The UK Unilever pension fund is still taking legal advice with a view to addressing the issue of compensation for underperformance by one of the scheme’s former asset managers, Mercury Asset Management (MAM).
The scheme hit the headlines when it was disclosed that it was seeking an unprecedented compensation payment of around £100m (E153m) for alleged poor performance by MAM, on a £1bn mandate.
A spokesperson for Unilever says: “The Unilever Superannuation Fund is continuing discussions with its legal advisers on how to proceed, although no decision has yet been reached.”
A spokesperson for MAM has said that the company does not comment on individual clients and had nothing further to add.
However, the repercussions of a possible court case to settle the issue are being felt throughout the UK investment industry.
Bernard Cazenove, deputy chairman at Cazenove Fund Managers, believes such a case would be hard to pursue in court: “Should any case arise I couldn’t see the result going against the asset manager unless there was an issue of negligence that could be proved. “ In terms of underperforming the benchmark though, I certainly don’t think there has been a precedent legal case.
“ Were a case to be found against a manager though there would be probably be a very large shift to passive management as a result.
“ It also throws up other issues such as trustee responsibility and whether they should be liable for any negligence occuring within pension funds.”
Lindsay Tomlinson, chief executive , Europe at Barclays Global Investors comments: “Undoubtedly the whole issue will engender better risk control and tighten up the whole procedure and agreement side of the fund manager/pension scheme relationship.”
Kanesh Lakhani, marketing director at State Street Global Advisors, commented that he didn’t know the full extent of the case, but added: “ In principle, the relationship between a pension scheme and the investment manager should be a question of agreeinginvestment expectations and making clear all the responsibilities involved from the beginning.”
Commenting on the Mercury/ Uni-lever issue, one lawyer said: “It is possible to prove negligence, but very difficult, and in this case all the other large investment managers were underperforming at the same time, so I think it would be very difficult to pursue.”
The case follows hard on the heels of a recent ruling against consultant William M Mercer by the UK pensions ombudsman Julian Farrand, ordering the company to pay compensation of £250,000 for poor investment advice.
The ombudsman’s decision hinged on the issue of whether actuaries could be considered as administrators to a pension scheme and thus legally accountable for any shortfalls.
According to a legal expert, Mercer had advised the Minworth pension scheme, which commenced winding up in 1991 following employer receivership, regarding its cash and gilt investments.
A spokesperson for Mercer says the company, which contested the decision, will not be appealing it as it would be uneconomical to do so. The Trustee Corporation, the independent body in charge of the scheme, which was also fined by the ombudsman, is understood to be considering an appeal. Hugh Wheelan

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