USS breaks ground leading equity release securitisation
Project Summerhouse highlights a quiet shift in how large schemes are deploying long-dated capital.
It is still unusual for a UK pension scheme to find itself on the issuing side of a securitisation. Even in markets awash with long-dated capital, that role is typically left to banks, specialist lenders or asset managers. That is what makes Project Summerhouse — a £350m-plus securitisation led by the USS Investment Management Limited (investment manager and advisor to the Universities Superannuation Scheme) (USS) — notable.
Rather than investing in someone else’s structure, USS built, optimised and executed its own. The transaction securitised a seasoned portfolio of equity release mortgages that USS had built up over several years, before partnering with Scottish Widows to sell senior notes eligible for matching adjustment.
Eamon Ray will be speaking at Private Markets Profile’s Inside the Deal conference on 25 February.
“It was very much a portfolio management exercise,” says Eamon Ray, head of private credit and alternative income at USS. “But it’s not a route many pension schemes have yet taken.”
The underlying assets are equity release mortgages — loans extended to homeowners typically over the age of 55, allowing them to release value from their property as part of retirement planning. USS has been acquiring these loans for around six years, gradually building a book of more than 2,500 mortgages with a balance exceeding £350m.
“These mortgages accrue interest over a very long duration,” Ray explains. “They’re very well suited to pension and insurance capital.”
For USS, equity release sits within its liability-matching portfolio, where the emphasis is on long-dated, stable and predictable cashflows. Ray describes the unlevered portfolio as having “IG-like characteristics”, aligning with the scheme’s need to meet pension obligations stretching decades into the future.
But holding the assets outright was only one option.
Recutting the capital structure
During the summer of 2025, USS launched a competitive process to securitise the portfolio. The aim was not to exit the assets, but to rework the capital structure in a way that improved risk-adjusted returns while preserving long-dated cashflows.
“We were looking to work with partners that are also long duration in nature, but looking for slightly different risk-reward profiles,” Ray says.
That search led USS to Scottish Widows, which ultimately purchased senior notes structured to be eligible for the insurer’s matching adjustment – the regulatory mechanism that allows insurers to recognise higher yields on long-term assets backing predictable liabilities.
Insurers, operating under Solvency II, are natural buyers of lower loan-to-value equity release exposure. Pension schemes, while also long-term holders, face a different capital framework.
“Insurers are typically quite strong buyers of the lower loan-to-value (LTV) equity release mortgages,” Ray says. “We were able to synthetically create a lower-risk exposure by selling just the senior tranches.”
“We were looking to work with partners that are also long duration in nature, but looking for slightly different risk-reward profiles”
Eamon Ray, USS
USS retained a small portion of the senior notes and a larger share of the junior capital, shifting its remaining exposure from investment grade to what Ray describes as a “slightly higher risk, but the majority of our capital exposures still being IG”.
“That’s the point on the curve where we can partner well with insurance capital,” he adds.
Despite the increased risk, Ray is clear that the transaction was not a pivot towards more aggressive positioning. “I wouldn’t call it highly risk-seeking,” he says. “We were very much optimising the capital structure.”
The loans themselves remain relatively conservative, with low LTV ratios and borrowers largely in their 50s and 60s. Because interest accrues rather than being serviced, the primary risk lies in how that roll-up interacts with house price evolution over time.
“We believe the assets we hold present long-term, stable, predictable cashflows,” Ray says. “They’re very much in line with our investment thesis.”
Selling the safest portion of the structure to an insurer with a lower cost of capital, he argues, allowed USS to hold the remaining exposure that better matched its own return requirements without sacrificing duration.
A first for USS
Project Summerhouse was the first securitisation USS has led itself, though the scheme has invested in and supported structured transactions across other asset classes.
As a first-time issuer, the learning curve was steep. Ray estimates the project took around a year from initial design to completion, encompassing not just economics, but governance, operational readiness and partner selection.
“We mapped out the other structures in the market and made sure this was the right long-term decision,” he says. “It wasn’t just about pricing. It was about the operational side and finding the right partners to hold this for the long term.”
The deal closed last summer, with structuring and funding completed on schedule. Since then, Ray says, performance and operations have been in line with expectations.
“Our partnership with Scottish Widows is very strong,” he says. “It’s delivered as expected.”
“We expect to see more peers engaging in similar activity as they refine their investment appetite”
Eamon Ray, USS
One promising outcome of the transaction is what Ray refers to as the “intellectual property” created through the structuring process. While USS does not see itself becoming a serial issuer, elements of the approach could be applied elsewhere.
“We have other very long-dated assets with stable, predictable cashflows,” he says, pointing to US annuities and social housing investments as examples where similar optimisation might be possible. “If we can partner with appropriate long-dated capital, we may be able to optimise the capital treatment for both counterparties.”
That said, Ray is cautious about overextending the model. “This was quite an endeavour,” he says. “It’s something we would consider carefully over the coming years.”
A broader market shift
The transaction lands amid a broader push to mobilise UK pension and insurance capital into long-term assets, reinforced by initiatives such as the Mansion House Accord and the Sterling 20 programme.
While securitisation has long been a staple of banking and insurance markets, pension schemes have historically played a more passive role. That is beginning to change as teams build internal expertise and look for new ways to manage portfolios.
He frames Project Summerhouse as evolutionary rather than revolutionary. “The investment landscape is changing,” Ray says. “We expect to see more peers engaging in similar activity as they refine their investment appetite.”
USS is open to further equity release investment, either through similar partnered structures or by purchasing loans outright, though market conditions remain challenging. Higher interest rates have dampened origination volumes across the sector, particularly for fixed-rate-for-life products.
For now, Project Summerhouse stands as a marker of how far some pension schemes have evolved – not just as allocators of capital, but as active shapers of financial structures traditionally dominated by other institutions.
