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Alternative Market Briefing

UK pension sues investment consultant for $72 million over botched currency hedge

Tuesday, January 06, 2015

Komfie Manalo, Opalesque Asia:

The UK’s British Coal Staff Superannuation Scheme, one of the largest pension funds in the UK, is suing global consulting firm Towers Watson over its alleged "negligent investment consulting advice" in relation to a currency hedge.

In a report, Chief Investment Officer said the £8.7bn British Coal is seeking to recover more than $72m, according to a 10Q filing made to the U.S. Securities and Exchange Commission on November 5.

Court records showed that British Coal hired Towers Watson in August 2008 to provide advice on a £250m investment in a local currency emerging market debt fund. However, the pension fund suffered "substantial loss" from the said investment between August 2008 and October 2012. The loss was estimated to value at $72m.

But a spokesperson for Towers Watson disputed the charges made by British Coal and said the company would "defend the matter vigorously."

It will be interesting to watch how this lawsuit will play out. Financial intermediaries like funds of funds have long time criticized the growing influence of consultants who have been taking large market shares from them, mostly without actually taking on a fiduciary responsibility over the clients' assets and investment success.......................

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