Published On: Thu, Oct 24th, 2013

Heathrow deal takes USS infrastructure portfolio to £1.5bn

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The purchase of a £400 million stake in Heathrow Airport by the Universities Superannuation Scheme has taken its portfolio of infrastructure assets to £1.5 billion – roughly twice what it had 18 months ago.

USS said yesterday afternoon that today it would acquire the 8.65% stake in FGP Topco ̶ a holding company that owns Heathrow Airport Holdings ̶ from Spain’s Grupo Ferrovial, which remains the largest shareholder with a 25% stake.

The Heathrow stake is USS’ largest investment in UK infrastructure to date. In yesterday’s statement Roger Gray, the chief executive of USS Investment Management, which runs the scheme, described Heathrow as a “premier UK infrastructure asset” and said the transaction was a “long-term investment by USS in the future of London and the UK”.

The £392 million purchase takes USS’ infrastructure portfolio to £1.5 billion, making it one of the scheme’s principal alternative investment categories. This portfolio was valued at £1.1 billion in March this year, according to the scheme’s accounts published this week, and £788 million as of March 31, 2012.

The scheme has a long-term plan to invest up to 7% of its assets (up to £2.7 billion) in infrastructure and timberland. A spokeswoman for the fund said: “The tempo of investment is obviously dependent on the transactions and terms available to us.”

With total assets of £38.8 billion as of March 31, USS is now either the largest scheme in the UK, or the joint-largest. The last reported figures of the BT Pension Scheme give its value at £38.7 billion as of December 31 2012, but the two funds’ reporting periods do not match up exactly, and their values will both fluctuate in line with market movements from day to day and month to month.

In the longer term, USS is set to become the UK’s largest fund, as the BT scheme is closed to new joiners. With a funding deficit last gauged at £7.9 billion, as of June 2013, it said it is keen on investments that match the pensions payouts it has to make.

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