UK - Merrill Lynch and the Unilever Superannuation Fund (USF) have reached an undisclosed out of court settlement in their high profile £130m (e210m) court battle over the management of some £1bn in Unilever pensions money during the 1990’s by Mercury Asset Management (MAM) – now owned by Merrill.

The two sides announced this morning that they had “resolved all issues” between them with Merrill agreeing to pay a sum to the Unilever fund without admission of liability.

Reports have suggested that the amount could be in excess of £70m.

Unilever has withdrawn its court proceedings and the companies say they will resume “normal business relations”.

Both sides said that they were pleased with the terms of the settlement and have agreed not to make any further comment.

The dispute arose in the context of a new mandate given by the Unilever Fund to Mercury in January 1997, and involved a customised set of investment objectives unique to the Unilever Fund.

USF alleged that MAM negligently took too much risk when managing £1bn for the fund between January 1, 1997 and March 31, 1998, following the introduction of the new investment agreement, which sought to achieve 1% outperformance with a downside risk tolerance of –3%.

The case had threatened to be a watershed in the fund management industry on the issues of risk control and liability for underperformance.

However, a number of pension funds, including the £3bn J Sainsbury scheme, have said they were awaiting the outcome of the court case to decide whether they would press ahead with similar legal action against Merrill Lynch.
It is not yet known whether they will take any action following the Unilever/Merrill settlement.

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