USS and Thames Water

Universidad

Yes, that Thames Water, who have been in the news a lot recently.

Did you know that Thames Water is ~20% owned by USS? And that Thames Water is the single largest investment on their books?

https://www.uss.co.uk/news-and-views/latest-news/2021/12/12032021_uss-increases-thames-water-investment

Well, now you do.

Cornish_mum

Oh my goodness that’s not good thank you for sharing CM

RSTime

Possible implications for USS? I have seen the financial investment of USS rumoured to be from a few billion to £20 billion (I hope the latter is an exaggeration and can not imagine Thames Water worth  that much), I suspect investment in the region of £5 billion?

westv

We're always being told that profits go to "greedy shareholders" so it doesn't matter!
In reality, if course, these shareholders are very often connected to ordinary people like you or me.

RSTime

Indeed, I think most people forget that pensions are the shareholders in many privatised companies, however, in my view Thames and many others have been poorly run and not invested. Will be interesting to see how this plays out and the implications for the USS...

MattMattMattUK

westv said:

We're always being told that profits go to "greedy shareholders" so it doesn't matter!
In reality, if course, these shareholders are very often connected to ordinary people like you or me.

In the UK Pension funds directly own about 5.5% of the FTSE 350, but they are estimated to own another 10-15% through other investment vehicles. The state owns 3%, Charities 1%, the rest is split between a combination of UK based individuals, investment funds, unit trusts, banks, insurance companies etc. and around 55% is owned by persons or entities outside of the UK. 

RSTime said:

Indeed, I think most people forget that pensions are the shareholders in many privatised companies, however, in my view Thames and many others have been poorly run and not invested. Will be interesting to see how this plays out and the implications for the USS...

The thing with the water companies is that they have offered a reliable return on investment in a sector that was viewed as being guaranteed because everyone needs water and was very unlikely to go bust, they fit the lower yield, ultra low risk category that pension funds and large investors keep some of their money in, although the ultra low risk assessment now turns out to have been hugely wrong. 

Pat38493

Maybe a silly question but this article is from 2021 - are they definitely still invested at 20% in Thames Water?

westv

Pat38493 said:

Maybe a silly question but this article is from 2021 - are they definitely still invested at 20% in Thames Water?

Thames Water website says 19.711%
It also shows that around 71.065% is owned by pension funds here and overseas.

RSTime

I read somewhere it was around 20%, do we know what this equates to (value)? In the worse case scenario and Thames Water is nationalised, what are the implications for pension funds such as the USS?

MattMattMattUK

RSTime said:

I read somewhere it was around 20%, do we know what this equates to (value)? In the worse case scenario and Thames Water is nationalised, what are the implications for pension funds such as the USS?

They would lose somewhere between the vast majority and all of their investment.

dunstonh

Its also worth noting that the USS value is around £89bn and the likely write-down with failure is going to be around £1bn.   That is around 1.1% of the fund value.   The FTSE100 is currently down 1.33% today.

So, its big money but within acceptable tolerances.