Dutch and UK pension funds ravaged by losses now seeking class action to recover investments
January 13 2011, 1:44 pmInvestment International
20th December 2010
Dutch and UK pension funds ravaged by losses now seeking class action to recover investments
Northern European pension funds are set to try to recuperate €3.9 billion in class action law suits connected to losses suffered at the peak of the financial markets crisis in 2008, according to a new report.
The funds from Germany, the UK, Ireland, France and the Netherlands have lost over €450 billion on their investments in 2008. Over €60 billion of these losses originated from their US investments, says the report from GOAL Group, the leading global class action services specialist.
Dutch pension funds suffered the most colossal losses of €28 billion, followed closely by the UK pension funds at €26 billion, considerably ahead of the losses seen in France, Ireland and Germany at €3.4 billion, €2.4 billion and €485 million respectively.
The report also highlights that if class action participation rates do not improve, a number of Northern European pension funds will effectively forego their right to recoup in total approximately €1 billion of recoverable funds. This is a wake-up call to pension funds that are currently missing out on their legal right to claim damages through the US courts.
If investors and fund managers are to recoup a proportion of their losses through class action litigation, either in US or European courts, now is the time to become actively involved in the filing and participation process, the report added.
The losses experienced by Northern European pension funds in 2008 have been on such a large scale that only a fraction has so far been recouped. Whilst some cases are resolved within two years of being filed, many, as effectively demonstrated by the high profile case against Enron, will take several years before reaching resolution or settlement.
A study by Nera Consulting showed that at the end of 2009, over four fifths of filings related to the financial markets crisis were still unresolved. For cases filed in 2008 and 2009, median investor losses rose by two fifths compared to previous years, to over $500 million.
Securities class actions experienced a surge in the second quarter of 2010, with the annual number of filings set to be more than experienced in 2008, yet fewer than in 2009.
However, total settlement amounts in the first half of 2010 fell in comparison to 2009 levels. Once these credit crunch related cases come to resolution, the number and the size of settlements are likely to increase, as quantified by GOAL’s research.
Whilst pressure exerted on pension funds by the economic downturn appears to be easing, there is nevertheless a pressing duty of care for institutional investors and fund managers to act now if they are to recoup significant losses suffered at the peak of the financial markets crisis.
The recent abundance of high profile cases in the UK and throughout Northern Europe has helped raise awareness of the opportunities to claim. In March 2009, Merseyside and North Yorkshire pension funds filed a motion to become lead plaintiffs in a US securities class action against Royal Bank of Scotland. Similarly, Avon Pension Fund, was granted lead plaintiff status in a case against UK listed GlaxoSmithKline, Other examples include Lothian Pension Fund and the Northern Ireland Local Government Officer Superannuation Committee (NILGOSC) which were both granted co-lead plaintiff status in August 2008 against Lehman Bros over their mortgage backed securities.
‘Our research shows that aside from employing class actions to fulfil corporate governance responsibilities, there is a growing need for pension funds within the Northern European region to plug the escalating pensions gap, particularly as a result of losses suffered during the financial markets crisis,’ said Stephen Everard, Managing Director, GOAL Group.
‘As credit crisis borne cases continue to be brought through 2010, filings are likely to give way to Ponzi scheme allegation cases and standard securities actions. Fund managers should therefore be proactively filing and participating in class actions now, if they are to be included in what are likely to be the most sizeable settlements over the next three to five years, those emerging from the economic crisis,’ he added.
