AXA Rosenberg terminated from two mandates over coding error; faces possible lawsuit

US – Two pension fund managers have terminated AXA Rosenberg Investment Management as a result of a coding error and at least one consultant is considering preparing a class action lawsuit, Global Pensions has learned.

Florida State Board of Administration senior officer of investment programs and governance Michael McCauley confirmed the fund manager terminated AXA from a US$400m domestic equity mandate because of the coding error. He could not immediately provide further comment.

Meanwhile, a European pension manager, who declined to be named, told GP they plan to terminate AXA from a €50m (US$66.2m) developed equities portfolio.

On April 15, AXA sent a letter to consultants saying its chairman Barr Rosenberg was taking a 30-day leave of absence after company officials failed to disclose a coding error in the quant firm's investment process. The head of the firm's research centre Thomas Mead will resign in one year. (Global Pensions; April 16, 2010)

The error occurred in June 2009, and was corrected between September and November of that year, but AXA could not say the extent to which this affected investors' portfolios.

The European pension manager said the biggest issue for them was performance issues as well as doubts about the effectiveness of their risk management systems.

A consultant said they had strong doubts whether the firm will be able to continue to run its programme without Mead and they could not rule out class actions being filed against AXA because of this coding error. "They will need a pretty radical restructure if they're not going to go under," he said.

Officials at AXA could not immediately comment.