Henderson changes legal advisers amidst LP dispute

Clifford Chance has replaced CMS Cameron McKenna as legal advisers to Henderson on a dispute with several pension funds over the performance of its second infrastructure fund. The pensions have given Henderson until late September to draft a compensation scheme before taking it to court.

UK-based asset manager Henderson Group has changed legal advisers on a dispute with a group of pension funds that are threatening litigation over the performance of its second infrastructure fund.

Henderson: LPs
unhappy with

Clifford Chance has replaced CMS Cameron McKenna in providing legal counsel to Henderson on the dispute. A spokesman from Henderson did not wish to comment on the change, which comes as a key deadline in the conflict between Henderson and some of its limited partners (LPs) approaches.

During a recent results presentation, Henderson said that investors in one of its infrastructure funds – Henderson PFI Secondary Fund II (Fund II) – were threatening litigation over its performance. Fund II has lost 60 percent of its value since it closed in 2006.

At the heart of the dispute – which is said to involve up to 30 pension funds invested in Fund II, comprising some 90 percent of its value – is the way in which Henderson used the £574 million (€689 million; $885 million) it raised from investors.

The disgruntled pensions are alleging that Henderson told LPs it would invest the money in low-risk, steady-income projects that form part of the UK’s private finance initiative (PFI), the UK’s standard procuring process for public-private partnerships.

Instead, Henderson used all of the capital raised to acquire UK construction company John Laing, which owns an extensive portfolio of PFI projects. This exposed LPs to John Laing’s pension deficit which, combined with low forecasts for PFI projects in 2009 and 2010 and capital constraints faced by John Laing in the wake of the financial crisis, led to Fund II’s steep drop in value.

Henderson said during the results presentation that it “is confident that it has no legal liability in respect of these issues and will vigorously defend any proceedings which may be brought”.

The 10-year Fund II has seen its value increase by 23 percent to £229 million as at March 31, 2010, Henderson said in its half-yearly results presentation. In October 2009, a leaked internal report to Henderson’s shareholders showed that Fund II was only worth £191 million, a 66 percent drop in value since it was raised.