MLIM Once Again Gets Out of Legal Hot Water

May 9, 2003 ( - Merrill Lynch Investment Managers (MLIM), which has had a serious of legal challenges to its management of large European pension plans, has settled its latest pension-related spat.

According to a Reuters news report, the Britain’s Co-Operative Group announced in a statement that it had reached an agreement with MLIM over the handling of its $3.21-billion pension fund.

“On behalf of the trustees I can confirm that we have resolved our dispute with MLIM amicably,” Co-Op Group Secretary Nick Eyre said in a statement. “We are not prepared to discuss any of the details or the issues involved. I can confirm however, that, as a result of this agreement, we will be resuming our business relationship with MLIM.” An unnamed Merrill spokesman confirmed the deal to Reuters.

In May 2002, the Co-op fund had said it was dropping Merrill as manager of part of its £2-billion fund, ending a 30-year relationship. The Co-op said then it was investigating the possibility of legal action against MLIM over the historic performance of its pension fund. “We have been unhappy with Merrill’s investment performance for some time,” Eyre was quoted in news reports at the time (See  MLIM Performance Takes Another Hit  ). “In view of the recent exodus of key managers from Merrill’s and following specialist advice, we have decided to dispense with their services.”

The case is a legacy of a period of poor investment performance at Mercury Asset Management, bought by Merrill Lynch in 1997.

Merrill    last year paid a reported £75 million to the pension fund of consumer products group Unilever Plc to settle the fund’s claim of negligence.  The case, which played out in Britain’s High Court, saw the consumer goods giant accuse MLIM of negligence in its management of Unilever’s £1-billion mandate.  It specifically addressed the £600 million UK equity portion of the portfolio, managed by Alistair Lennard, a “wild card” in the words of Unilever’s lawyers (See  In Depth: Unilever CaseUpFront: Learning From Unilever ).

In August 2002, Merrill settled a similar claim with British supermarket chain J Sainsbury Plc in an undisclosed deal (See MLIM Settles Another UK Suit ).