For those investing online and still debating the wisdom of a contrarian bet on UK assets amidst the eye of the Brexit storm, Norway is showing how it’s done. With £740 billion and rising of assets under its management, the Scandinavian nation’s oil and gas-funded Government Pension Global Fund is the largest sovereign wealth fund in the world. It’s already one of the UK’s biggest investors with £6 billion of Treasury gilts, swathes of prime property in London and other major cities and is a top 5 or 10 investor in a number of FTSE 100 companies from BP to HSBC.
Yngve Slyngstad, the fund’s current chief executive, yesterday said that significant further UK-based acquisitions are planned in the months ahead, regardless of how Brexit pans out. With a 30-year outlook for its investment strategy, the fund is confident that UK investments will be a winner in the long run. New government debt, property and equity investments are all planned.
Over the past couple of years UK investments have proven among the least popular international asset classes with institutional investors around the world. Brexit uncertainty has clouded the outlook for the next several years and turned investors off investors with shorter time horizons. However, the result of that capital withdrawal and lower demand from international buyers has been a drop in valuations.
Particularly within the context of many of the UK’s largest companies earning much of their revenues abroad and in currencies other than the pound, many analysts have reached the conclusion that UK assets are now much more attractively priced than comparable alternatives in other developed markets. Investors unwilling to take a risk on how quickly the UK will bounce back from the economic challenges around Brexit have opened a door of opportunity for others with a longer term outlook and no pressing time pressure.
That sentiment was concisely expressed by Mr Slyngstad yesterday, who stated:
“We will continue to be significant investors in Britain. We foresee that over time our investments in the UK will increase….With our time horizon, which is 30 years-plus, current political discussions do not change our view of the situation.”
Norway’s sovereign wealth fund is not the only investor of its type to take advantage by snapping up discounted UK assets. Qatar has put around £3 billion into building up its UK portfolio with reported plans to add £2 billion more. Other Middle Eastern funds are also said to be loading up on bargains.
Depending on how observers chose to interpret Norway’s plans, it can be seen as either a long term positive or negative for the UK. On the one hand, Norway and other large investors buying into the UK is a show of faith in the long term prospects of a post-Brexit Britain. On the other, the depressed prices of UK assets that the Brexit process has resulted in could be seen as meaning UK assets are being sold off to foreign investors too cheaply.
What is, however, clear is UK investors with some time until retirement are being given a tip-off by some of the biggest investors in the world that a bet now on UK assets could well be an astute long-term investment decision.