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  • by Karma Loveday

Nationalisation "not a Labour priority" says fund manager

As MPs from both sides the Commons split from their party ranks to form an independent group to challenge the established policy lines, water nationalisation may not top a putative Labour government’s list of priorities and could even appear in the next Conservative manifesto according to reported comments from fund managers.

Online investor newsletter, Morning Star, reported manager of the Legg Mason IF RARE Global Infrastructure fund, Nick Langley, as claiming a number of Labour politicians have suggested to him that nationalisation was low their priority list. “Our view is there’ll be a lot of noise around it and it plays well with their constituent base, but ultimately financial sense will prevail and it’s unlikely to be actually implemented,” Langley said.

On the other hand manager, of L&G Fixed Interest Trust, Mark Benstead, reportedly told Morning Start that investors should be thinking about the potential for a change in government more than they are Brexit on the grounds that the impact of leaving the European Union could take decades. He is quoted as suggesting: “Nationalisation of utilities could be around the corner,” and public ownership of utilities could, he said, appear at least in part in a Tory manifesto because “nationalisation is not a vote loser.”

Benstead admited to Morning Star that he had sold every non-operating company water bond in his portfolio, but calculated that bonds in operating companies may not be negatively affected. Citing as an example, Railtrack, which was was re-nationalised by Labour in 2002, he said: “Equity got wiped out in Railtrack, but the bonds ended up being government guaranteed.” But he conceded that Railtrack was “not necessarily completely comparable,” to water.

Langley,reportedly said the fund bought exposure into UK utilities equities, particularly water companies after his team analysed Corbyn’s impact earlier this year.

He was reported as predicting any government was unlikely to get away with paying no premium for any business it renationalised suggesting a 10-15% premium to the asset base was more realistic. And while listed players tend to trade at premiums of 5-20%, unlisted companies which are generally backed by sovereign wealth funds, usually trade at 25-35%.

He considered water firms’ responses to Labour’s rhetoric to have been aggressive indicating a likelihood they would take the government to court if the premium was seen as too small.

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