Towers Watson Faces Lawsuit over ‘Negligent Advice’

Global consulting firm Towers Watson is being sued by one of the UK’s largest pension funds for more than £47 million ($72 million).

The UK’s British Coal Staff Superannuation Scheme has filed a lawsuit in the US against the consultant alleging “negligent investment consulting advice” relating to a currency hedge.

The trustees of the £8.7 billion pension issued Towers Watson a letter of claim in September, according to a 10Q filing made to the US Securities and Exchange Commission (SEC) on November 5. The lawsuit relates to a currency hedge on a £250 million investment in a local currency emerging market debt fund, which was made in August 2008. The advice was provided by Watson Wyatt, which merged with Towers Perrin to create Towers Watson in 2010.

According to the regulatory filing, the claim alleges that the currency hedge caused a “substantial loss” to the pension fund between August 2008 and October 2012. The loss was valued at £47.5 million by the pension fund.

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A spokesperson for Towers Watson told CIO that the firm “disputes the allegations brought by the British Coal Staff Superannuation Scheme and intends to defend the matter vigorously.”

The SEC filing stated: “Based on all of the information to date, and given the stage of the matter, [Towers Watson] is currently unable to provide an estimate of the reasonably possible loss or range of loss.”

The consultant was set to have issued a letter on the matter to the pension fund on or before December 23, 2014, the filing said.

The British Coal Staff Superannuation Scheme declined to comment.

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US pension funds experienced their first overall quarterly loss on investments since April-June 2012 in the three months to the end of September 2014, according to data from the US Census Bureau.

The data from 100 of the biggest public pensions in the US shows that revenue from investments fell $43 billion in the third quarter of 2014, following gains of more than $200 billion in the first half of the year. The third-quarter declines were in part due to falls in the FTSE 100 and EuroStoxx 50 indices during the period.

Despite the losses, total assets across the 100 funds rose by $105 billion in the first nine months of 2014 to $3.31 trillion. Over five years, total assets in US public pension funds have risen 39%, from $2.37 billion in September 2009.

Pensions increased their exposure to corporate and government fixed income securities by $84 billion during the same period, and added $38 billion to US equity investments. Overseas securities exposure was reduced by $37 billion.

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US Census Bureau Qly Survey