UK - A group of 30 pension funds is threatening to sue Henderson Group, if it fails to pay substantial compensation for losses incurred by an infrastructure fund, which they claim was promoted as a low risk investment.
The dispute, first reported in The Times newspaper, concerns the Henderson PFI Secondary Fund II, which raised £575m from investors in 2005, but which has since fallen in value by 60 per cent to £225m (€269m).
Sources close to the dispute say the pension funds blame Henderson’s purchase of construction company, John Laing, (at a cost of £1bn in a bidding war in order to gain exposure to the firm’s 60 to 70 PFI projects), for the fund’s poor performance.
The disgruntled funds claim that the fund was promoted as a low risk investment, which would provide a steady inflation-proofed income stream for years into the future.
Souces close to the investors also say they were expecting the fund to invest in a range of firms involved with infrastructure projects, not one individual company with a pension fund deficit.
They have also had to bear the cost of John Laing bidding for contracts, a cost and risk they say had not been alerted to at the outset.
John Laing’s infrastructure projects included contracts to build and maintain schools and hospitals.
The fund lost money as the cost of debt rose after the credit crunch and John Laing was forced to inject money into its final salary pension fund to plug a spiralling deficit.
Richard Acworth a spokesman for Henderson said the group had referred to the dispute in its half year statement, that it had reviewed the issues raised, was confident that it was not at fault and would defend itself vigorously. Henderson is being advised by CMS Cameron McKenna.
The potential litigants, which represent 90% by value of investors in the fund, are understood to have given Henderson a two week deadline to pay redress, after which they are threatening to institute legal proceedings, sources close to the dispute confirmed.
The potential litigants include heavyweights, such as the £15bn Railways Pension scheme (Railpen), the British Steel pension plan and the Fenner pension scheme. The group has hired Steven Hull, of law firm, Ashurst, and commercial litigation QC, Iain Milligan, to represent them.
Other investors include managers, such as Oxford Investment Partners, which invests funds on behalf of the university’s colleges and their pension funds.
Pensions lawyer, Robin Ellison, of Pinsents Mason, said: “Nothing will be clear until a writ is actually issued. It will all depend on exactly who said what to whom about the investment.”