Britain's Universities Pension Boosts HFs, Seeks Infrastructure

The £30 billion universities pension fund aims to up its exposure to short-term computer-driven hedge funds that try to profit from volatility by betting on turbulent market moves.

(November 10, 2010) — Britain’s £30 billion ($48 billion) universities pension fund is planning to up its exposure to short-term computer-driven hedge funds to deal with volatile markets, Reuters is reporting.

According to Luke Dixon, portfolio manager in absolute return strategies at the Universities Superannuation Scheme (USS), the fund this year has increased its exposure to short-term commodity trading advisers (CTAs), which tend to outperform many other hedge funds during short-lived market fluctuations. The fund aims to raise that exposure in the months ahead. “We intend to use (them) dynamically. (They) should help us in highly volatile markets. Our expectation is that we’ll continue to go through volatile (conditions),” he told the news agency during the Hedge 2010 conference in London.

USS began putting money into hedge funds last year. So far, it has invested £950 million with 15 managers. It’s in the process of increasing its exposure to macro hedge funds focused on emerging markets and commodities. Currently, the fund has roughly 40% of assets in macro funds, 40% in long-short equity, 15% in credit trading funds and 5% in managed futures or CTAs, Reuters reported.

Looking ahead, the fund plans to commit up to £2 billion to hedge funds over five years.

Separately, the USS, which invests £800 million of its £30 billion assets under management in infrastructure, aims to gain more exposure to direct and co-investment strategies. Roger Gray, chief investment officer at USS, told the Financial Times that the attraction of direct ownership comes from gaining a long-term asset.

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