UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934

Release No. 94927 / May 17, 2022

INVESTMENT ADVISERS ACT OF 1940

Release No. 6027 / May 17, 2022

ADMINISTRATIVE PROCEEDING

File No. 3-20855

In the Matter of

ALLIANZ GLOBAL INVESTORS 

U.S. LLC

Respondent.

ORDER INSTITUTING ADMINISTRATIVE 

AND CEASE-AND-DESIST PROCEEDINGS, 

PURSUANT TO SECTIONS 15(b) AND 21C 

OF THE SECURITIES EXCHANGE ACT 

OF 1934 AND SECTIONS 203(e) AND 203(k) 

OF THE INVESTMENT ADVISERS ACT OF 

1940, MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A CEASEAND-DESIST ORDER 

I.

The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 

public interest that public administrative and cease-and-desist proceedings be, and hereby are, 

instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 (“Exchange 

Act”) and Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 (“Advisers Act”)

against Allianz Global Investors U.S. LLC (“AGI US” or “Respondent”). 

II.

In anticipation of the institution of these proceedings, AGI US has submitted an Offer of 

Settlement (the “Offer”), which the Commission has determined to accept. AGI US admits the facts 

set forth in Section III below (except as to findings relating to investor knowledge and belief in 

paragraphs 3, 6, 13, 16, 19 and 22; certain former employees’ knowledge and belief in paragraphs 

16, 20 and 21; a derogatory statement by a member of the portfolio management team referenced in 

paragraph 12; and concealment efforts described in paragraph 23 and 24), acknowledges that its 

conduct violated the federal securities laws, admits the Commission’s jurisdiction over it and the 

subject matter of these proceedings, and consents to the entry of this Order Instituting Administrative 

and Cease-And-Desist Proceedings, Pursuant to Sections 15(b) and 21C of the Securities Exchange 

Act of 1934 and Sections 203(e) and 203(k) of the Investment Advisers Act of 1940, Making 
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Findings, and Imposing Remedial Sanctions and a Cease-And-Desist Order (“Order”), as set forth 

below. 

III.

On the basis of this Order and AGI US’s Offer, the Commission finds1that:

Summary

1. These proceedings involve a complex options trading strategy AGI US marketed and 

sold to approximately 114 institutional investors in 17 unregistered private funds (“Structured Alpha 

Funds”), which ultimately represented approximately $11 billion in assets under management as of 

December 2019. The Structured Alpha Funds were intended to generate profits by using a portfolio 

of debt or equity securities as collateral to purchase and sell options principally on the S&P 500 Index. 

The Structured Alpha Funds performed well until the COVID-related market volatility in March 2020 

when they suffered catastrophic losses, including losses in excess of 90% in certain funds. Investors 

lost billions of dollars. These included pension funds for teachers, clergy, bus drivers, engineers and 

others, the vast majority of whom live and work in the United States. 

2. Beginning on or before January 2016, and continuing through March 2020 (“Relevant 

Period”), AGI US, through the Structured Alpha portfolio management team, misled investors as to 

the significant downside risk of the Structured Alpha Funds, which included misrepresentations and 

omissions made in connection with the purchase and sale of these securities. First, AGI US’s 

marketing materialsmisrepresented to investors the levels at which hedging positions were put in 

place. Second, the portfolio management team did not consistently implement a bespoke risk 

mitigation program agreed to with the largest client in the Structured Alpha Funds. Third, the 

portfolio management team manipulated reports and other information provided to or created for 

certain investors on an ad hoc basis to conceal the magnitude of the strategy’s downside risk. In 

addition, the portfolio management team misrepresented to investors that Structured Alpha had a 

capacity limit of $9 billion for certain funds when, in reality, it exceeded that amount by over $3

billion. After the COVID-related market volatility in March 2020, the portfolio management team 

engaged in numerous, ultimately unsuccessful, efforts to conceal their misconduct from the 

Commission staff (“SEC”). 

3. Investors in the Structured Alpha Funds trusted that AGI US would manage their 

assets in accordance with its fiduciary obligations and believed that the information AGI US provided 

was accurate and complete in all material respects. The Structured Alpha portfolio management 

teambetrayed their trust and belief. The Structured Alpha Funds lost billions of dollars. AGI US is 

in the process of compensating investors in the Structured Alpha Funds for their losses and putting in 

place policies and procedures designed to prevent similar misconduct in the future.

 

1 The findings herein are made pursuant to AGI US’s Offer of Settlement and are not binding on 

any other person or entity in this or any other proceedings.
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Respondent

4. AGI US is a registered investment adviser headquartered in New York City and is 

under common control with Allianz Global Investors Distributors LLC, a registered broker-dealer. 

As of December 31, 2020, AGI US managed $148.8 billion in client assets.

Facts

Structured Alpha

5. The Structured Alpha Funds provided investors an opportunity to acquire exposure to 

a variety of debt or equity securities – the “beta” component – coupled with a complex options trading 

strategy designed to generate additional profits – the “alpha” target. Investors could choose among 

various combinations of beta components and alpha targets. For example, Structured Alpha US 

Equity 500 provided exposure to the S&P 500 Index with an alpha target of 5% per year, while 

Structured Alpha 1000 provided exposure to 90-day Treasury Bills with an alpha target of 10% per 

year. 

6. The Structured Alpha Fund’s options trading strategy had three components: rangebound spreads, directional spreads and hedging positions. Range-bound spreads and directional 

spreads were designed to generate profits by collecting premiums from selling put and call options 

that expired out-of-the-money (“OTM”). Hedging positions were designed to protect against shortterm market crashes. Investors viewed hedging positions as a critical component of the strategy and 

investors were led to believe those hedges would provide protection in the event of a short-term 

market crash.

7. The portfolio management team for the Structured Alpha Funds was led by Gregoire 

P. Tournant (“Tournant”), a member of AGI US’s Executive Committee for the majority of the 

Relevant Period. Tournant played a critical role in all major aspects of the Structured Alpha Funds,

including setting the levels at which hedging positions were put in place, controlling the flow of 

information to investors and determining compensation for other members of the team. The other 

lead portfolio managers were Trevor L. Taylor (“Taylor”), Stephen G. Bond-Nelson (“BondNelson”). The portfolio management team had significant discretion over the Structured Alpha Funds

with limited day-to-day supervision by others at AGI US. 

8. As of December 2019, AGI US managed 17 unregistered private funds that utilized 

the Structured Alpha Funds with approximately $11 billion in assets. AGI US received $550.3 million 

in fees for managing the Structured Alpha Funds during the Relevant Period. AGI US incurred $146.6 

million in revenue sharing payments and other direct costs associated with the strategy leaving it with 

a net profit of $403.7 million. Net profit for the most recent 5 years was $315.2 million.

Hedging Positions 

9. AGI US misrepresented to investors the levels at which the hedging positions for the 

Structued Alpha Funds were put in place. As illustrated below, AGI US represented in its marketing 

materials that hedging positions included long put options “laddered for various market outcomes to 
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the downside” with “[s]trike distances from -10% to -25%” and that “[t]he primary objective of 

hedging positions is to protect the strategy from a short-term equity market crash,” which was 

“[d]efined as a decline of 10% to 15% in less than 5 days.” 

10. The Structured Alpha Fund’s hedging positions included what was referred to 

internally as “tail risk hedges” (“TRHs”). TRHs were long put options on equity indices such as the 

S&P 500 Index with strike prices relatively far OTM. Contrary to AGI US’s marketing materials, 

strike prices for TRHs were not laddered within the range of -10% to -25% during most of the 

Relevant Period and, beginning in February 2018, strike prices averaged between -30% to -50% 

OTM:

11. For most of the Relevant Period, the portfolio management team made no effort to 

ladder TRHs with strike distances from -10% to -25%; instead, they purchased TRHs with 

significantly lower strike prices. These lower strike prices provided less protection in the event of a

short-term market crash. AGI US did not have in place policies and procedures reasonably designed 
5

to monitor for this type of deviation from the Structured Alpha Fund’s stated investment 

methodology. 

12. During the COVID-19 market crash, Bond-Nelson informed a colleague of the actual 

strike prices for the TRHs, to which this individual replied, “TRH 22% to 55% OTM. Jesus.” A 

member of the portfolio management team later characterized the laddering of TRHs at levels that far 

OTM in derogatory terms.

Variable Alpha Targets

13. The portfolio management team failed to implement a bespoke risk mitigation 

program agreed to with Structured Alpha’s largest investor (“Client A”), an ERISA plan 

administrator. After committing a substantial portion of its capital through a “fund of one,” Client A 

developed concerns over the significant downside risk of Structured Alpha and considered reducing 

its exposure or exiting the strategy. Client A remained invested after AGI US agreed to a risk 

mitigation program whereby the alpha targets would be adjusted according to the level of the CBOE 

Volatility Index (“VIX”). VIX represents a market expectation for volatility and is a measure of risk, 

fear or stress in the market. AGI US agreed to vary alpha targets for Client A depending on the level 

of the VIX. For example, in 2019 if the VIX was less than 15, the alpha target would be between 

2.5% and 4%, whereas if the VIX was greater than 30, the alpha target would be between 6.5% and 

9%. The specifics of AGI US’s agreement with Client A changed over time and funds, but the 

program was in place throughout the Relevant Period.

14. During most of the Relevant Period, the portfolio management team did not 

consistently implement the risk mitigation program, as a result of which, alpha targets were 

significantly higher than agreed to with Client A. For example, alpha targets for funds with equity 

beta components typically had alpha targets 40%-to-50% above the levels reported by the portfolio 

management team during 2018 and 2019:

Tournant was responsible for implementing the risk mitigation program for Client A; however, 

Tournant did not do so in conformity with the agreement with Client A. To conceal his misconduct,

Tournant provided Client A with written reports that misrepresented alpha targets to which the funds 

had actually been managed. Tournant provided the same false and misleading information to AGI 

US in an effort to increase his compensation under a complex formula tying the portfolio management 
6

team’s compensation to performance of the Structured Alpha strategy. AGI US did not have in place 

policies and procedures reasonably designed to monitor for this type of deviation from agreed-upon 

investment methodologies. 

Manipulated Reports

15. The portfolio management team manipulated reports and other information provided 

to and created for certain investors on an ad hoc basis to conceal the magnitude of the Structured 

Alpha Fund’s downside risk. These included (i) risk reports prepared by an AGI US affiliate, IDS 

GmbH (“IDS Risk Reports”), (ii) daily performance data, (iii) Greeks, (iv) attribution spreadsheets, 

(v) expected value (“EV”) sheets and (vi) open position data. This false and misleading information 

deceived certain investors as to certain aspects of the strategy and concealed the fact that the portfolio 

management team was dishonest. There was no meaningful review of these investor communications 

by others at AGI US during the Relevant Period.

16. IDS Risk Reports contained various stress test results that modelled the impact of 

changes in the market on Structured Alpha. These stress tests included a -20% decline in the S&P 

500 Index coupled with a +300% increase in implied volatility – the so-called “touchstone” scenario 

– which mirrored the October 1987 market crash. AGI US described IDS GmbH in its marketing 

materials as a service provider supporting an independent risk management function. Certain 

investors requested copies of IDS Risk Reports from the portfolio management team and relied upon 

them in assessing the downside risk of the strategy. Beginning on or before February 2018, and 

continuing through the Relevant Period, the portfolio management team manipulated IDS Risk 

Reports sent to certain investors to conceal the magnitude of the downside risk of the strategy. At 

Tournant’s request, Bond-Nelson altered numerous IDS Risk Reports before having them sent to 

certain investors. The manipulations were generally designed to limit losses to approximately -10%. 

For example, losses under a market crash scenario in one report were reduced from -

25.7439646282594% to -9.74396462282594%. Bond-Nelson made over 200 alterations to data 

contained in IDS Risk Reports, and the portfolio management team caused at least 87 altered reports 

to be sent to certain investors or prospective investors. On at least one occasion, Tournant 

manipulated historic IDS Risk Report data by altering over 150 pieces of data before having it sent to 

an investor. In one alteration, Tournant reduced losses under a market crash scenario from -

42.1505489755747% to -4.1505489755747%.

17. Daily performance data was requested by certain investors interested in 

understanding how Structured Alpha performed historically during periods of market stress. 

Tournant and Bond-Nelson responded to these requests by “smoothing” actual daily performance 

data for certain dates before having it sent to investors. For example, on one occasion, Tournant 

reduced losses for August 24, 2015 from -18.2607085709004% to -9.2607085709004%, while 

reducing gains for August 26, 2015 from +8.37147093860846% to +1.27093860846%. Smoothing 

concealed the magnitude of the downside risk and volatility of the strategy. The portfolio 

management team caused at least 6 sets of smoothed daily performance data to be sent to certain 

investors during the Relevant Period. During the COVID-19 market crash, a member of the

Structured Alpha team admitted in an email, “We definitely sent smoothed numbers.”
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18. Greeks were requested by certain investors. Options traders calculate and rely upon 

delta, gamma, vega and theta positions in making investment decisions. These “Greeks” provide 

measures of risk associated with options positions. Delta is a measure of the sensitivity of an option 

position to a change in the underlying asset. Tournant and Bond-Nelson manipulated Greeks 

provided to certain investors principally by lowering deltas. For example, on one occasion, BondNelson reduced the delta for December 26, 2018 from 83.6041719850865% to 52.6041719850865%. 

Tournant reduced deltas provided to certain investors numerous times by 10% and 20%. The portfolio 

management team caused at least 124 reports with altered Greeks to be sent to certain investors or 

prospective investors during the Relevant Period. 

19. Attribution spreadsheets were designed to show the gains and losses attributed to the

three prongs of the strategy. Range-bound spreads purported to generally contribute two-thirds of the 

profits, directional spreads one-third. Hedging positions generally lost money as they expired 

worthless in stable markets. Tournant manipulated attribution spreadsheets in an attempt to mislead 

certain investors as to the amounts spent on hedging positions. For example, on one occasion, 

Tournant altered one month of TRH losses from -0.023291582278481% to -0.133291582278481%. 

These alterations misrepresented the amount of money the portfolio management team was spending 

on hedging positions. 

20. EV sheets were shown to certain investors during portions of meetings designed to 

demonstrate the sophistication of the portfolio management team’s investment methodology and risk 

mitigation techniques. EV sheets calculated gains and losses under various market conditions. 

Tournant and Taylor manipulated EV sheets shown to certain investors to conceal the magnitude of 

the downside risk of the strategy. For example, on one occasion, at Tournant’s instruction Taylor 

reduced expected losses from $4,786,991 to $718,049 by multiplying them by 0.15. Manipulation of 

EV sheets was labor intensive and, as a result, Taylor sent Tournant password-protected, step-by-step 

instructions on how to efficiently alter data to avoid detection by investors.

21. Open positions data was created for certain investors for the demonstration portion of 

meetings. This presented a problem for Tournant and Taylor given that TRHs were nowhere near the 

-10% to -25% range represented to investors. They dealt with the situation by altering data on open 

positions data spreadsheets to increase strike prices on TRHs. For example, on one occasion, Taylor 

increased strike prices on TRHs in an open positions sheet created for an investor from 1625 to 2225, 

thereby reducing strike distances from -45.01% to -24.71% OTM. This helped conceal the fact that 

TRHs were out of the range represented to investors. 

Capacity Limits

22. AGI US’s marketing materials misrepresented to investors that Structured Alpha had 

a capacity limit of $9 billion for certain funds when, at times, it exceeded that amount by over $3 

billion. AGI US’s marketing materials represented that the Structured Alpha Funds with the highest 

alpha targets had been closed due to capacity constraints. Capacity limits were important to investors 

who worried about the portfolio management team’s ability to mitigate losses in volatile markets. 

Contrary to the marketing materials, the portfolio management team never closed these funds or 

otherwise adhered to the $9 billon capacity limit, eventually acquiring over $12 billion in capacity 

utilization as of December 2019: 
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Tournant was principally responsible for breaching capacity limits and manipulated various 

“multipliers” used to calculate them. 

Efforts to Conceal Misconduct

23. After the COVID-related market volatility, the portfolio management team engaged 

in numerous, ultimately unsuccessful, efforts to conceal their misconduct from the SEC. Prior to his

SEC testimony, Bond-Nelson had a conversation with Tournant during which Tournant expressed the 

view that the SEC appeared to be moving quickly and, as a result, may not have put the pieces 

together. Tournant and Bond-Nelson discussed what Bond-Nelson should say about their adjustments 

to IDS Risk Reports. They agreed that Bond-Nelson should testify falsely that the adjustments 

reflected the portfolio management team’s view of the “volatility curve” and other fabricated

justifications. Upon being confronted with adjustments to certain IDS Risk Reports and Greeks, 

Bond-Nelson lied repeatedly during SEC testimony and refused to return from a restroom break late 

in the afternoon of the second day. Following the break, testimony was adjourned and the record kept 

open at the request of Bond-Nelson’s counsel. 

24. After Bond-Nelson’s SEC testimony, Taylor had a conversation with Tournant in a 

vacant construction site during which Tournant expressed the view that the adjustments to IDS Risk 

Reports and Greeks might not have been material to investors. During that conversation, Tournant 

also raised the issue of the altered EV sheets and open positions data and asked Taylor what they 

would do if anyone located those files. Tournant advised Taylor to move assets overseas, as he 

claimed to have done recently. 

 

* * *
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As a result of the conduct described above, AGI US willfully violated Section 10(b) of the 

Exchange Act and Rule 10b-5 thereunder and Sections 206(1), 206(2) and 206(4) of the Advisers 

Act and Rules 206(4)-7 and 206(4)-8 promulgated thereunder. 

Remedial Efforts

In determining to accept the Offer, the Commission considered remedial acts promptly 

undertaken by AGI US and cooperation afforded the SEC after Bond-Nelson’s testimony. AGI 

US is in the process of compensating investors for their losses and putting in place policies and 

procedures designed to prevent similar misconduct in the future.

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to 

impose the sanctions agreed to in AGI US’s Offer.

Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act and Sections 203(e) 

and 203(k) of the Advisers Act, it is hereby ORDERED that:

A. AGI US cease and desist from committing or causing any violations and any future 

violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and Sections 206(1), 

206(2) and 206(4) of the Advisers Act and Rules 206(4)-7 and 206(4)-8 promulgated thereunder. 

B. AGI US is censured. 

C. AGI US shall pay to the Commission disgorgement of $315.2 million plus 

prejudgment interest of $34.0 million for a total of $349.2 million, which shall be deemed satisfied 

by forfeiture and restitution ordered pursuant to the settlement of parallel criminal charges by the 

United States Department of Justice in United States v. Allianz Global Investors U.S. LLC

(S.D.N.Y.). The disgorgement and prejudgment interest ordered here is consistent with equitable 

principles and does not exceed AGI US’s net profits from its violations. 

D. AGI US shall, within 21 days of the entry of this Order, pay a civil money penalty in 

the amount of $675 million. AGI US shall satisfy this obligation by (i) paying approximately $131

million pursuant to the Fair Fund provisions of Section 308(a) of the Sarbanes-Oxley Act of 2002 to 

certain investors in the Structured Alpha Funds and (ii) making a payment of approximately $544

million to the Commission. Investor payments shall be made as follows: Investor 1 $10,093,123, 

Investor 2 $3,403,369, Investor 3 $1,836,689, Investor 4 $1,500,903, Investor 5 $4,320,345, Investor 

6 $17,393,324, Investor 7 $30,727,855, Investor 8 $6,287,001, Investor 9 $47,967,532, Investor 10 

$983,866 and Investor 11 $6,800,727. The Commission will hold undisbursed funds paid pursuant 

to this paragraph in an account at the United States Treasury pending a decision whether the 

Commission, in its discretion, will seek to distribute funds, or subject to Exchange Act Section 

21F(g)(3), transfer them to the general fund of the United States Treasury. If timely payment is not 

made, additional interest shall accrue pursuant to 31 U.S.C. §3717. 
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Payment to the Commission must be made in one of the following ways: 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request; 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to: 

Enterprise Services Center

Accounts Receivable Branch

HQ Bldg., Room 181, AMZ-341

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying AGI 

US as the Respondent in these proceedings, and the file number of these proceedings; a copy of the 

cover letter and check or money order must be sent to Reid A. Muoio, Division of Enforcement, 

Securities and Exchange Commission, 100 F St., NE, Washington, DC 20549. AGI US shall 

cooperate with the staff of the Commission to obtain evidence of receipt of the payments set forth 

herein. 

E. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is created 

for the $675 million if civil penalties referenced in paragraph D above.

F. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 

treated as penalties paid to the government for all purposes, including all tax purposes. To preserve 

the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it 

shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 

compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in this 

action ("Penalty Offset"). If the court in any Related Investor Action grants such a Penalty Offset, 

Respondent agrees that it shall, within 30 days after entry of a final order granting the Penalty Offset, 

notify the Commission's counsel in this action and pay the amount of the Penalty Offset to the 

Securities and Exchange Commission. Such a payment shall not be deemed an additional civil 

penalty and shall not be deemed to change the amount of the civil penalty imposed in this proceeding.
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For purposes of this paragraph, a "Related Investor Action" means a private damages action brought 

against Respondent by or on behalf of one or more investors based on substantially the same facts 

as alleged in the Order instituted by the Commission in this proceeding.

By the Commission.

Vanessa A. Countryman

Secretary