Dealmaking in the UK by some of the largest sovereign wealth funds has plummeted because of the growing uncertainty around Brexit, a report from IE Business School in Madrid has revealed.
State-backed funds — including Singapore’s GIC and the Canada Pension Plan Investment Board — invested a total of $21bn in the UK in 2017 compared with only $1.8bn last year, said the report, based on the total assets allocation of 91 funds with $8.1tn of assets under management.
There were only eight deals by SWFs in the UK last year, compared with 18 a year before.
The numbers are skewed because of China Investment Corporation’s $14bn acquisition of London-headquartered Logicor, a warehouse business, from Blackstone in 2017.
Still, the drop is sizeable, even excluding the Logicor deal.
“SWFs have put the United Kingdom on hold in 2018, probably waiting to make investments or divestments once the Brexit decision is made,” said Javier Capapé, a professor at IE Business School.
When it comes to top destinations by deal count and percentage of total deals, the UK came fourth in the world ranking in the 2017-18 period, behind the US, China and India and only marginally ahead of Singapore.
Excluding deals in which SWFs invest alongside others such as private equity groups, the UK went from being the top destination for their investments in 2017 to dropping off the top-five list entirely last year. The UK was overtaken by the Netherlands and France.
The findings come as investors in private equity are increasingly demanding a reduction in the UK exposure of the funds they invest in, prompting buyout groups to seek new hubs of activity in Europe, including Spain and the Netherlands.
Others are ditching the UK as a top-tier investment destination. [...]
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