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UK pension commits $750m to US start-up fund

A fund led by former Standard Life executives has signed a strategic relationship with USS, a relatively recent entrant to the asset class.

Universities Superannuation Scheme (USS), the UK’s second-largest pension fund, has backed Boston-based Constitution Capital Partners (CCP), a start-up private equity firm focussed on North American buyouts, to the tune of $750 million (€484 million).

USS has invested $600 million in CCP’s debut fund, which has a target of $1 billion. It has also committed $150 million to a warehouse line and taken a ten percent ownership stake in CCP.

USS only began investing in alternative assets towards the end of 2006 when it appointed Mike Powell as head of alternative assets from the Shell Pension Fund. But the organisation, which has around £30 billion under management, has a medium-term aim of committing 20 percent of its total capital to alternatives, with half of this accounted for by private equity and infrastructure.

Commenting on the strategic relationship with CCP, Powell said in a statement: “We were looking for the most effective way to increase our investments in North American middle market private equity, and after extensive due diligence, we believe we have identified the best team and approach.”

CCP will focus on fund of fund investments in North American private equity funds with $200 million to $2.5 billion in assets under management, as well as direct investments of $10 million to $45 million in companies with enterprises values between $100 million and $1 billion.

The CCP team is headed by managing partners Daniel Cahill, the former head of Standard Life Investments Private Equity USA, and John Guinee, formerly an investment director at the same organisation.

Private equity funds backed by USS to date include Apax Europe VII, Carlyle Partners V, Warburg Pincus Private Equity X and WL Ross Recovery Fund IV.