Canada’s largest pension funds see opportunities to invest in U.K. real estate and infrastructure at discounted prices following Britain’s decision to leave the European Union, fund executives said on Friday.
The funds, which manage over $1 trillion (US$768 billion) of assets and are among the biggest investors in U.K. real estate and infrastructure, anticipate valuations falling as a result of the country’s decision to leave the bloc, presenting opportunities for investors willing to take a long-term view.
“The Canadian plans are great investors and I think, as opportunities present themselves, they will take advantage of them. It’s at times of dislocation that people often get a really good deal,” said Hugh O’Reilly, chief executive at OP Trust, one of Canada’s 10 biggest public pension funds.
Canada’s large pension funds have differentiated themselves from international rivals by investing directly in infrastructure and real estate as an alternative to choppy equity markets and low-yielding government bonds.
In the U.K., Canadian funds own or have a stake in assets including London City Airport, the High Speed One rail link connecting London to the Channel Tunnel, the country’s National Lottery operator Camelot, Scotland’s biggest gas network, and the ports of Southampton and Grimsby.
Their long-term investment perspective means they can look beyond short-term volatility to invest in assets they believe will deliver strong returns in future years, executives say.
The Canada Pension Plan Investment Board, one of the world’s biggest deal-makers and Canada’s biggest public pension plan, said the fallout from the vote could provide compelling opportunities and the U.K. remained an attractive market.
“The U.K. and Europe continue to be very important and attractive markets for us. As any investor, we have a bias to stability over uncertainty, yet periods of dislocation can present compelling opportunities that short-term investors are unable to pursue,” a spokesman for the fund said.
The funds continue to view Britain as a good investment over the longer term despite concerns over the impact that the decision will have on London’s standing as a financial center.
“The economic fundamentals in the U.K. are very solid. We think there are, and may continue to be, great opportunities from an investment point of view. In terms of the position of the City (of London), I think what matters there is access to capital plus its talented people,” O’Reilly said.
Lisa Lafave, senior portfolio manager at the Healthcare of Ontario Pension Plan, another of Canada’s 10 largest funds and a big investor in U.K. real estate, also said she anticipated the vote to leave would present buying opportunities.
“There may be some positive opportunities in the short-term. Timing will be important to protect from any downside,” she said.
A spokeswoman for the Ontario Teachers’ Pension Plan, Canada’s third-biggest public pension plan, said the fund was continuing to work on new opportunities in the U.K.
Earlier this year, a consortium of Canadian pension funds purchased London City Airport, effectively a vote of confidence in London’s future as a financial centre regardless of the outcome of the vote.
By Matt Scuffham
(Editing by Alan Crosby)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Reuters/Yves Herman