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Railtrack poser for pension fund investors

UK – It’s still too early to know if pension funds have a right to action in the collapse of Railtrack, the UK’s railway station and track maintenance group, says Robin Ellison, chairman of the pensions group at the London office of international legal firm, Eversheds. The heavily indebted group went into administration earlier this week, when the government refused any further funding

However, he points out it is the asset managers of the pension funds that invested in Railtrack that are making the most noise. “It is the actual fund managers rather than the trustees that are putting on the pressure and talking of suing, but other than the question of whether pension funds have any right to action, we need to also wonder if it’s worthwhile taking action, since there may not be any money to grab anyway.”

However, though Ellison says that the shares could be worthless, some newspaper reports are beginning to hint that fund managers, among others, may get a “sniff” of a chance of getting some money out of the bankrupt group if they decide to sue. “It’s early days, and my guess is that since Railtrack was pretty much near the bottom if its index at the time of collapse, there would have been very little invested in it anyway,” Ellison comments.

Though members of pension funds that invested in Railtrack stand to lose money, and trustees generally accept this as part of the capitalist ‘win some – lose some’ philosophy, suggests Ellison, members of Railtrack’s own pension arrangements should be protected.

Elsewhere, a spokesperson for the National Association of Pension Funds (NAPF) confirmed that the NAPF will be taking part in a meeting of the Institutional Investor Committee to discuss what issues have arisen and what action needs to be taken in light of the situation, but that the NAPF hasn’t yet had any feedback from its members or about what arrangements are being made for shareholders.

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