Education

Legal & General's academic tie-up has a degree of exclusivity | Nils Pratley


Legal & General’s £4bn development partnership with Oxford University is a deal for the times, or at least Nigel Wilson, the insurer’s chief executive, thinks it should be. “A terrific example for cities across the globe to follow,” he says.

He has a point. The world is simultaneously deep in debt, as a result of the financial crisis a decade ago, and awash with cash looking for a home.

In L&G’s case, it has a large book of long-term annuities to feed and the fixed-income debt markets have little to offer; $13tn (£10.2tn) of assets are calculated to be trading at negative yields. Instead of fishing in those shallow waters, it is more sensible to build real assets and then collect rental income for a few decades at a rate that has been semi-guaranteed at the outset to keep pace with inflation.

The university provides the land and, after 40 years or so, takes ownership of the assets – graduate accommodation, subsidised housing for staff, new science parks, research centres and so on. Oxford obviously has to provide L&G with a commercial return (so the graduates shouldn’t expect rental subsidies) but the trade seems reasonable, not least because UK universities are alert to the value of keeping spin-out commercial firms in the same vicinity.

A disgraceful statistic, from a European point of view, is that 11 of the world’s top 20 technology companies are American and the other nine are Chinese, with closer ties between universities and hi-tech startups part of the explanation.

So, yes, Wilson is surely right that more of these partnerships will come. L&G itself it has already made £15bn of such direct investments in the UK, with Manchester, Leeds and Newcastle among previous ventures. The next big one, covering Bristol, Bath and Cardiff, is in the pipeline.

This version of “inclusive capitalism” has clear benefits but let’s not predict it is a cure-all. First, the projects have to be large to interest an insurer of L&G’s size. In theory, the asset-backed long-term model could do excellent work in the care home sector, which has been wrecked by the greed of private equity bandits, as argued here in the past. In practice, care homes are deemed fiddly and L&G is only now having a look.

Second, if you are a town or city without a university, you’ll struggle to join the party. The presence of a university, it seems, is now deemed necessary for an ambitious urban regeneration project to attract backing. It is not fresh news that money follows money, of course, but the gaps in investment are widening.

Finn and Pendragon drive in opposite directions

Trevor Finn, who lasted 30 years at the top of car dealer Pendragon, would be a hard act to follow, everybody agreed. And that’s how life has turned out. Mark Herbert, a hot shot recruit from the UK conglomerate Jardine Matheson, has been dropped by “mutual agreement” after only three months as chief executive of the company that owns the Stratstone and Evans Halshaw dealerships.

Mutual agreement did not extend to Pendragon’s strategy, it seems. Herbert was a specialist in selling new cars but the rest of the board wants to get big in the used variety via the Car Store operation. Herbert did not sound so keen a fortnight ago when highlighting excess levels of stock and speaking about “the need for a refocus of strategy and execution in Car Store”.

Surely, though, this ground should have been covered in the job interview. How did the conversation go? “What do you think of our strategy?” “Not much.” “Great, the job’s yours.” The chairman, Chris Chambers, has an awkward vacancy to fill – and some explaining to do.



READ NEWS SOURCE

This website uses cookies. By continuing to use this site, you accept our use of cookies.