UK- Merrill Lynch Investment Managers and the £2.4bn pension fund of retailer J Sainsbury have avoided going to court over alleged underperformance following a settlement of an undisclosed amount. The supermarket group had been pursuing a claim from Merrills following the landmark payment made to Unilever last year.

An informal agreement avoids the spectre of another embarrassing and high profile court case for Merrill Lynch. Last December it was forced to compensate the £6.6bn Unilever pension scheme a supposed £70m in an out of court settlement after the superannuation fund sued it for underperformance.

In a statement Sainsburys and Merrill Lynch investment managers said they had “resolved all past issues on an amicable basis.” Neither side would comment on details of the settlement.

Sainsburys dropped Merrill Lynch from a UK equity brief in 1999 although the retailer still uses it for three mandates- Japanese and European equities and a global fixed income product.

MLIM added that it is performing successfully today with 70% of its e500bn in assets ahead of their benchmark. A spokesman said: “we don’t believe there is a basis for any future claims” and that “if one were brought, it would be vigorously contested.”

AstraZeneca’s £2bn pension fund, which dropped Merrill Lynch in 2001 following a change in investment policy and questionable investment performance, is considering legal action. A spokesman said: “we have taken legal advice but the pension fund trustees have yet to make a decision.”

In May the Co-operative Group’s £2.1bn pension fund ended a thirty year relationship after it dropped Merrills for underperformance on a £500m active mandate.

At the time, trustee Nick Eyre confirmed they were consulting with their lawyers Richards Butler about possible legal action over Merrill’s historic investment performance. The group has yet to decide whether to pursue a claim.