UK Universities scheme focuses on emerging markets

The £27 billion ($44 billion) Universities Superannuation Scheme has made three new appointments and reorganised its equities team with a new dedicated global emerging markets capability, the first internal restructure under new chief investment officer Roger Gray.

The new appointments include Carmel Peters who will head up a combined global emerging markets/Asia unit, incorporating the existing four-person Asia ex-Japan team. The emerging markets exposure is about £2 billion, but it is an area Gray identified when he was appointed to the role last September.

Other appointments include Danila Gallarato who was previously the head of equity opportunities for Europe at Abu Dhabi Investment Authority as with responsibility for ADIA’s strategic investment in both developed and emerging European markets, both private and public.

Chris Shale also joins the team, he previously worked with Peters at RWC.

“Carmel, Danila and Chris bring great experience and calibre to our organisation, enabling us to strengthen further our Asian capability and to take a global approach to the varied opportunities across the full range of emerging markets,” Gray said.

Equity investment at the USS London Investment Office (LIO) is divided into five regions: the UK, American, European, Japanese and Asian (excluding Japan) markets.

The London investment office of USS employs about 70 people and with the exception of about 10 per cent in alternatives and about 10 per cent in external equities, the fund manages the majority of its investments in house.

When Gray joined the fund in September last year he told conexust1f.flywheelstaging.com one of the more philosophical issues was the regional rather than global equities allocation. The UK traditionally has invested on a regional basis, unlike other parts of the world which allocate globally, and the equity investments at the USS London investment office are divided into five regions, with teams specialising in the UK, American, European, Japanese and Asian ex-Japan markets.

Gray said there may be some room to debate this regional versus global allocation.

“I’m globalist by heart but a regionalist or pragmatist by head. It seems difficult to pull together a true global fund,”he said at the time. “Global equities on a quant basis is plausible. You have to think hard about how to pull it together but it is ripe for experimentation.”

While the UK traditionally has had a regional focus, it was a nuance of the previous chief investment officer Peter Moon not to make a distinction between developed and emerging market equities. So the internal team has to make a call, for example, within the Americas, to allocate between US and Brazil. So Gray said at the time global emerging markets was an area the fund may also look at.

“We haven’t got an emerging markets focus per se. Mandates are set up as all-country, regional mandates, it’s an area to look down.”