MAM 'broke rules' on Unilever

By PAUL ARMSTRONG
Updated:

 

MERCURY Asset Management broke some of the golden rules of investing with a high-risk approach that caused Unilever's pension fund to miss its performance targets by almost 10%, the High Court was told.

Opening the case for the household products group, Jonathan Sumption QC said Mercury, now owned by Merrill Lynch, failed to ensure the Unilever fund was adequately diversified and it paid heavily for poor investment decisions made between 1 January 1997 and March 1998.

Unilever is suing Mercury, claiming the investment manager's negligence cost its fund £130m. Mercury denies the allegations.

Sumption said the pair had agreed the fund would aim to beat its benchmark index by 1% and avoid underperforming it by more than 3%. 'The result, it is agreed, was an underperformance of about three times the 3%,' he said.

This was due mainly to the poor returns recorded on the fund's investments in UK equities. These underperformed the FTSE All Share index by 13% in the period, due partly to the overweight position in industrial stocks.

But he said Carol Galley, then head of Mercury, would say the targets were 'no more than a hopeful aspiration' and not intended to govern the way the portfolio was managed.

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