The in-house money manager for the Universities Superannuation Scheme, London, is planning to overhaul its investment approach related to about £14 billion ($18 billion) of developed market equities.
USS Investment Management, which runs the assets of the £68 billion pension fund, said in a statement that it plans to reshape its developed market equities portfolio toward a "longer-term thematic approach which better leverages its internal investment capabilities in matching its pension liabilities."
The plans, which relate to about half of the public equities portfolio, would see a move away from traditional stock picking, USS added in the statement.
The firm hired BlackRock as transition manager to oversee three equity allocations — Japan, the U.S., and pan-Europe — while the change in investment approach takes place. A spokeswoman for USS said BlackRock has already taken on these assets.
Due to the planned changes 13 roles will be put at risk of redundancy, including that of Elizabeth Fernando, head of equities at USS Investment Management, the spokeswoman confirmed. The firm has launched a period of consultation with the staff, with some personnel moving to other teams. A further 18 staff members working on the equities team and focusing on global emerging market equities, quantitative analysis and responsible investment will be unaffected by the plans.
The new approach will see quantitative and responsible investment analysts working together to identify long-term investment opportunities best suited to producing returns to meet the pension fund's liabilities. Regarding developed markets, the new plans will move focus away from individual stocks and more toward the impact of environmental, social and governance issues as well as other long-term factors driving investment themes.
Stock selection will remain a focus in those areas where there are long-term structural opportunities. These investments "will also receive a strong responsible investment overlay so that there is a consistent view across markets and asset classes," the statement said.
The statement added that the change in approach "marks no change to the investment objectives, asset allocations or outperformance targets for the scheme. Nor is this any reflection on the performance of equities, which was very strong in 2019."
The spokeswoman added that USS has not set a time frame for the changes.
