The £3bn (e4.33bn) London Pensions Fund Authority is cautious about new opportunities for institutional investors, as London prepares to host the 2012 Olympic Games.
In the wake of the announcement that the UK capital beat Paris, Madrid, New York and Moscow for the 2012 games Peter Scales, chief executive of LPFA, says the fund has adopted a wait-and-see attitude.
Shortly after the announcement, Scales said that for the time being the LPFA would keep an eye on the market potential.
The LPFA already invests in companies which are likely to be involved with infrastructure for the games but Scales said the fund would be cautious with specialist companies.
“It will no doubt feature as an issue if there are businesses trying to generate capital,” he said. But he said the fund would consider how the bid would be financed.
London's victory will involve investments of billion of pounds in the revival of the area where most of the stadiums will be built. The creation of infrastructure will also represent an investment opportunity.
Shares of UK construction and building companies like Balfour Beatty Plc, Persimmon Plc and others rose after the announcement.
But it will take time for institutional investors to become comfortable with regeneration projects, according to Katie Kopec, director at real estate firm Jones Lang LaSalle. The firm worked with the London Olympic team to provide commercial advice.
“While institutional investors are becoming braver in investing in regeneration, I think they will have to see some returns and it takes a while to establish a place and be certain of one’s returns,” Kopec said.
She added that the new facilities should have a legacy beyond the Olympic games. The investment community is not entirely upbeat about the impact of the Olympic commitment. F&C AM said the economic stimulus would be “modest”.