives-based strategy, will “enter into an orderly liquidation”, according to a company spokesperson.
Both hedge funds incurred significant losses despite hedging their portfolios with put options, which allow shares to be sold at a defined time and price and which are often used by investors to protect against downturns.
“The nature of the move had a particularly large impact on the options positions held by Structured Alpha funds,” said the spokesperson. Both hedge funds recorded significant losses, they added, even as managers moved to de-risk the portfolios during the market sell-off.
AGI, which manages more than €500bn in assets, is also liquidating a related offshore feeder fund. The group still operates 25 funds in its Structured Alpha family.
Structured Alpha 1000 and Structured Alpha 1000 Plus targeted returns of 10 per cent above three-month US Treasury bills.
The US stock market fell 30 per cent below its peak earlier this month as fears about the impact of the coronavirus pandemic on the economy gripped investors despite multiple efforts from central banks to shore up confidence.
Allianz owns two big asset management businesses — AGI and bond group Pimco, which together have almost €2tn under management. The insurer has been on the hunt for asset management acquisitions.
The closures were first reported by The Wall Street Journal.
Initially the hedge fund industry was resilient as coronavirus spread and market volatility rose. The average hedge fund lost just 1.4 per cent in February, according to Hedge Fund Research.
But as the turmoil deepened and market liquidity declined in many areas, some popular and previously reliable trades went awry. Hedge funds were now down 8.6 per cent in March, and nearly 10 per cent for the year, HFR said.