Asset managers to invest £9bn in UK firms

London - Six asset managers will invest about £9bn over the next five years in British firms, schools and roads following tax changes, says a funds industry body.

Britain's finance minister George Osborne on Wednesday announced a new exemption from withholding tax for interest on private placements - a form of long-term, non-bank debt financing for smaller firms and infrastructure projects.

The Investment Management Association (IMA) said on Thursday that Allianz Global Investors, Aviva, Friends Life, Legal and General, Prudential and Standard Life intended to make investments totalling around £9bn in private placements and other direct lending to UK companies.

Signals potential beginnings

"This measure is a significant boost to the development of the UK private placement market, unlocking crucial capital for UK businesses," IMA chief executive Daniel Godfrey said in a statement.

Osborne said the fund managers would attract investment to Britain and increase credit to companies.

"This also signals the potential beginnings of an enduring private placement market for the first time in the UK," Osborne said.

The European Union's financial services chief Jonathan Hill is due to announce plans for a capital markets union (CMU) that is expected to include initiatives to boost private placements in a bid to reduce the region's reliance on banks for funds.

Private placement sector

"Compared to the stability and depth of its US counterpart, the European private placement market remains in its infancy, so will need continued careful nurturing to achieve its full potential," said Deborah Zurkow, chief investment officer for infrastructure debt at Allianz Global Investors.

Allianz said it would invest upwards of £3bn over the next three to five years in UK infrastructure, with £600m invested by the end of 2014.

European issuance of private placements in 2013 totalled £15bn, compared with £45bn in the United States, the Association for Financial Markets in Europe (AFME), a banking lobby, said in a study.

AFME urged Hill, who will launch a public consultation on the CMU project in early 2015, to expand the private placement sector by using standardised structures, practices and documentation.