“Does Brexit offer any opportunities for pension investors?”

How do we keep our British economy interesting to foreign investors now that Brexit is a reality? With that question in mind, UK Trade and Investment Minister Gerry Grimstone launched the "Investment Council" at the end of April. This is an advisory body consisting of directors of forty large international companies from various sectors: from Airbus to Kraft Heinz, from Deutsche Post to Hewlett Packard and Morgan Stanley. The only Dutch participant, Gert Dijkstra sits on this Investment Council on behalf of APG. The think tank advises the British government on how the UK can remain an interesting market for foreign investors, for example in terms of legislation and tax rules.  So that they do not turn their backs on the United Kingdom and British jobs are preserved.

Is the UK, which has isolated itself with Brexit, still an important market for a pension fund to invest in?

Dijkstra: “Absolutely. The British economy is still among the global Top 5, even after Brexit. It is an open and well-regulated economy that is very accessible to us, also because of the language. On top of that, the British have had extensive experience with privatization since the 1980s, led by Margaret Thatcher at that time. This means that they are very familiar with public-private partnerships, a construction that we often like to use. On behalf of our clients, we have been investing in the United Kingdom for some twenty years. We have built up good contacts, including at the British Embassy and the Ministry of Commerce. The British, in turn, find us an interesting discussion partner, partly because together we have invested some 35 billion Euros in the United Kingdom.”

Invested in what?  

“APG has invested in hotels like CitizenM, ports, rental and owner-occupied housing, among other things. And we also invest in shopping centers and all kinds of infrastructure, such as wind farms and London’s water company. We also continued to invest during the Brexit negotiations, such as in homes in London and a large shopping and recreation center in Edinburgh.” 

What is the average return on all those British investments?

“I don’t know exactly; that is not how we look at it. We don’t compare returns between countries or regions, but between themes or sectors. But in general, the long-term returns are good.”

Is Brexit unfavorable to a pension investor like APG? 

“At first glance, yes: we are pre-eminently a long-term investor that benefits from calm, certainty and predictability. Well, you can forget about that with such a drastic exit from the EU. We were not excited about that at all. An additional disadvantage is that we really have lost a ‘buddy’; in our pension lobby in Brussels, they were often on our side because their pension system was similar to ours. They often advocated the same interests to the EU as we did.”

Will Brexit make the prices of potential investment assets go up, and will you not be affected by new regulations?

“The process of the UK leaving the EU has caused short-term price fluctuations of - potential - investments in the UK currency. First they fell, then they rose. In the long term, this will average out to realistic market prices. So far, I have seen no signs that new regulations are preventing us from making investments in the UK.”

Does Brexit have any advantages for a pension investor like APG?

“Certainly. Every disadvantage has its advantage including in this case. For example, because the British government is going to invest heavily in things like renewable energy, mobility and infrastructure. For almost every investment this rule applies: preferably as sustainable as possible. Exactly what we’re aiming for. For example, they want to invest four billion British pounds in inter-city transport, such as roads and railroads. And within the telecom market they are going to invest in both cables and fiber optics, where we are also seeing opportunities; see also our recent joint venture with KPN, for the installation of fiber optics in the Netherlands.”

Is it pleasant for foreign investors like APG to negotiate with the British now that they have isolated themselves through Brexit?

“Yes, I can’t deny that. We can negotiate in quite a relaxed manner, although we are not the only foreign investor, of course. The British understand that they need to stay focused on their business, make new trade deals and re-establish contacts. They want to reaffirm or rebuild relationships. The creation of such an Investment Council fits in well with that. Getting advice from big investors and companies from abroad and finding out what they think is important is a really smart move. In this way they create more cohesion. For APG, our participation in this Investment Council means that we are in the front row when new investment opportunities arise.”

You just finished the first meeting of the new Investment Council. What points did you bring to the table?

“I outlined that predictable government policy is crucial for us as long-term investors. Secondly, that on behalf of our clients we are making a move towards increasingly responsible investment; and we therefore take this into account in our investment policy. And third, that we benefit from a good climate for entrepreneurs. If they are stimulated to take initiatives, we get more opportunities to invest. Ranging from small start-ups to very large companies and initiatives. Most of the other participants had similar points, with the desire to invest responsibly in particular really being a common thread. As investors, we hope for an atmosphere in which we feel welcome to enter the UK market. Including in terms of fiscal options.”  

Finally, on what issues do you see the biggest challenges now in terms of investing in the UK?  

“For us, a stable political environment and consistent government policies are important, with a clear role for long-term institutional investors. For example, you can see that the current government is now rolling back privatization, including in the area of public transport. Secondly, I expect competition with large investors that should not be underestimated.”