UK - The £2bn J Sainsbury Pension Scheme has reached an out of court settlement with Merrill Lynch Investment Managers (MLIM) nearly a year after threatening legal action following poor performance claims.
In a brief statement Sainsbury’s said that the two parties had “resolved all past issues on an amicable basis. Neither Merrill Lynch or Sainsbury’s would comment on reports that the settlement ran into £tens of millions.
The relationship between the two companies dates back to 1974 through Mercury Asset Management which MLIM acquired in December 1997. The disputed period was between 1996 and 1997 where Sainsbury’s claimed to have suffered underperformance of its UK equity portfolio. The company would not comment on the extent of the underperformance. Despite the settlement MLIM continues to managed around £355m for the fund.
The settlement saves MLIM the embarrassment of being dragged through another high-profile court case. The firm is still reeling from last years’ showdown with the Unilever pension fund which saw MLIM reach another out of court settlement - without admission of liability - for a sum believed to be around £70m. Unilever sued for alleged negligence over the management of its UK equity portfolio by Mercury - then run by Carol Galley - which underperformed an agreed benchmark by nearly 11% between 1997-1998.
Other pension funds thought to be considering action against MLIM include AstraZeneca, the Co-operative Group, Carclo and Surrey County Council.
Responding to the reports, MLIM stressed that it was “ now time to move on.”
“We don't believe there is a basis for any future claim. If one were to arise we would contest it vigourously.”
MLIM pointed to recent performance, saying that 69% of its global funds has outperformed benchmarks. The firm added that new business figures had reached US$9bn since the start of the year, but did not have a comparable figure for losses.
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.