Fundraising

Henderson threatened with litigation by fund clients

The UK-based asset manager announced yesterday that clients in one of its UK infrastructure funds are threatening legal action against the group. The fund in question has been underperforming since its inception and is fully invested in a single company and its projects.

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Henderson Group, the UK-based asset manager, announced during its half-yearly results presentation yesterday that some of its clients are threatening litigation over the performance of one of its infrastructure funds.

The fund in question – Henderson PFI Secondary Fund II (Fund II) – is fully invested in UK infrastructure group John Laing and its projects, the majority of which are project finance initiative (PFI) deals. PFI is the UK government’s standard method of procuring public works through the private sector.

“Some clients invested in Fund II have written to us threatening litigation, although, as of today’s date, no legal proceedings have been served,” Henderson wrote in its results report. “The group has thoroughly investigated the issues raised and is confident that it has no legal liability in respect of these issues and will vigorously defend any proceedings which may be brought,” it added.

Henderson said that Fund II and its first infrastructure fund – Henderson PFI Secondary Fund – increased in value by 23 percent and 4.6 percent respectively during the half-year. Fund II is valued at £229 million (€279 million; $358 million) as at March 31, 2010 – a £344 million drop in value since it was raised.  Henderson raised Fund II in 2006 reaching final close at £573.5 million.

Still, Fund II has seen worse days. In October 2009, a leaked internal report to its shareholders showed that it was only worth £191 million, a 66 percent drop in value since it was raised.

In the leaked report, Henderson blamed its £1 billion acquisition of John Laing in 2006 for Fund II’s decreasing value. The report highlighted John Laing’s pension deficit, low forecasts for PFI projects in 2009 and 2010 and capital constraints faced by John Laing as the chief factors behind the fund’s devaluation.

Modest growth in the value of its first infrastructure fund in the period to March 31 2010, which also invests in PFI projects and owns part of John Laing, has meant that its valuation remains flat in relation to the £330 million it raised to reach final close in 2005.