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USS sells £640m private equity portfolio as it targets direct investments

The Universities Superannuation Scheme (USS) has sold a £640m (€868m) private equity (PE) portfolio as it prepares a shift towards greater direct investment.

The portfolio, sold to Ardian, comprises the pension scheme’s stakes in 13 PE funds, but USS said in a statement that the sale of any one managers’ fund would not preclude it from working with them in the future.

Geoffrey Geiger, head of private equity at the fund’s wholly owned asset manager USS Investment Management, said the sale on the secondary market was an effective way to adapt its portfolio as it shifted towards a greater number of direct PE investments.

“Within our private markets team direct investment experience extends across multiple asset classes, sectors and geographies,” Geiger added.

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“At the same time,” he said, “we recognise the value of investing in funds managed by [general partners] who share USS’s values and we will continue our active allocation strategy.”

The statement by USS added that it would continue to commit to a “concentrated group of GPs with whom [we] will work in partnership”, citing the opportunity for co-investments alongside direct investments.

The industry-wide fund, the largest in the UK with £48bn in assets, last year hired a number of new staff for its private markets team, currently responsible for around one-fifth of fund assets and comprising property, infrastructure, private debt, inflation-linked debt and equity, special situations and private equity.

It hired Emma Singh, a former private equity controller at UK in-house pension manager BP Investment Management, to help manage the fund’s new direct investment strategy.

The private markets team in October last year wholly acquired Moto Mospitality, a UK motorway services firm, only to later sell a 40% stake in the firm to CVC Capital.

It returned 17.9% over the course of the 2014-15 financial year.

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