Canada pension funds hold back on UK deals ahead of Brexit vote

Thu Mar 17, 2016 1:02am EDT
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By Matt Scuffham

TORONTO (Reuters) - Some of Canada's top pension funds, among the world's biggest investors in British real estate and infrastructure, are holding back on UK deals until after Britons vote on whether to leave the European Union, according to senior executives.

These funds, which together manage more than C$700 billion ($524 billion) in assets, fear valuations could drop if Britain chooses to leave the bloc and have particular concerns about the impact on London's financial district, the executives said.

There is no precedent for an economy as big as Britain's leaving a trade bloc, and the rival campaigns paint contrasting pictures of what quitting the EU might mean for its trade.

Pro-Europe campaigners say banks and other financial institutions could pull operations out of the City of London if they cannot access critical EU markets.

An executive at one of Canada's biggest public pension funds, who spoke off the record due to the sensitivity of the issue, said the risks posed by the June 23 vote were part of the reason it passed on a recent deal for an office property in London's financial district.

"London is the financial center of Europe, but if that changes, the whole trajectory is different. That's become a factor in our thinking," he said.

The retreat by Canadian investors could be harmful to the British economy and raises questions about whether other international investors will also lose their appetite for UK assets.

Canadian institutions have been the second biggest international investors in UK real estate over the past three years, with direct investments peaking in 2015. They are also prominent infrastructure investors.   Continued...

Union flags and the Big Ben clocktower cover notebooks are seen on sale in London, Britain, in this December 17, 2015 file photo.   REUTERS/Luke MacGregor/Files