After being smote by regulators, a multinational asset manager is preparing to sell
its $120-billion-AUM U.S. business to a publicly traded firm on this side of the pond.
| Tobias C. Pross|
Allianz Global Investors
Yesterday, Tobias Pross
(CEO of Allianz Global Investors
), Rod Martin
(chairman and CEO of Voya Financial, Inc.
), and Christine Hurtsellers
(CEO of Voya Investment Management
a memorandum of understanding
(MOU) under which Voya IM has agreed to buy
the bulk of AllianzGI's U.S. business. In exchange, AllianzGI will receive a 24-percent stake in Voya IM, and AllianzGI will become a long-term distribution partner internationally for Voya IM. The deal is expected to boost VoyaIM's AUM to about $370 billion on a pro forma basis (roughly a 48-percent boost).
Goldman Sachs & Co. LLC
is advising Voya on the deal, while Cleary Gottlieb Steen & Hamilton LLP
is providing legal counsel. Stay tuned for the finalization of a definitive purchase agreement in the coming weeks.
News of the impending deal came as Gary Gensler
, chair of the Securities and Exchange Commission (SEC
), and Gurbir Grewal
, director of the SEC's division of enforcement, revealed
securities fraud charges yesterday against AllianzGI's U.S. business and against three former AllianzGI portfolio managers: Gregorie Tournant
, Trevor Taylor
, and Stephen Bond-Nelson
. (See the 54-page complaint
and three related orders
.) AllianzGI admitted
to the violations and agreed to pay $1.0242 billion in disgorgement and penalties in the SEC case, and has agreed to a guilty plea in a parallel criminal case
brought by the U.S. Attorney's Office for the Southern District of New York; that criminal case involves nearly $6 billion in restitution and fines. And Taylor and Bond-Nelson have also agreed to SEC settlements (including permanent injunctions and fines) and to guilty pleas in the criminal case. (Tournant, meanwhile, surrendered to authorities in Denver yesterday morning, according to the Department of Justice.)
The guilty plea automatically disqualifies AllianzGI from advising U.S. registered investment funds for the next decade, though a brief transition period is allowed, hence the impending deal with Voya. AllianzGI sold
its U.S. retail business to Virtus last year
, with Virtus taking over as investment advisor, distributor, and/or administrator for AllianzGI's U.S. open-end mutual funds, retail SMAs, and closed-end funds. One AllianzGI team became a Virtus boutique as part of that, and AllianzGI itself stayed on as subadvisor of the products that Virtus was adopting. It's not clear what the impending Voya-AllianzGI deal means for the relationship with Virtus.
The smiting from the SEC involves not AllianzGI-subadvised mutual funds but an options trading strategy, Structured Alpha
, offered to institutional investors. Over the years (specifically between 2016 and 2020), the strategy attracted about $11 billion in assets from about 114 institutional investors and generated about $550 million in fees. According to the SEC, Tournant (lead PM of the strategy), with help from Taylor (co-lead PM) and Bond-Nelson (PM) deceived investors about both the strategy's risks and its actual performance, fudging numbers in reports. (AllianzGI has already been hit with investor lawsuits over the March 2020 collapse of the Structured Alpha products.)
"Allianz Global Investors admitted to defrauding investors over multiple years, concealing losses and downside risks of a complex strategy, and failing to implement key risk controls," Gensler states. "Unfortunately, we've seen a recent string of cases in which derivatives and complex products have harmed investors across market sectors."
"They lost over $5 billion in investor funds when the market volatility of March 2020 exposed the true risk of their products," Grewal states. "Following the crash of the Structured Alpha Funds, the defendants continued their pattern of deceit by lying to SEC staff and their fraud would have gone undetected if it weren't for the persistence of SEC lawyers who pieced together the full scope of the massive fraud."
The U.S. DoJ charged Tournant with: conspiracy to commit securities fraud, investment adviser fraud, and wire fraud; securities fraud; two counts of investment adviser fraud; and conspiracy to obstruct justice. The DoJ charged Taylor with: conspiracy to commit securities fraud, investment adviser fraud, and wire fraud; securities fraud; and investment adviser fraud. The DoJ charged Bond-Nelson with: conspiracy to commit securities fraud, investment adviser fraud, and wire fraud; securities fraud; investment adviser fraud; and conspiracy to obstruct justice. And the DoJ charged AllianceGI U.S. with securities fraud.
The SEC charged Tournant, Taylor, Bond-Nelson, and AllianzGI U.S. with multiple violations of the Securities Act, the Exchange Act, and the Investment Advisers Act.
Meanwhile, at Voya, Martin, describes the AllianzGI-Voya deal as "a unique opportunity to acquire highly complementary investment management teams and assets, at scale."
"We have long identified increased scale and broader international distribution as attracctive growth priorities, and this transaction would help us achieve those objectives while complementing our continued focus on private strategies and alternative investments."
"We are very much looking forward to beginning a new chapter in AllianzGI's development with a partner in the U.S. that complements our own strengths and footprint, and supports long-term growth for both firms," Pross states. "AllianzGI's stake in Voya IM will underscore our commitment to the global success of their soon-to-be enlarged business."
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