One Book of Record, Better Outcomes: A Class Action Playbook for Pensions

Portfolio diversification is the cornerstone of public pension investment strategy, enabling funds to balance their long-term obligations against short-term risks. When it comes to shareholder class actions, however, the same disciplined approach rarely produces the best outcomes.

Pensions with public equity allocations are often eligible for significant compensation. In 2025 alone, investors recouped approximately $4 billion from more than 125 settled U.S. securities cases. Plans have a fiduciary obligation to file claims for these cases when their constituents suffer losses.

Some plan sponsors split class action responsibilities across external partners, believing it ensures coverage and maintains cost efficiency. Custodians, for example, might handle U.S. claims filing while one or more law firms monitor domestic stock drops and global shareholder litigation. Through this lens, outsourcing case monitoring and claims filing to multiple parties might sound logical.

However, taking a fragmented approach to class actions can erode recovery efforts and governance in multiple ways. For example, it introduces:

• Gaps in historical holdings and trading data when custodian transitions occur
• Opacity around the status and outcomes of previously filed claims
• Bias toward active participation in cases (as opposed to only filing passively)

Where fragmented class action strategies can fall short, a comprehensive securities litigation governance program – built around a single book of record – can deliver better outcomes for institutional investors. This article will explore why and how.

The Coverage Gap

Selecting an asset servicing partner is a foundational decision for any pension plan. Over the years, custodians have expanded their offerings to include numerous services that fall outside of their core competencies, such as cash management, benefits payments, securities lending, and foreign exchange – all areas where specialty providers also exist. Shareholder class action services fall squarely in the same category. Pensions, therefore, could benefit from a third-party perspective on class action governance.

Where most custodians provide “opt out” services for domestic settled class actions, virtually no major asset services provider covers non-U.S. shareholder litigation or securities-related antitrust cases due to the operational burden. Even within U.S. class actions, many asset servicing firms are disinclined to support more specialized recoveries, such as SEC Fair Funds or Delaware merger cases, because of the administrative challenges.

Dismissing these cases as insignificant would be a mistake. From 2022-24, for example, we saw:

• SEC Fair Funds represent roughly $1.7 billion in recovery opportunities
• More than $1.2 billion in new antitrust class action settlements
• 100-plus group actions initiated across a dozen non-U.S. jurisdictions

When large settlements attract headlines, plan staff unfamiliar with legal distinctions may anticipate or expect coverage for these specialized case types. Institutional investors should understand the level of class action their custodian offers and can even benefit from periodically reviewing the scope of their service agreement.

To address service gaps, some major custodians have begun outsourcing their class action services to third parties that specialize in managing these more complex recoveries. FRT, for example, manages filing and recovery obligations for three of the five largest global custodians. In fact, many custodians today already have a third party fulfilling pensions’ class action obligations through a “private label” provider.

However, working directly with a third-party class action specialist that can service all relevant shareholder litigation will offer the most comprehensive coverage. It also allows pensions to evaluate asset servicing providers on their core areas of competency – and not simply the breadth of their solutions.

The Historical Data Gap

Custodian migrations are massive undertakings. No custodians will utilize legacy data from a prior provider to file class action claims. Any related loss of historical trading data can thus raise the risk of overlooked, incomplete, or sub-optimal filings over a period of several years, as this data is the foundation of claim accuracy.

In addition, when an asset servicing partnership winds down, pensions may find it more difficult to obtain the documentation and records that settlement administrators require when auditing claims. FRT analysis shows that high-loss claims filed in U.S. class actions are more likely to be audited today than they were even four years ago. Without adequate trade substantiation, administrators will reject any claims they audit.

Ensuring that transaction data is complete, validated, and reconciled across past and present custodians is key to protecting plan member entitlements in future cases. As is often the case, however, the devil is in the details. A comprehensive class action governance program requires capabilities that most custodians will not offer, such as:

• Standardizing historical transactions and holdings across custodians and accounting agents
• Pre-filing analytics that can provide buy/sell matching to optimize claims either at the trust level or at the portfolio level
• Trade lineage software that can accurately address inter-account transfers before claim submission
• Automated reporting that creates an audit trail for class action participation, with oversight of pending claims throughout post-settlement administration

Establishing a single book of record for class action data allows pensions to take a “custodian-agnostic” approach to class actions – one that improves governance and reduces reliance on a single vendor.

The Role of Outside Counsel

Plaintiff law firms play an important role in bringing meritorious cases, routinely advising pension funds through complex legal matters. In addition, some firms provide securities class action monitoring and claim filing services. Like custodians, however, the operational and procedural nuances of shareholder recovery generally fall outside of a law firm’s expertise – i.e., advising clients and securing compensation for aggrieved shareholders.

For example, law firms would not significantly invest in claim filing operations such as data collection and normalization, deficiency management, or verify fully reconciled client remittances. Firms may also provide limited reporting on class action activity and case eligibility. Claims filing is typically more of a relationship-building exercise for outside counsel than an essential service offering.

Conversely, third-party class action providers are focused on what happens after a legal dispute is resolved. They will not solicit investors to register as lead plaintiff, but rather work to file accurate claims, and ensure that eligible settlement funds are recovered.

Because third parties are not promoting participation in cases, these providers can also offer a more objective view of the shareholder litigation landscape, including the potential risks and benefits of participating in “opt-in” cases outside of the U.S. Where advantageous to investors, third parties may also partner with litigation funders and case organizers to develop more favorable agreements for class members, such as terms that reduce registration burdens or enable investors to passively preserve their claims in pending litigation. All of this helps ensure alignment of interest with institutional investors.

To be clear, law firms will always hold a critical place in the ecosystem. Without their efforts and risk-taking, class actions would not be an effective mechanism to hold public companies accountable for their actions and business practices. Class action providers are complementary to these efforts. Where outside counsel is most focused on securing adequate financial redress in court, however, third party class action firms have a prerogative to secure compensation owed after a case settles.

Conclusion

Fragmented class action strategies may seem practical, but they often leave pension plans at risk of missed recoveries, data gaps, and governance risks. By consolidating oversight under a single, comprehensive program, plans can safeguard member entitlements, reduce vendor complexity, and maximize compensation opportunities globally.

In an era of heightened fiduciary scrutiny, a centralized approach is more than a best practice – it’s essential.