Representatives of the U.K.’s financial sector have been meeting with Canada’s largest pension plans over the past week to learn how British plans might adopt their investment strategies.
They are also seeking to drum up more interest from Canadian plans in British infrastructure projects.
The meetings come as the British government embarks on a massive £250-billion five-year infrastructure spree to update things like its energy, transportation and water systems. While the spree is to be funded by both private and public-sector money, the government is still working to attract investors. And it has realized how far behind its own pension funds have fallen, compared to those in Canada, when it comes to investment prowess.
Canadian pension funds are already among the biggest investors in British infrastructure. For example, Borealis Infrastructure (an arm of the Ontario Municipal Employees Retirement System) and the Ontario Teachers’ Pension Plan had the winning $3.4-billion bid for the rights to run High Speed One, Britain’s only high-speed rail line.
Pension funds are natural infrastructure investors, because the projects provide relatively stable cash flows and fit with their long investment horizons. But, while Canadian pension funds have been building up their investment capabilities in alternative asset classes as well as direct-investing, British plans tend to stick to plain-vanilla liquid securities.
“The pension funds here are ahead of most pension funds in the U.K. in their approach to investment,” says David Wootton, Lord Mayor of the City of London. He was speaking following a meeting with the Toronto Financial Services Alliance Friday.
(The Lord Mayor - as opposed to the Mayor of London - is the official title for the head of the City of London Corporation, and the person tasked with representing London’s financial district, known as the City, and the financial services sector across the U.K.)
“Typically the U.K. pension funds will invest in liquid instruments - shares they can sell, bonds they can sell and securities they can sell,” Mr. Wootton says. “Never mind Canadian pension funds investing in U.K. infrastructure, we’d like to have our pension funds broaden their investment horizon, not just in British infrastructure.”