Merrill stumps up to end Sainsbury pension fund row

Merrill Lynch Investment Managers has avoided another high profile legal action from a leading pension fund client by making a secret payment to the supermarket group Sainsbury, which had been seeking redress for the management of its £1.5bn fund.

The move follows last year's acrimonious court room battle between MLIM, formerly known as Mercury Asset Management, and Unilever over the performance of the food and detergent group's pension fund in the mid to late 1990s.

Industry sources believe that MLIM was anxious to avoid another public row after the Unilever case pitched its former head Carol Galley against Wendy Mayall, head of the Unilever pension scheme.

The Unilever case ended suddenly in December with a hastily agreed out-of-court settlement thought to run to £70m. Sainsbury is understood to have accepted compensation which also runs into tens of millions of pounds.

Neither MLIM nor Sainsbury would comment on the size of the compensation last night.

In a joint statement they said: "J Sainsbury plc and Merrill Lynch Investment Managers Limited, based on their long standing business relationship, have resolved all past issues on an amicable basis."

Their relationship dates back to 1974 when Sainsbury's pension fund placed £1m with what was then SG Warburg.

The Unilever case prompted many other pension fund clients of MLIM to consider compensation action for the poor performance of the funds in the mid to late1990s.

Industry sources believe that the threat of legal action from Sainsbury's was of most concern to MLIM, which has lost customers as a result of its difficult trading period in 1997 and 1998. It is understood that MLIM did not admit liability in settling with Sainsbury.

MLIM, part of the Wall Street firm Merrill Lynch, is expected to contest any further claims. AstraZeneca is among those rumoured to be considering action.

The Co-operative group sacked MLIM in May after 30 years because it was "unhappy" with its performance. Sainsbury, however, is understood to be maintaining its relationship with the fund management group which has undergone a restructuring since Ms Galley left last year.