Germany’s Allianz shuns safe-haven bond risk after multibillion-dollar US fund collapses | – #Germanys #Allianz #shuns #safehaven #bond #risk #multibilliondollar #fund #collapses
FRANKFURT, Feb 14 (Reuters) – Allianz ( ALVG.DE ), one of the world’s biggest investors, has poured billions into property, wind farms and even London’s sewer system over the years, but it is now moving away from such “alternative” investments. People with knowledge of the subject said for plain vanilla gardens.
The German company’s new approach comes amid changes in the investment climate, with central banks raising interest rates to curb inflation and leading to higher yields on core assets.
They stressed that the redistribution would be gradual and that the new money would go mainly to fixed income rather than to alternative investments. fire will not result in sale.
Allianz declined to comment.
The move by Germany’s biggest financial company by assets and market value, which keeps governments afloat and feeds pensioners and 2001 is proving to be a significant shift away from income-generating alternatives to the multi-trillion dollar market for investment-grade bonds. ultra low and even negative interest rates.
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Repositioning for Allianz also last year USAAbout 6 announced for fraud in billion dollars coinciding with his efforts to restore his reputation after paying fines and settlements. this is USApart of its asset management business, has resulted in its agreeing to plead guilty to conduct that its lawyers say is tantamount to a “death sentence.”
Allianz’s solvency ratio – a measure of its financial strength – has suffered since the funds collapsed, and the new investment approach could help restore it, one of the people said.
Reuters graphics
Giulio Terzariol, Allianz’s chief financial officer, highlighted the company’s rethinking when he told analysts at a conference in November: “The value proposition of fixed income is more attractive than it was a few years ago … it’s a different game.”
Allianz’s results, due on Friday, will provide an annual update on the company’s investment mix.
Allianz, a global insurer, USA 2.6 trillion euros ($2.79 trillion) managed through bond heavyweight Pimco and Allianz Global Investors, whose unit is at the center of the latest scandal. dollars) ranks as one of the world’s largest money managers by assets.
Reuters graphics
Allianz’s search for alternatives began when Michael Diekmann, now the group’s chairman, became CEO. In a speech on his last day in the job in 2015, he complained about potholes on the roads between Salzburg and Munich and stressed the need for infrastructure investment. It has 80 “real asset classes” of Allianz, including infrastructure billion 110 from the euro billion promised to increase up to euro.
Since then, Allianz has increased its alternative investments by 350% 20More than 0 billion euros, while fixed income investments increased by 40% and equities by 30%.
Major acquisitions included a stake in London’s new sewer tunnel and wind farms from the US to Finland.
Real estate, which forms the bulk of Allianz’s alternative investments, includes a roughly €700m stake in New York’s Hudson Yards complex and a tower in Frankfurt that is part of a €1.4bn property development.
But with the investment climate changing, Allianz is looking for opportunities to move the new money into other investments, such as fixed income.
Allianz Real Estate Europe CEO Annette Kroeger said her division has a “wait and see” approach to real estate. “We, like the rest of the market, are looking ahead with caution,” he told Reuters.
In a sign of changing times, even bond yields in Japan soared higher on speculation that the era of ultra-easy monetary policy was coming to an end.
Allianz is not alone in rethinking alternatives. Goldman Sachs’ asset management arm plans to significantly reduce its $59 billion in alternative investments.
Moody’s and S&P rated Allianz highly credit rating agencies pointed to greater risk posed by illiquid alternative investments relative to Allianz’s portfolio.
Alternative investments come at a price and require Allianz and other insurers to set aside more capital to own them because they are less liquid than bonds.
Allianz hopes the change will help improve capitalization and solvency ratios, which some people say track how a company would fare in a crisis.
Allianz’s Solvency II capitalization ratio, a key indicator of Allianz’s financial health, partly due to fines and settlements, according to Allianz’s financial statements 2018It fell from 229% in 2018 to 199% at the end of the third quarter of last year. For US fund fraud.
This work, 2020It comes after an $11 billion fund collapsed earlier this year after markets were rocked by the coronavirus outbreak.
US prosecutors alleged falsified documents, falsified risk reports and altered schedules.
The compensation was “generous,” according to a submission by Allianz lawyers to the US Department of Justice last year. compensation 1.49 billion in $6 billion in settlements and fines to Blue Cross Blue Shield, one of Allianz’s biggest investors, to make dollars paid. It was announced in the application submitted to the court last month.
An attorney for Blue Cross Blue Shield declined to comment.
In the same filing, Allianz lawyers argued that the guilty plea Allianz eventually agreed to for its US business was “a death sentence for a registered investment adviser”.
Following this, Allianz had to close Allianz Global Investors in the US, dealing a serious blow to the company.
($1 = 0.9328 euros)
Supplement by Alexander Huebner in Munich and Dhara Ranasinghe in London report. Edited by Jane Merriman
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Tom Sims
2023-02-14 10:16:18
Source – reuters
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