Due diligence in the spotlight as Aon battles pension over

Aon Investments has hit back at Blue Cross and Blue Shield Association after the health insurers’ pension fund claimed losses from its investment in the collapsed Allianz Structured Alpha funds resulted from the consultant’s poor due diligence, according to Bloomberg. 

The Blue Cross and Blue Shield Association National Employee Benefits Committee first sued Allianz and Aon in 2020, according to Bloomberg, and alleged that Aon’s investment advisory team failed in its vetting of the Allianz Global Investors Structured Alpha funds.

The funds lost billions of dollars during and after the Covid-19 crash of March 2020, when their complex hedging strategies failed to protect on the downside as advertised. Allianz was subsequently sued by a number of institutions that invested in the funds and faced investigations from the Securities and Exchanges Commission (SEC) and the Department of Justice (DOJ), which it settled in May. As part of a settlement with both agencies, the asset manager pleaded guilty to one count of securities fraud, was fined $1bn, and agreed to pay around $5bn back to investors, and stop managing mutual funds for 10 years. 

Blue Cross had $3bn, or as much as 62% of its entire pension portfolio, in the funds by the time the Allianz strategies’ failures came to light, Bloomberg reported. 

Per Bloomberg, Allianz has settled with Blue Cross, among other investors, but the settlement does not cover all the losses incurred by the pension fund, which has sued Aon, claiming that the consultant maintained conviction Structured Alpha and failed to monitor the strategy. 

The consultant has responded by suing Blue Cross as well as five of the pension fund’s executives, including former executive Jamey Sharpe.  

In a May lawsuit, Aon said Sharpe ‘was central to the committee’s management of the trust,’ and encouraged the committee to allocate more to Structured Alpha. 

Sharpe retired in January. His attorney, Sean Gallagher, told Bloomberg that Sharpe was currently fighting cancer and branded Aon’s lawsuit as ‘abusive, unnecessary, and [a] baseless attempt to shift the blame for their bad advice on Structured Alpha personally to him.’

To read the Bloomberg story in full, click here. 

Structured Settlements