Plaintiffs have filed a new Employee Retirement Income Security Act (ERISA) complaint in the U.S. District Court for the Southern District of New York against Allianz Global Investors.

Distinguishing the case from many of the numerous ERISA suits filed in the past several years, the plaintiffs in the suit are not retirement plan participants but instead are members of the Raytheon Technologies Corporation Pension Administration and Investment Committee. In their complaint, the plaintiffs suggest Allianz mismanaged a fund called the AllianzGI Structured Alpha U.S. Equity 500 LLC, allegedly leading to hundreds of millions of dollars in losses on behalf of the Raytheon pension plan.

“Allianz courted retirement plans to invest in the fund, promising them that structural risk protections were the cornerstone of the Structured Alpha strategy,” the complaint states. “While the fund was designed to generate returns through an options trading strategy, Allianz promised that hedges would be in place ‘at all times’ to cap the downside risk of that strategy. Allianz told investors that these hedges would limit investment losses to a ‘defined maximum loss,’ afford ‘reinsurance’ against a market crash, and eliminate the risk of a margin call.”

According to the complaint, Allianz also promised that it would never forecast the direction of the market or market volatility, that Structured Alpha’s investment strategy was “non-directional,” and that it would “perform whether equity markets are up or down, smooth or volatile.” The plaintiffs say these claimed risk protections were critical to the decision by the plan’s fiduciaries to invest assets in Allianz’s Structured Alpha investment strategy.

“Yet when equity markets declined, volatility spiked and the fund’s option positions were exposed to a heightened risk of loss in February and March 2020, Allianz’s promised protections were absent,” the complaint alleges. “Unbeknownst to the plan fiduciary or anyone at Raytheon, and in violation of Allianz’s stated investment strategy and the fiduciary duties it owed under ERISA, Allianz had abandoned the hedging strategy that was the supposed cornerstone of Structured Alpha, leaving the portfolio almost entirely unhedged against a spike in market volatility.”

The complaint goes on to allege that Allianz placed a directional bet that volatility would remain relatively low even as the pandemic struck in the U.S. The plaintiffs call this “the equivalent of a ticking time bomb if its forecast (one it had promised ‘never’ to make) proved false.”

“As Allianz has since admitted, it constructed the fund’s portfolio to offer no downside protection against the market decline and volatility spike that occurred in February and March 2020,” the complaint alleges. “Contrary to its promise to investors that it would always purchase hedges as ‘reinsurance’ for the options it sold, Allianz had purchased no hedges for an entire segment of the portfolio. Meanwhile, the so-called hedges that Allianz did purchase were not the hedges Allianz said it would buy.”

Allianz Global Investors shared the following statement regarding the lawsuit: “As we set out at the time, the Structured Alpha portfolio sustained losses during the severe market rout in late February and March. While the losses were disappointing, the allegations made by Raytheon Technologies Corporation Pension Administration and Investment Committee are–like other plaintiffs’–legally and factually flawed, and AllianzGI will defend itself vigorously against them.”

Allianz has not yet responded to a request for comment about the complaint, but it has responded to similar allegations leveled in related lawsuits filed in recent months.