State-owned investors overhauled their approach to investment in the UK due to Brexit and the impact of Covid-19, Global SWF CEO Diego López told the UK’s House of Commons Select Committee on International Trade today.
Sovereign wealth funds have deployed a total of US$131 billion into the UK economy over the past 50 years, Mr López told the cross-party committee. If public pension funds are included, the total investment by state-owned investors is over US$215 billion. London remains popular among state-owned investors, said Mr López, with 23 offices, more than anywhere else in the world.
Around 90% of sovereign wealth investments come from just nine funds: four from the Middle East - QIA (the leading investor with US$35 billion of UK assets), KIA, ADIA, Mubadala - plus four from Far East - Singapore’s GIC and Temasek and China’s CIC and SAFE – along with Norway’s NBIM.
Following the 2016 Brexit referendum, the average deal size by sovereign wealth funds investing in the UK fell from more than US$1 billion to around US$200 million. While investment in hotels and offices has fallen, this does not represent diminished interest in other areas of the British economy where state-owned investors see opportunities.
Giving evidence, Mr López told the committee that “sovereign wealth funds have traditionally preferred properties, but focus has shifted markedly from 2016 and due to Brexit and Covid19 funds are deploying more capital into data centers and logistics and this facilitates investment outside London.”
Mr López added: “Infrastructure is a different animal altogether. Funds tend to form co-investment clubs, bidding for assets together. There is a significant footprint outside London, such as Scotia Gas Networks and Birmingham Airport which backing from both sovereign wealth funds and public pension funds.”
The UK has much more to offer in terms of cutting edge technology and state-owned investors have only dipped their toes into the true potential the UK provides. Mr López said: “In terms of new trends: life sciences, technology, and renewables, including hydrogen, represent a big opportunity in the UK. Interestingly enough, British venture capital has only attracted US$1 billion from sovereign funds, which is less than 3% of the global total. The potential is large, but is still very much untapped.”