The trustees of the Unilever Superannuation Fund (USF), the consumer giant’s pension fund, claims that MLIM was negligent in its management of its £1 billion mandate, in particular, the £600 million UK equity portfolio managed by Lennard, dubbed a “wild card” by USF lawyers.
Galley, who eventually removed Lennard from the USF account following a period of underperformance, had defended him during the initial stages of her testimony.
But, in her testimony Monday, Galley agreed that criticisms of Lennard’s performance in 1997 by Keith Mullins, his team leader, was warranted, the Financial Times reported.
In the March 1998 review, prepared a year after Lennard was removed from the USF account, Mullins noted that Lennard “needs to have a more consistent application of risk control”. Galley agreed, adding that, “he’d had a bad year”.
After Lennard was replaced, it was found that he ran a series of other portfolios with higher levels of risk than his colleagues in the “select” team, which Mullins headed.
Formal risk controls were implemented in mid-1997 as part of a “recovery plan” for the Unilever UK equity portfolio.
Galley acknowledged that prior to the Unilever case, the group had relied on informal controls, but denied the controls were triggered by failures of the group to manage risk in the USF portfolio.
Instead, she cited market trends, and currency movements as the major factors in the underperformance of the portfolio.
USF lawyers questioned the accuracy of this statement, noting that currencies were traditionally volatile and that Galley had not pointed this out in the detailed report that she prepared for USF trustees.