UK infrastructure fund JLIF pauses on foreign deals after Brexit vote

By Esha Vaish

(Reuters) - John Laing Infrastructure Fund Ltd (JLIF), one of Europe's largest listed investors in public infrastructure projects, is giving pause to new foreign investments as it reassesses risks due to sterling's fall following the Brexit vote, a director of the fund's management said.

JLIF said it was considering multiple options, including taking out currency swaps or hedges, on potential overseas deals where a recovery in the value of the sterling over the about 10 years that such infrastructure projects run for could hurt its yield.

"We would be a little foolish to be charging into acquiring assets when they are 10 percent more expensive than they were a few months ago, without putting into place protections against that," JLIF Investment Adviser Andrew Charlesworth told Reuters.

"The short term impact is that it's a bit of a pause for breath from us," he added, saying that in the immediate aftermath of the vote the fund had decided not to move forward with an overseas deal.

UK-listed companies and firms that make shareholder payouts in sterling could face some concerns as the fall in the value of the currency eats into their returns from overseas projects.

The pound hit a three-decade low in July following Britain's vote to leave the European Union, however, it has since been buoyed by as a run of upbeat data has led many investors to take a more optimistic view of the British economy. Sterling traded flat against the dollar on Monday.

JLIF, which invests in public-private-partnership projects for the operation of infrastructure such as hospitals, motorways and schools, held interests in 59 projects as of June 30, with a portfolio value of 1.038 billion pounds.

Shares in JLIF have risen about 6 percent since June 23, the last trading day before the results of the referendum were announced, as investors have poured money into funds with longer income streams, that are considered safer bets.

Many UK infrastructure funds have also gained on hopes of increased government-backed spending, with Prime Minister Theresa May open to the idea of using infrastructure to stimulate a flagging economy.

JLIF said on Monday that in the short term UK market activity was expected to slow as investors assessed the political and economic ramifications of the Brexit vote.

Charlesworth said one or two UK assets were on the market, however, and bidding interest remained high due to an oversupply of capital seeking investment in UK infrastructure at a time of a limited supply of projects.

JLIF also said it expected to see some "dual pressure" on UK asset pricing as non-sterling denominated investors tried to take advantage of the weakened currency, "offset by the 'wait and see' attitude likely to be adoped by some investors in the short term."

(Corrects paragraph 7 to read "operation" instead of "construction".)

(Reporting by Esha Vaish in Bengaluru; editing by Jason Neely, Greg Mahlich)