Former protege attacks Galley over running of Unilever pension fund

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The Independent Online

Alistair Lennard, the star fund manager who managed £660m of assets in Unilever's pension fund, yesterday attacked the formidable reputation of Carol Galley and criticised her record as a fund manager.

Mr Lennard was a protégé of Ms Galley at Mercury Asset Management and took over day-to-day running of the Unilever fund from her in August 1993 at the age of 27. The court heard Mr Lennard testify about the management of the fund which has performed so badly it has triggered a £130m lawsuit against Mercury by Unilever.

Mr Lennard told the High Court the hand-over of the fund to him followed a period of serious underperformance by Ms Galley in 1992 and 1993, which led to the investment missing its target of being in the upper quartile over a three-year period.

Asked if he thought Unilever was "dissatisfied" with this performance, Mr Lennard replied: "Actually I think they were. [Her performance] wasn't upper quartile, it wasn't even break even. She was getting a bit of a hard time [from Unilever]."

He attributed the fall in standards to Ms Galley's attention being diverted from her focus on UK equity investment for Unilever. "She was spending more and more time managing the business as opposed to focusing on managing the money. Part of the reason for me taking over the fund was she did not feel she was focusing enough on the portfolio," Mr Lennard said.

Ms Galley, who spent four and a half days in the witness box defending her and Mr Lennard's record, was not in court to hear Mr Lennard's description of her own performance.

She has previously said she handed the portfolio over to Mr Lennard because she had other managerial responsibilities at Mercury by 1993, but the court has not previously heard the claim that Unilever were "dissatisfied" with her performance.

Mr Lennard also cast doubt on the expertise of Wendy Mayall, chief investment officer for the Unilever pension fund and the main bridge between Unilever trustees and Mercury, which is now owned by Merrill Lynch.

He said Ms Mayall "did not seem to be someone who followed the markets and investment trends." He described his first meeting with her at a lunch in October 1995 as "hard going".

Mr Lennard, who was giving his first day of evidence, has heard his own record severely criticised as it inevitably contributed to an underperformance of 10.5 per cent by the whole Unilever fund between January 1997 and March 1998.

Due to his duff decisions, Mr Lennard, who is now 35, was removed from the Unilever fund in May 1997 and in October last year left the investment house to spend more time with his young family. He is thought to be setting up his own fund management business.

Mr Lennard attempted to give a robust defence of his role in charge of the Unilever fund, saying he had "high conviction" in his investment decisions. This included strategies such as selling practically all financial shares in the second half of 1996, a time when a strategy committee at Mercury believed that the sector still had value.

According to Jonathan Sumption QC, representing Unilever, Mr Lennard's dramatic positions led to "stratospheric" levels of risk in the portfolio. Under his control, active risk tripled from its level of 2.2 per cent under Ms Galley.

Mr Lennard acknowledged his risk levels were high but said it was not his job to monitor risk in the Unilever fund as a whole, which included additional funds to his UK equities portfolio. He attributed that role to a separate group within Mercury, called the Portfolio Review Committee.