Responsible Investor

USS is often approached by legal firms, particularly from the US, who are trying to get us, as shareholders in the companies they are targeting, to participate in class actions. USS tends to only participate in class actions where we believe that there is an opportunity for us to work with the company to change its governace structure and avoid issues happening again in the future.
Class actions are still relatively rare in the European market. USS has just participated in a settlement with Shell following its restatement of reserves a couple of years ago. This was a unique project led by Dutch pension funds under Dutch law whereby a settlement was reached with the company, as opposed to the more confrontational class action lawsuits that you see in the US.

Responible Investor: USS collaborates with a number of pension schemes worldwide on different topics. How do you decide what issues to look at and how does it work in practice.

David Russell: The types of collaborations that USS has been involved in enable other pension funds to participate at any point and we are very open to being approached by other pension funds and quite regularly are. Currently we are involved in a number of different collaborations on a range of issues including climate change through the Investor Group on Climate Change (IGCC). USS was also a signatory to the Carbon Disclosure Project (CDP) in its first iteration in 2002. We are also members of the Enhanced Analytics Initiative (EAI), which is encouraging the sell-side and other research providers to produce better longer term financial research. We are also members of the International Corporate Governance Network (ICGN) and Global Investor Governance Network (GIGN).

We are funders of Pharma Futures, which looks at the pharamaceutical sector and its business model to look at how we as large investor can work with companies to make that business model sustainable.
Responible Investor: USS was involved a couple of years ago in the long-term mandate competition. Is that something that you employ now as a pension fund, and if not, why?

David Russell: The competition that we ran in 2003 led to quite a significant number of changes within USS. What we have done in the last year is that we have employed someone specifically to look after our alternative investment portfolio and within that we have significant investments which will give us much longer-term type investments.

Responible Investor: The fund recently announced it would be putting significant investment into alternative assets. How do you reconcile that with long-term fiduciary responsibility.
David Russell: USS has committed to put a significant portion of our assets into alternatives in the broader sense. Much of the money is currently going into private equity and infrastructure funds.
Responible Investor: Has private equity been an issue for you bearing in mind the recent criticisms of the industry?
David Russell: People have the view that private equity is a short-term investment strategy. But actually most private equity holdings tend to be longer term than most public equity holdings where I believe, for example, the rate of stock turn is a full turn every ten months, i.e. the full portfolio is turned over every ten months. Private

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