The British Coal Staff Superannuation Scheme has lodged a legal complaint against Towers Watson, alleging precursor Watson Wyatt provided “negligent” investment advice.
The scheme’s trustee body, which manages £20bn (€25bn) in assets for both the sector-wide funds for the former nationalised industry, brought a professional negligence claim against the consultancy in September 2014, according to filings with the US Securities and Exchange Commission.
The claim, initiating a resolution procedure that precedes a court hearing, alleges Watson Wyatt provided “negligent” investment consulting advice relating to a currency hedge.
The hedge was put in place due to the industry-wide scheme’s £250m commitment to a BlueBay Asset Management emerging market debt fund.
“It is alleged that the currency hedge has caused a substantial loss to the Scheme, quantified at £47,500,000, for the period August 2008 to October 2012,” the filing by the consultancy said.
The manager is still employed to oversee part of the scheme’s emerging market strategy, according to an interview with Stefan Dunatov, CIO of Coal Trustees, in the November issue of IPE.
Discussing the fund’s view of currency risk, he said at the time: “Our belief is that if you buy into the general thesis, then you will want to own the asset and the underlying currency exposure that comes with it.
“You either have to believe that the underlying currency exposure will help your long-term total returns as exchange rates converge as consumption grows and these economies become more services-oriented than goods-oriented, or you have to accept that it’s very difficult to forecast currency returns.”
Towers Watson was created in 2010 in a merger between Watson Wyatt and Towers Perrin.
A spokesman for the consultancy said: “Towers Watson disputes the allegations brought by the British Coal Staff Superannuation Scheme and intends to defend the matter vigorously.”
The Coal trustee body could not be reached for comment.