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EXPERTS INSIGHTS

SEDA Experts' role in an ERISA Portfolio Mismanagement

  • Writer: SEDA Experts
    SEDA Experts
  • Mar 18, 2021
  • 3 min read

Updated: Mar 16, 2023


THE CASE

One of the largest employee retirement funds in the country at the time with nearly $1bn in assets under management, suffered losses due to a portfolio mismanagement between 2014 and mid-2016.


The fund managers were alleged to have violated their fiduciary duty to maintain proper diversification in the fund by allowing one particular security to reach a concentration level above 25% of the fund value between 2014 and 2015, and up to over 40% of fund value by mid-2015.


There were also allegations against the retirement fund managers of failure to prudently divest the security when accounting irregularities became publicly known in late 2015.



SEDA EXPERTS' ROLE


SEDA's experts were retained by plaintiffs to:

  1. Describe the minimum standards and prevailing practices of investment managers and advisory committee with discretionary authority and/or control over the management and/or administration of investment assets as well as those with the power to appoint, retain and/or remove those with discretionary authority and/or control over the management or administration of investment assets.

  2. Describe the prevailing standards and practices for the diversification of investment assets where necessary to minimize the risk of large losses.

  3. Describe the prevailing standards and practices for those responsible for overseeing and/or monitoring those with discretionary authority and/or control over the management or administration of investment assets as well as those with the power to appoint, retain and/or remove those with discretionary authority and/or control over the management or administration of non-diversified investment assets;

  4. Opine on the conduct of the investment manager and the advisory committee managing the ERISA fund.

  5. Identify alternative investments in which the investment managers should have invested the fund assets made available by sale of the stock at issue when it became prudent to do so, and rebalancing the fund assets.

  6. Based on the above calculate how pension fund investors were harmed by the alleged breach of fiduciary duty in failure to adequately diversify the portfolio and prudently divest a particular security when its accounting irregularities became public.

  7. Calculate damages to over 400 participants to the fund based on simulated but-for portfolio values assuming the fund managers did not violate their fiduciary duty.

  8. Simulate fund performance under four alternative portfolio management strategies to calculate but-for performance and fund value had the fund not violated their fiduciary duty.


THE RESULT


Arbitrators accepted entirely SEDA's experts analysis and opinions, and over 90% of the retirement fund investors have been able to recover damages calculated to be nearly $300 million at the fund level.




EXPERTS RETAINED


Richard Marin

Richard Marin as a former finance senior executive with over 40 years of industry experience, and as a former clinical professor at Cornell University is a world-class testifying expert in asset management, alternative investments, private equity investments, securities lending, retirement and pensions, and real estate/project financing. He was previously the Chairman and Chief Executive Officer at Deutsche Bank and Bear Stearns, and a senior executive at Bankers Trust Company. Click here for his bio



Damiano Colnago

Damiano Colnago is a Managing Partner at SEDA Experts, specializing in complex structured products. Mr. Colnago demonstrates intricate focus, knowledge, and expertise with regard to securities operations and reconciliation, custody and trustee services, collateral administration, and funds operations. His expertise includes damage calculations related to financial instrument defining lost profits, performing disgorgement analysis, and event study analysis. Click here for his bio




Sergio C. Godinho

Sergio Godinho is a senior professional with diversified experience in both the financial services industry, as well as providing advice in litigation, dispute resolution, mediation, and business consulting matters, including class actions and class certifications. He works closely with senior experts in establishing causation, liability, and damages across a vast array of dispute matters. Click here for his bio




ABOUT SEDA


SEDA Experts is a consulting firm specializing in financial services. We provide superior independent advice, expert witness services, data analytics, and valuation services to law firms in both litigation and business contexts.


​Our mission is to support law firms by offering the highest level of expertise across the financial industry, providing access to the most influential financial services industry leaders in the market.


Our experts have unmatched industry experience in a vast array of financial services practices. With decades of industry experience as senior executives and global managing directors at leading financial institutions, consulting firms, and regulators, each of our financial expert witnesses is dedicated to applying exceptional real-world economic, financial, and quantitative principles to complex business and legal challenges.


We deliver academic rigor, objectivity, and industry best experience with issues arising from regulation, public policy, strategy, finance, and litigation.


Learn more about SEDA at sedaexperts.com

Contact Us

+1 646-626-4555

 
 
 

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mark tan
5 days ago

The jump from 25% to over 40% in one security really shows how quickly a lack of diversification can spiral—especially after red flags like those accounting irregularities. Thanks for explaining SEDA’s role in setting minimum standards; it makes the fiduciary breach easier to grasp. By the way, I keep a free transmission fluid reference guide I like to share. https://transmissionfluid.net/

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