This is not the first time that I have written about these three investment blunders. Fortunately, they are becoming less common. But, until they disappear altogether, admonitions are still warranted.

  1. The lawsuits filed against the German financial-services conglomerate Allianz, for the collapse of its Structured Alpha suite of funds
  2. The woes of Chinese property developer Evergrande Group (The company is not “ever grand,” as it turns out).

The inclusion of Allianz’s funds makes sense, but you might wonder how the problems of a property developer qualify as an investment topic. Although Evergrande’s main business is real estate, it also offers “wealth management products” to customers who buy its apartments. Who better to manage your retirement savings than the people who built your house?

(In the United States, property developers’ brand extensions are less ambitious.)

Unhappily, the answer is “pretty much anybody.” Evergrande allegedly ran a Ponzi scheme, using incoming proceeds to pay off older accounts. In addition, stated one of the company’s executives, the firm used investor accounts to “bridge various funding gaps faced by the parent company.” Whatever the reasons, the money is gone, and Evergrande is now bartering with its customers. Rather than cash, the company says, it will provide those who wish to redeem their investments with IOUs for a future apartment. Such a deal!

Not that Allianz’s Structured Alpha shareholders can do much boasting….

Read more…