Former Allianz Global Investors CIO Pleads Guilty to Fraud

Gregoire Tournant, the former CIO and co-lead portfolio manager for a series of private investment funds managed by Allianz Global Investors, has pled guilty to investment adviser fraud. Tournant allegedly lied to investors, secretly exposed them to risk and sent out altered risk reports.

In 2022, Allianz Global Investors, which is the U.S.-based asset management arm of German insurer Allianz SE, settled Securities and Exchange Commission charges that the firm allegedly conducted “a massive fraudulent scheme” that cost investors more than $5 billion.

The alleged fraud involved a trading strategy called “Structured Alpha,” which used complex options trading to earn returns for investors. Between 2014 and 2020, Tournant was the CIO of the Structured Alpha Funds, which were primarily marketed to institutional investors, including pension funds. According to the allegations in the indictments, Tournant and his co-conspirators concealed the risk associated with how the funds were being managed by providing investors with altered documents to hide the true riskiness of the investment. Tournant also hid the fact that the investments were not sufficiently hedged against risks associated with a market crash.

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This turned disastrous for the funds in March 2020 when the COVID-19 pandemic caused markets to crash. The Structured Alpha Funds lost more than $7 billion in market value, including more than $3.2 billion in principal, faced margin calls and redemption requests, and were ultimately shut down. Approximately 114 institutional investors had bought the investment product and paid more than $550 million in fees, according to an SEC press release from May 2022.

“The defendants lied about nearly every aspect of a highly complex investment strategy they marketed to institutional investors, including pension funds managing the retirement savings of everyday Americans,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement in 2022.

In May 2022, Allianz Global Investors pled guilty to securities fraud in connection with the scheme and was ordered to a pay a criminal fine of approximately $2.3 billion, forfeit approximately $463 million, and pay more than $3 billion in restitution to investor victims.

Tournant pled guilty to two counts of investment adviser fraud, each of which carries a maximum sentence of five years in prison. He also agreed to forfeit approximately $17 million in paid and deferred compensation traceable to his commission of the fraud. He is scheduled to be sentenced Oct. 16.