UK pension funds should collaborate more when investing in private market assets rather than compete for costly in-house staff, according to the chair of the £49bn (€66.9bn) Universities Superannuation Scheme’s in-house manager.

Virginia Holmes argued that not each pension fund in the UK needed to launch a “top-decile infrastructure team” and urged investors to pool resources, echoing comments made by others in the industry, including Mike Weston of the Pensions Infrastructure Platform (PiP).

Speaking at the book launch for Keith Ambachtsheer’s ‘The Future of Pension Management’, Holmes was critical about the “unacceptable” levels of pay emerging among Canadian pension investors.

Asked whether she anticipated the reorganisation of the UK local government pension schemes (LGPS), which have been asked to form half a dozen asset pools, would see increasing competition for in-house staff and potentially drive up staff costs across the sector, she emphasised the importance of a more collaborative approach.

“If we can pool our resources and make sure the way teams are paid is aligned with the skills they are bringing to the transaction, we can actually do some really interesting collaborative things together,” she said. 

For such an approach to work, she said there needed to be a clear understanding of how to operate in private markets.

“You need to be very clear on what size cheque you’re going to write,” she added, “and you’ve got to be very clear about how long it’s going to take you to get your approvals.

“Provided you can club with a group of like-minded people, and there is a clear understanding of the rules of entry, then I don’t think we all need to be trying to build the same thing.”

USS last year hired a number of staff for its private markets team, currently responsible for around one-fifth of fund assets and comprising property, infrastructure, private debt, inflation-linked debt and equity, special situations and private equity.

Emma Singh, a former private equity controller at UK in-house pension manager BP Investment Management, was appointed to help manage the fund’s new direct investment strategy, which at the beginning of the year saw a £640m boost through the sale of the fund’s former private equity fund stakes.

The private markets team in October last year wholly acquired Moto Hospitality, a UK motorway services firm, only to later sell a 40% stake in the firm to CVC Capital.

Holmes’s call for greater collaboration comes after Weston, chief executive of the PiP, previously expressed concern that his fund would be in direct competition for many assets from like-minded UK investors, including USS and the £500m infrastructure vehicle set up by the London Pensions Fund Authority and Greater Manchester Pension Fund. 

Weston said in IPE’s January issue that it would be “perfectly logical” for the PiP to collaborate and seek additional capital from other pension investors rather than compete.

He noted that USS had, for example, also shown an interest in funding the Thames Tideway Tunnel.

One of the things that is quite high on our agenda is how to make sure we can co-operate with funds and not compete,” Weston said.

“It doesn’t benefit pensioners at the end of the day if we are sitting down and competing with other pension schemes.”