> Pension Funds Insider> Dutch pension fund ABP sues third asset manager over mortgage-backed securities
ABP, the third biggest pension scheme in the world, filed a lawsuit at the New York state Supreme Court last Friday against asset managers Goldman Sachs over 'misleading' investments.
The scheme responsible for the Dutch public sector and teacher's pensions, sued the firm in a bid to claim back an undisclosed amount of losses. The losses allegedly occurred from investments in residential mortgage-backed securities (RMBS), sold to the scheme by the manager.
According to ABP, which invests over €239bn, Goldman facilitated the "systematic abandonment" of underwriting guidelines and appraisal standards to package and sell securities to investors like ABP. These securities were far riskier than initially represented, according to the lawsuit.
Goldman and its rivals currently face multiple lawsuits accusing them of misleading investors who suffered losses when the housing market crashed in the U.S. Like ABP, the investors often claim Goldman placed bets against their own securitisations.
Goldman Sachs is the third manager to get sued by the scheme in a matter of months. In December 2011, ABP sued JPMorgan, followed by Credit Suisse in early January.
Both of the previous lawsuits also involved the alleged mis-selling of RMBS.
ABP and its administrator APG are known for their shareholder activism and thorough governance practices. The move to claim back losses is therefore not unexpected, even though many schemes may have declined to make claims on similar losses to avoid further possible losses due to high legal fees.
The pension fund is represented in the case by Grant & Eisenhofer. Goldman Sachs declined comment.
The complaint reads: "The securities purchased by ABP were collateralized against mortgages acquired by Goldman from various other third-party originatorsâ€¦The originators did not, however, hold the mortgage loans they originated and/or acquired. Rather, taking advantage of an unprecedented boom in the securitization industry, these originators sold their mortgage loans to investment banks, which then repackaged and sold the loans as RMBS to investors seeking safe investments, such as Plaintiff ABP.
"In the case of the loans underlying ABP's certificates, the investment bank that sold the RMBS was Goldman. Specifically, GS Securities pooled the mortgage loans made by the originators; deposited the loans into special purpose entities or "trusts"; and then repackaged the loans for sale to investors in the form of RMBS. The defendant, as underwriter, then sold the RMBS to investors such as ABP."
The case is Stichting Pensioenfonds ABP v. The Goldman Sachs Group, 650264/2012, at the New York state Supreme Court.
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