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Supermarket chain ends 30-year relationship with Merrill Lynch over funds; CO-OP: Threat of court action against investment manager after poor performance of pensions.

THE Co-op yesterday said it was considering legal action against Merrill Lynch Investment Managers over the poor performance of its pension fund.

In yet another blow for the USowned fund manager, the Co-op said it was dissatisfied with MLIM's investment record.

The Co-op has ended its 30-year relationship with MLIM and hired City law firm Richards Butler to decide on what action to take.

MLIM managed more than pounds 500m of the Co-op's pounds 2bn pension fund but this part of the fund has now been placed with Legal and General.

The move comes just months after MLIM paid consumer goods giant Unilever pounds 70m in compensation following a dispute over its investment performance.

The settlement drew a high-profile court case over alleged poor risk control to a close and was seen as a humiliating climb-down for the fund manager.

Co-op group secretary and fund trustee Nick Eyre said, ``We have been unhappy with Merrill's invest-ment performance for some time. ``In view of the recent exodus of key managers from Merrill's and following specialist advice, we have decided to dispense with their services.

``In a separate but related matter, we are being advised on possible legal action over Merrill's historic investment performance in relation to the fund.''

Manchester-based Co-op would not reveal the performance of its fund with MLIM, one of six fund managers to handle the group's pension money. More than 60,000 employees' pensions are tied-up in the pounds 2bn fund from across a Co-op business that spans funerals, travel and supermarkets.

Following the Unilever settlement in December, several firms said they were reviewing their pension arrangements with MLIM, including Sainsbury's.

The supermarket chain said the position regarding its pounds 3bn fund was unchanged despite the Co-op's possible legal action.

A spokeswoman said, ``The trustees of our pension fund are continuing to review the position in relation to the settlement between Unilever and Merrill Lynch.''

MLIM said it was ``not aware'' of any grounds for legal action by the Co-op and defended the strength of its business.

A spokesman said, ``We are disappointed to lose the mandate after a long relationship but we are not aware of the basis for any claim from the Co-op.'' He added talk of a crisis and reports of high-profile departures was ``rubbish''. Pension fund consultants have been urging companies to ditch MLIM claiming the turnover among its workforce has caused instability. MLIM's head of global equities outside the US, Andreas Utermann, left the company last week.

The spokesman said that only 14 of MLIM's 600-strong investment team had left since the turn of the year.

He added MLIM had taken in $9bn (pounds 6.3bn) of net new business since January.
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Title Annotation:Business
Publication:Western Mail (Cardiff, Wales)
Date:May 18, 2002
Words:449
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