“Flashing Red”: Finance System Grows More Dangerous

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FRANKFURT — Allianz Chief Executive Officer Oliver Baete said on Thursday that the financial world was getting more dangerous, not safer, setting an ominous tone for investors.

Baete, who oversees one of the world’s largest insurers and asset managers, pointed to high valuations in the car and technology sectors, “accidents” like the failures of supply chain finance company Greensill and hedge fund Archegos, and weaker banking regulation.

“All lights on risk management are flashing red,” he said at an investor conference.

“The financial system is not getting safer. It is getting more dangerous again,” he added.

Munich-based Allianz is one of the world’s biggest money managers with more than 2.5 trillion euros ($2.84 trillion) in assets under management through bond giant Pimco and Allianz Global Investors.

In describing the risks, Baete made no mention of the demise of some of Allianz’s own funds last year. The so-called Structured Alpha group of funds plunged in value after the coronavirus pandemic sent markets into a tailspin.

In that aftermath, Allianz is facing a slew of investor lawsuits and related investigations by the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC).

Baete criticized regulators for banning the insurance industry from paying dividends during 2020 because of the uncertainty it created for investors, resulting in a rising cost of capital.

“That was a disaster for our industry, and it shouldn’t repeat itself,” he said.