UK – The Universities Superannuation Scheme is considering a £6bn (€8.7bn) shift out of equities into alternative assets such as private equity and infrastructure investments, according to a news report.

The Financial Times cited USS investment chief Peter Moon for its report saying the £21.7bn fund, which has a £6.6bn deficit, is considering the move following an asset-liability modelling exercise by Mercer Human Resource Consulting.

It said Mercer advised that between 20%-30% of the fund could be shifted into alternative assets.

USS invests retirement funds for 215,000 academics and has more than 80% of its UK and overseas equities.

The FT added that such a “huge shift” from equities, albeit over a number of years, would represent one of the biggest changes in asset allocation that the market has seen from a private pension fund.

The report said a decision on the proposed change in asset allocation would be taken by the management committee of the USS trustee company on June 14.

Moon told the paper that the aim is not primarily to reduce risk through diversification but to achieve returns similar to those in equities by investing in uncorrelated asset classes.

Reuters quoted pension consultant John Ralfe as saying USS has a major deficit and is more exposed to stocks than many rival funds.

“USS is taking a bigger equity bet than any insurance company, bank or hedge fund,” Ralfe said in a note for RBC Capital Markets.

The agency quoted USS as saying Ralfe underestimated its financial strength and defended its high equity allocation.

Meanwhile, it has emerged that David Russell and Daniel Summerfield will take over the responsible investing duties at USS with the departure of Raj Thamotherman to AXA Investment Managers.

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