Britain’s largest pension asset owner, the Border to Coast Pensions Partnership (B2C), is set to reduce its allocation to U.S. assets by up to 10%. This strategic adjustment, revealed by an executive on Tuesday, is prompted by concerns over increasing overexposure to a select few Silicon Valley technology giants. The Border to Coast Pensions Partnership (B2C) is Britain’s largest pension asset owner, managing approximately £120 billion ($161 billion) in local government pension assets globally. Joe McDonnell, B2C’s chief investment officer, stated the fund would shift 5-10% of its weighting from U.S. investments towards Europe and Asia. McDonnell expressed discomfort with “that level of risk, the sheer size of the U.S. market in terms of concentration now.”
The surge in U.S. stock markets to record highs, driven largely by AI enthusiasm, has led to significant investor exposure to what McDonnell described as a “very narrow” set of mega-cap technology stocks. Additionally, B2C will avoid private credit funds targeting wealthy retail investors. This decision follows concerns about volatility caused by cash withdrawals and lending standards in certain high-profile funds. McDonnell emphasised his reluctance to “lend money or invest in companies alongside retail investors” due to potential market disruptions, adding that Border to Coast’s private investing needed to be segregated from retail if possible.
The private equity sector also faces heightened scrutiny, exemplified by Switzerland’s Partners Group capping investor withdrawals from an $8.6 billion fund. While acknowledging that listed private equity managers might face regular challenges, McDonnell anticipated this “market noise” would dissipate within six to nine months, absent economic deterioration. Despite these adjustments, B2C plans to maintain a steady allocation to private markets, committing approximately £20 billion over the next five years, matching its previous five-year investment. McDonnell confirmed no recent deterioration in asset quality. In a separate discussion, Mark Elliott, CIO at insurer Hagerty, noted insurers’ ongoing “voracious appetite” for private credit, focusing on sectors less exposed to AI disruption.
