Ending a 30-year relationship, the Co-op said it was considering a suit against MLIM over the historic performance of its $2 billion pension fund, according to a Reuters news report.
“We have been unhappy with Merrill’s investment performance for some time,” Co-op group secretary Nick Eyre said in a brief statement quoted by Reuters. “In view of the recent exodus of key managers from Merrill’s and following specialist advice, we have decided to dispense with their services.”
A spokesman for MLIM said the firm was “not aware of the basis for any claim from the Co-op.”
MLIM, the fund arm of US investment bank Merrill Lynch, last year paid an estimated £75 million to the pension fund of consumer products group Unilever Plc to settle the fund’s negligence claim.
MLIM settled with Unilever without admitting liability, but only after a court case in which the management style of former MLIM co-head Carol Galley was subject to sustained attack (see our Unilever page ).
More recently MLIM has suffered a number of staff defections.
The Co-op will shift its funds from MLIM to Legal & General Investment Management at the end of May, where they will be run on a “passive” basis tracking stock market indices.
The threat of legal action by the Co-op will add to woes at Britain’s biggest active pension fund manager, which has also seen its parent hit by a probe into the independence of its equity research by New York State Attorney General Eliot Spitzer.