New York-based private equity fund Cerberus is to sell its stake in the company which made the rifle used in the Sandy Hook Elementary School massacre.

Under pressure from its investors, Cerberus released a statement saying it was "shocked and deeply saddened" by the shootings which occurred in Newtown, Connecticut, last Friday.

Cerberus described the shooting deaths of 20 children and seven adults as a "watershed event that has raised the debate on gun control to an unprecedented level".

The statement added: "It is not our role to take positions, or attempt to shape or influence the gun control policy debate.

"That is the job of our federal and state legislators. There are, however, actions that we as a firm can take.

"Accordingly, we have determined to immediately engage in a formal process to sell our investment in Freedom Group."

Freedom Group is the manufacturer of the Bushmaster .223 assault rifle used by gunman Adam Lanza.

The California State Teachers' Retirement System, which is an investor in Cerberus and operates one of the biggest pension funds in the US, said yesterday that it was reviewing its investment with Cerberus over concerns about its shareholding in Freedom Group.

Majority of schools in Newtown reopen

Students returned to school in Newtown today, accompanied by police and counsellors to help them cope with grief and fear.

Sandy Hook Elementary will remain closed.

It is an active crime scene, with police coming and going past a line of 26 Christmas trees put up by visitors and decorated with ornaments, stuffed animals and balloons in the school colors of green and white as a memorial.

The rest of Newtown's schools were set to reopen.

"We are ready to open our doors and give them everything they need to feel safe," said Julie Shull, a social studies teacher at Reed Intermediate School. "I could not be prouder to be a part of this amazing group of individuals that devote their lives to children."

Sandy Hook pupils will later resume class at an unused school in another town.

The massacre of young children shocked Americans who had grown accustomed to mass shootings, prompting some US politicians to call for tighter gun restrictions and pressuring one private equity firm to sell its investment in a gunmaker.

US President Barack Obama, who called for action at a Sunday night prayer vigil in Newtown, held talks with Vice-President Joe Biden and three Cabinet members yesterday in what a White House official said was an effort to "begin looking at ways the country can respond to the tragedy in Newtown."

Several Democratic politicians have called for a new push for USgun restrictions, including a ban on assault weapons such as the Bushmaster AR-15 used by Lanza, who carried hundreds of rounds of ammunition in extra clips and shot all of his victims repeatedly, one of them 11 times.

Lanza also shot dead his mother before driving to the school, and then killed himself to end the massacre with a death toll of 28.

The nation's powerful gun industry lobby, the National Rifle Association, has remained silent on the Newtown shooting.