The body governing Britain’s biggest pension funds advised its members to chase some $2.4 billion (£1.23 billion) in unclaimed damages from US securities class actions yesterday, putting it on a collision course with representatives of the UK’s largest investors.

The National Association of Pension Funds (NAPF) advised its members, which care for the £800 billion saved by Britons in final salary pension schemes, to make sure that they get their share of the $18.3 billion paid out last year by US companies to litigating shareholders.

But the Association of British Insurers (ABI), which represents Britain’s biggest fund management houses investing in the stock market on behalf of pension funds, is opposed to class actions.

It fears that they would be undertaken at the expense of ordinary shareholders.

Speaking at the NAPF conference in Edinburgh, David Paterson, the NAPF’s head of corporate governance, said: “Pension trustees have a duty to protect the assets in their scheme. At the very least they shouldn’t neglect opportunities to recoup losses, especially where the cost and effort of doing so are commensurate with the expected return.”

The NAPF has issued a paper advising trustees on the practicalities of joining in US class actions. It has not suggested that similar actions are, or were likely to become, common in the UK or Europe.

“At a time when pension scheme deficits are a matter of ongoing concern, scheme members could be forgiven for asking why trustees are not taking every available opportunity to recoup funds to which they’re rightfully entitled,” Mr Paterson added.

He admitted that class actions were a “blunt instrument” but “when you haven’t got shareholder power of the kind that you have in the UK, litigating is the only thing open to you”.

The ABI believes that class actions will come at the expense of good relationships between shareholders and companies. Peter Montagnon, director of investment affairs at the ABI, said: “US-style litigation is expensive and open to the privileged few at the expense of the majority of shareholders. The better alternative is for shareholders to engage with companies, which we can pursue in the UK.”

A debate is raging in the US about the right of shareholders to vote on corporate issues such as executive remuneration. Without ways to make their views known to management, US investors bring between 130 and 160 successful compensation claims against companies every year. Much of the money won goes unclaimed.

Patrick Daniels is a partner at Lerach Coughlin, the US law firm founded by Bill Lerach, known as the King of the Class Action. Mr Daniels, who won £30 million from British and European pension funds in 2005 as part of the Time Warner/AOL settlement, said that UK investors had already embraced the NAPF’s advice.

“We’re already seeing it in practice and the reason is that the trustees see the publicity and the size of the settlements for cases like Enron and Worldcom and start to expect questions about their exposure and what they’re doing about it.”

F&C plans 50% profits boost

F&C Asset Management yesterday set itself the target of boosting profits by 50 per cent over two years as it issued details of its turnaround strategy. (Patrick Hosking writes)

The struggling fund management group also gave an indication of the size of the threatened dividend cut, which it foreshadowed in January. It said the rebased dividend would be at least 1.5 times covered by earnings, adding that it was comfortable with earnings forecasts for the current year of 9.8p. That suggests a maximum dividend for 2007 of 6.5p – a 41 per cent cut on the 11p dividend paid out in each of the past seven years.

Alain Grisay, chief executive, said that he aimed to boost profits between 2007 and 2009, but that profits would be down in the current year as F&C stepped up investment in new products, overseas offices and technology.

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