L&G To Launch £500m Urban Regeneration Fund
Legal & General, Britain's biggest pension fund manager, is in talks about creating a £500m investment vehicle that will be used to finance major UK urban regeneration projects.
Sky News has learnt that L&G is in detailed talks with several sovereign wealth funds and overseas pension funds about the new venture.
An agreement with a co-investment partner could be struck within the next week or so, according to a person close to the discussions, although it may not be finalised by the time L&G reports half-year results next Wednesday.
The new fund would see L&G acting as the investment principal, taking decisions about which UK regeneration and infrastructure projects to back.
The FTSE-100 insurance and pensions group is understood to be holding discussions with sovereign investors in Europe, the Middle East and Asia about ploughing hundreds of millions of pounds into the fund.
Once it is operational, L&G hopes to secure further commitments from other investors, the source said.
The venture will reflect the ongoing diversification of L&G's activities under the leadership of Nigel Wilson, its chief executive, and comes as the Government seeks greater private sector involvement in infrastructure development across the country.
Mr Wilson believes that direct investments represent an under-utilised opportunity to drive growth for insurers, and wants L&G to target socially useful projects in areas such as housing, education, transport and energy, which have the potential to generate high rates of return.
L&G has already established a significant presence in the UK housebuilding sector, acquiring a sizeable stake in Cala Homes, a Scottish-based group, last year.
Cala is now being groomed for a stock market flotation as its backers seek to exploit buoyant conditions for the housebuilding sector.
Mr Wilson has also engineered L&G's expansion into direct lending to major companies, announcing the purchase of a 40% stake in Pemberton Asset Management last month.
That deal included an initial commitment to invest ?250 million in Direct Lending through the Pemberton platform to UK and European companies, with an intention from L&G to make further commitments to the platform in future.
Paul Stanworth, managing director of Legal & General Capital, said:
"The UK and Europe have been too dependent on bank financing, and this impacts particularly on businesses wishing to invest and expand.
"Creating a new channel to deploy longer-dated institutional money in the mid-market sector will help drive economic recovery at a time when bank balance sheets are constrained, as well as creating a further asset class for direct investments by insurance companies and other institutions."
L&G declined to comment on the talks with sovereign wealth funds about the new vehicle.