The Co-operative Group’s £2.1bn (E3.3bn) pension fund has fired Merrill Lynch Investment Managers (MLIM) for underperformance on a £500m active mandate and is now considering legal action with the law firm Richards Butler.
Nick Eyre, Co-op group secretary and fund trustee explains: “We have been unhappy with Merrill’s investment performance for some time. In view of the the recent exodus of key managers from Merrill’s and following specialist advice, we have dedided to dispense with their services.
“In a separate but related matter, we are being advised on possible legal action over Merrill’s historic investment performance in relation to the fund.” A spokesman for MLIM said: “We are not aware of the basis of any claims from the Co-op.”
MLIM has been responsible for a quarter of the scheme’s assets and the firing ends a 30-year relationship between the two parties. A spokesman for the fund gave neither details of the underperformance nor of the status of any possible legal proceedings.
Co-op’s firing and possible legal action comes just five months after an out of court settlement between MLIM and the £5bn Unilever Superannuation fund.
Unilever took the asset manager to court claiming the then-named Mercury Asset Management took excessive risk when managing £1bn for the fund during 1997 and 1998.
The case was settled out for court with Unilever being awarded an undisclosed sum, believed to be about £70m.
Merrill Lynch has suffered a recent exodus of numerous senior investment managers. Andreas Utermann, head of the firm’s equity funds outside the US, quit last week as did Habib Annous, who ran the UK smaller companies and UK value funds. Anne Richards, managing director of MLIM’s e17bn UK equities Alpha team, was last month named as chief investment officer at Edinburgh fund Managers.
At the end of this month, Co-op funds at MLIM will be handed to Legal & General Investment Management to manage on a passive basis.
Other managers at the scheme include Deutsche, Fidelity, Morley and LaSalle.