Legal & General could invest with foreign partners in British infrastructure - CEO

By Carolyn Cohn

LONDON (Reuters) - Legal & General (L&G) (LGEN.L) is keen to invest in British property and infrastructure together with overseas sovereign wealth funds such as the Abu Dhabi Investment Authority (ADIA), the UK insurer's chief executive said on Wednesday.

L&G's $1.1 trillion (0.72 trillion pounds) in assets under management and investment in housing and transport schemes mean it wants to be seen as a sovereign wealth fund for Britain, CEO Nigel Wilson told Reuters in an interview.

ADIA, one of the world's largest sovereign wealth funds, manages the surpluses of Abu Dhabi's earnings from oil exports. It doesn't disclose the value of its assets under management but is estimated to hold nearly $800 billion by the Sovereign Wealth Fund Institute.

L&G has already invested 4.6 billion pounds ($7 billion) of a 15 billion pound programme in projects including housing, student accommodation and the rebuilding of a hospital in the north of England. Wilson said cities outside London needed much more investment.

"Great cities of the world are the economic drivers and we've only got one in the UK."

Asked whether L&G faced competition from funds like ADIA - which has a 15 percent stake in Gatwick Airport and a 10 percent stake in Thames Water, Wilson said:

"Who do ADIA co-invest in business parks with in the UK - that would be us. These huge guys want to co-invest. We already manage a lot of money for these people, we are natural partners for them, which goes back to...being the UK's sovereign wealth fund."

L&G's long-term liabilities from its savings and pension schemes, mainly in Britain, made long-term investment in the country a natural match, Wilson said.

L&G is a leading player in the bulk annuity market - taking on the risk of companies' defined benefit pension schemes - as government reforms cut into the sales of individual annuities.

Those changes mean insurers are being forced to look at other ways to boost their business, one of the key factors behind rival Aviva's (AV.L) planned $9 billion acquisition of Friends Life (FLG.L).

Wilson said the trend for insurers to take on pension scheme risk would continue, providing a buffer for the lost revenue from individual annuities.

"Have you ever met a pension CFO who says 'boy I'd like more pension risk'? The world wants to derisk its pension funds and wants to transfer that risk."

RBC raised L&G to "outperform" from "underperform" on Wednesday, saying it expected the firm to show strong growth in bulk annuities, which RBC said were "the most profitable product in UK insurance".

Investors, meanwhile, have shown increasing interest in longer-term and more illiquid forms of financing, as they tend to offer a higher yield.

Among investment possibilities are high-density housing for older people, who preferred to live in towns, Wilson said.

But planning laws make it harder to progress quickly, with approval for one housing scheme in the south of England only coming through after 17 years, he added.

Some investors may also be nervous about committing to large projects ahead of a British general election in May, which is expected to be unusually tight.

Wilson said he was not worried about the election outcome, with both major parties, Conservative and Labour, keen to boost the economy but hidebound by large deficits.

"They haven't got the money to make that much of a difference."

But he did see political risk to investment in infrastructure projects such as energy, for instance from Labour's plans to put a cap on energy prices paid by consumers.

The biggest risk to investment in Britain could come from personal and business taxes, deterring talented professionals and corporations from staying in the country, Wilson added.

"We have created all these barriers to sensible commercial solutions happening."

(Story refiles to add dropped first name of CEO)

(Editing by Elaine Hardcastle)