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Kuwait Investment Authority investment shows "international appetite" for UK infrastructure, says expert

News that the Kuwait Investment Authority (KIA) is planning to invest up to $5 billion in overseas infrastructure, with an emphasis on UK assets, demonstrates the "strong and persisting international appetite" for UK investment, an expert has said.02 Jul 2013

"Appetite to invest in UK infrastructure has always been there despite the economic climate," said Michael Watson, an infrastructure finance expert at Pinsent Masons, the law firm behind Out-Law.com.

"There potentially exists a £48bn 'wall of cash' waiting to be invested in infrastructure assets globally by foreign players - the challenge for the UK is to win its fair share. Overall investor sentiment around appetite and capital is positive, but at the same time question marks still remain over the political and regulatory support needed to attract investment," he said.

Watson was commenting as KIA announced plans to increase its infrastructure investments in the UK and other countries, on the 60th anniversary of the opening of its London-based Kuwait Investment Office (KIO). In his first interview with a foreign newspaper, KIA's managing director Bader al-Saad told the Financial Times that the authority would invest as much as $5bn in international infrastructure over the next three to five years, mostly in the UK.

KIA is one of the world's largest sovereign wealth funds, with more than $400bn of assets under management, according to the Financial Times. Over the past 10 years it has more than doubled its investment in UK assets from $9bn to $24bn, according to Reuters.

"Our view is that significant investment from China and other nations including Qatar and Kuwait, hungry to invest in solid infrastructure assets, is expected to grow this year," said Watson.

"Much of Britain's existing infrastructure is already owned by foreign investors. China has taken a 10% stake in Heathrow Airport as well as in the new Co-operative Building in Manchester and is looking at investment in a range of other significant infrastructure assets in the UK. Countries such as Canada, Singapore, Australia and other Gulf States have also invested. The recent acquisition of a stake in Stansted Airport by IFM, the Australian fund manager, is another example," he said.

However, the infrastructure finance expert said that the Government needed to do more if it was to encourage investment in projects at an earlier stage.

"We seem to be missing a trick – the UK Government needs to reassure investors of construction risk and procurement rules before trying to attract them into the market," he said. "This aspect is very important as whilst the UK remains very attractive for international investors in the secondary market, the opportunity exists to make the development market equally attractive."

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