USS Offloads $1B Private Equity Portfolio

The Universities Superannuation Scheme (USS) has sold off a section of its private equity portfolio, raising £640 million ($917 million) in the process.

The 13 stakes in private equity funds changed hands to Ardian—a former subsidiary of French group AXA— that, on its website, takes credit for kickstarting the secondaries market in 2010.

“The sale of these interests on the secondary market is an effective means of adapting our portfolio towards greater direct investment.”The move is part of a wider effort by USS, one of the UK’s largest pension funds at £48 billion, to take direct control of its private assets, within the wholly-owned asset manager USS Investment Management.

“The sale of these interests on the secondary market is an effective means of adapting our portfolio to reflect our shift towards greater direct investment,” said Geoffrey Geiger, head of private equity at USS. “Within our private markets team direct investment experience extends across multiple asset classes, sectors, and geographies.”

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In November the multi-employer pension hired six staff members to its internal team, reporting to Mike Powell, head of private markets.

At the time of the hires, Powell said the in-house team “can deliver superior risk-adjusted returns, and bring additional benefits for our members in terms of alignment of interests and greater governance over our investments.”

Last year the pension bought UK motorway services chain Moto Group, subsequently offloading a 40% stake to CVC Capital Partners as a co-investment.

USS’ private markets team also manages the pension’s 10% stake in Heathrow Airport, investing alongside heavyweight investors including China Investment Corporation and Caisse de dépôt et placement du Québec.

As well as private equity, the team manages timberland assets in the US and Australia and a private debt portfolio. Private assets make up more than 20% of USS’ total portfolio.

Geiger said that USS would continue to allocate to externally managed funds: “We recognize the value of investing in funds managed by general partners who share USS’ values.” The pension added in a statement that the sale would not preclude the offloaded managers from working with USS in the future.

The UK’s Railways Pension Scheme (Railpen) is also seeking to bring private equity management in-house. Richard Moon, a private equity and infrastructure specialist, told CIO in 2014 that Railpen aimed to cut costs by “consideration of a number of investment models outside the traditional fund model, such as co-investing or going direct with private equity and infrastructure.”

The American Red Cross’ investment office has entered the rebuild phase.

Postings for a head of private equity and senior investment manager went live yesterday, marking the first investment staff searches since CIO Greg Williamson took over in March 2015.

These senior positions both report directly to Williamson, the former longtime CIO of BP America.

The private equity manager “will take a leadership role in building, implementing, and overseeing” all activity for the asset class, the official posting stated, with the mission of implementing “a leading-edge private equity investment program.” Real estate, infrastructure, and other illiquid investments also fall at least partly under the position’s mandate.

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Candidates must have at least five years of relevant experience, “preferably in a direct environment.”

The senior investment manager position requires at least twice that much, including fluency with defined contribution, pension, and endowment assets. Portfolio managers and derivatives traders—current or former—are “highly desirable.”

This role appears to take over many of responsibilities formerly under deputy CIO Anne Shelton, who lost her job along with Managing Director Edward Karppi during a reorganization last October.

Like a typical deputy CIO, the senior investment manager “will report to and advise the chief investment officer on all investment and risk matters.”

The American Red Cross hired Williamson to transform the roughly $5 billion portfolio and the division responsible for it into “an industry leader in investment asset management.” As recruiting begins for core members of his senior team, Williamson appears to be pushing ahead on that mandate.

Both positions are based at the American Red Cross’ national headquarters in Washington, DC.

Interested?