British pensions giant reducing US exposure over tech risks

By Tommy Reggiori Wilkes and Iain Withers

LONDON, June 16 (Reuters) - Britain's biggest pension asset owner, the Border to Coast Pensions Partnership (B2C), is reducing its allocation to U.S. assets by up to 10% due to concerns about overexposure to a small number of Silicon Valley giants, an executive at the fund said on Tuesday.

B2C, which oversees around £120 billion ($161 billion) worth of local government pension assets globally, is shifting its weighting by about 5%-10% from investments in the U.S. to Europe and Asia, its chief investment officer, Joe McDonnell, told the Reuters Investment London conference.

"We're not comfortable with that level of risk, the sheer size of the U.S. market in terms of concentration now," McDonnell said. He did not say what the fund's exposure to the U.S. was but added that despite the shift, he still saw good opportunities in U.S. private assets.

U.S. stock markets have soared to new record highs, fueled by euphoria around AI, but leaving many investors with huge exposure to what McDonnell called a "very narrow" set of mega-cap technology stocks.

NOT INVESTING IN PRIVATE CREDIT ALONGSIDE RETAIL

McDonnell also said B2C would avoid investing in private credit funds that targeted wealthy retail investors due to the volatility caused by many withdrawing their cash, after concern about lending standards in several high-profile funds.  

"I do not wish to lend money or invest in companies alongside retail investors. I don’t really want to do that... I don’t want to get flipped around because of that element," McDonnell said. All of Border to Coast's private investing needed to be segregated away from retail if possible, he added.

Private equity funds are also coming under scrutiny, after Switzerland's Partners Group capped investor withdrawals from an $8.6 billion private equity fund.

"I'm confident that if you're a listed private equity manager, you're going to get beaten up on a regular basis," McDonnell said, but added he expected the market "noise" to dissipate in six to nine months if there was no economic deterioration.

B2C expects to maintain a steady allocation to private markets by committing around £20 billion over the next five years, after investing the same figure over the past five years, he added, noting he had not seen a recent deterioration in asset quality. 

In a separate panel, Mark Elliott, chief investment officer at Hagerty, an insurance company, said insurers still had a “voracious appetite” for private credit, although managers are now talking more about sectors less exposed to AI disruption. 

($1 = 0.7452 pounds)

(Reporting by Tommy Reggiori Wilkes and Iain Withers; Editing by Emelia Sithole-Matarise)