As Norway’s sovereign wealth fund snaps up bargain-basement British assets, is it the start of a tentative revival?
- The £740bn sovereign wealth fund has moved to increase its exposure to British companies, property and bonds
- Brexiteers have taken it as an endorsement that the UK will emerge stronger outside the European Union, while remainers believe the fund is just looking for a bargain
- Middle Eastern funds have also increased their exposure to Britain
Norway’s sovereign wealth fund has made a surprise move to increase its exposure to British companies, property and bonds. Global institutional investors have largely shunned UK assets as the Brexit negotiations have rumbled on, reasoning that there were better and less risky opportunities elsewhere.
An investor’s interpretation of the move by the £740bn fund will largely depend on which side of the political divide they fall. Brexiteers have taken it as an endorsement that the UK will emerge stronger outside the European Union. Certainly, the fund said it would invest regardless of the outcome of the negotiations.
Remainers have suggested that the fund is simply seeking a bargain because British assets are on their knees after the disastrous Brexit process. This is also true. UK assets have underperformed their global peers, in spite of the global nature of many UK companies. Sterling slumped after the referendum and has remained low ever since. It is currently experiencing a slight rally but is still around 20% below its peak against the Euro. For global investors, it makes buying UK assets cheaper still.
Chief executive Yngve Slyngstad would not be drawn either way: “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,”
There has to be a time to buy UK assets. They are cheap, high quality and compare favourably in terms of governance and dividend payments. However, most investors reason that while a no deal Brexit remains on the table – with all the ensuring disruption – it is not the time to buy. If there is a resolution, UK assets are likely to rally sharply and the Norwegian fund may be thinking that it would like to get ahead of the rush. After all, even the problems associated with a no deal would presumably be resolved eventually.
This may be the start of a tentative revival in UK assets. The Times reports that Middle Eastern funds have also increased their exposure to Britain with Qatar investing almost £3 billion with plans to invest £2 billion more. Global investors may now be seeing the end game for Brexit and positioning accordingly.