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Legal & General Group ‘leaning into this recession threat’: Sir Nigel Wilson

Legal & General Group Chief Executive Sir Nigel Wilson joins Yahoo Finance Live to discuss biotech, investing, volatility, and the outlook for the company’s partnership with Ancora.

Video Transcript

- British insurer Legal and General teaming up with US real estate developer Ancora. They're forming a new venture to build funding for life science and technology focused real estate assets across the US. The partnership ultimately bets on demand for biotech and life science industries with Legal and General kicking things off with a $500 million initial investment. Joining us now is Sir Nigel Wilson, Legal and General Group chief executive. It's good to see you. I guess I would ask you, just on an overarching basis, about investment right now at a time that feels so fraught from an economic perspective, from a rates perspective, why about the timing of this investment?

NIGEL WILSON: Yeah. We're a very long term business. And the world is awash with long term liabilities, pension liabilities, insurance liabilities, and climate change liabilities. And we we're trying to create assets to back those liabilities. And the duration of those is 10, 20, 30, 40, 50 years.

We have a number of successful partnerships here in the UK investing in identical sort of assets. We spent about-- including Oxford University where we have a 4 billion pound regeneration program, Manchester largely with the university 3 billion, Birmingham we've just announced another 4 pound billion partnership.

And so we're absolutely leaning in to this sort of recession threat that's hanging over us right now. Interest rates are still very, very low. Science and technology is the most exciting it's been since the 1860s. We're seeing a situation where others are standing back. And we're going to step up, and lean in, and invest more here in the UK economy and indeed in the United States as well.

- How do you determine, in this environment where there is so much volatility, what makes an attractive investment?

NIGEL WILSON: Well, for us, because we have this very long term view, the volatility doesn't matter to our business because we're matching assets and liabilities over a long duration. And therefore, because it turns other people off, it's actually helpful to us.

We began this program in 2009 in the wake of the financial crisis. And people at the time were very skeptical about how much we could achieve. But we've had great success in 15 or 16 different cities right across the UK. If COVID hadn't happened, I think we'd have been into the United States two or three years earlier than we are right now. But for the reasons I've just articulated, it is actually a wonderful investment time because others are stepping away.

- I'm also always curious, your main business, of course, your core business being the insurance business, you do a lot of pension plan management and such. How is the interplay between that and then these kinds of investments that you're making?

NIGEL WILSON: Yeah. There isn't really a US equivalent of us. Our fund management business is 1.3 trillion pounds. We have between 20% and 40% market share of 10 different markets here in the UK. We own five housebuilders for instance. So we we're not the traditional insurance business. We have a big venture capital business as well and so a huge renewables business.

So we spend a lot of time on both the assets and the liabilities. But we have a very dynamic approach to asset investment given that there's so many liabilities out in the world right now. So we're looking at these long term trends. It's a very attractive time to invest right now. And people know that when you reach the bottom of the market, it tends to be a good time to invest. And that's exactly what we're doing.

- So Nigel, even though it is a good time for you to invest and you are looking more long term, certainly you have a good read on what is happening economically there in the UK, in Europe, in the US for that matter. And so I'm curious what your impressions are right now. Do you feel that the UK, as well as the European Union for that matter, are going to go into a recession? And how severe could it potentially be?

NIGEL WILSON: Yeah. I think we have a context in which the UK is a low growth, low wage, low productivity economy fraught by political infighting. And I guess the events over the last few months have demonstrated that that continues to be the case. We would like to change that by increasing investment through better regulation, better planning, and more crowding in of funding from the government rather than crowding out from the government. And the same applies on much of Europe.

There's so much talk about the recession that it's actually now impacting on people's behavior. We're seeing that in the unwillingness of people to invest. Consumption is definitely tailing down a little bit. There's not lots of recession type data but there's a lot of recession type narrative right now. And it is absolutely the case that the fund management industry is pretty depressed.

I've had several meetings with many fund managers, not just around our own. And they're losing money. And when people lose money, they lose their confidence. And there's certainly a loss of confidence in investment capability at the moment because of the amount of noise that's going on in all economies, the war, geopolitics, inflation rates, movements, all the things that you articulated at the beginning of this slot are true. And they're very evident here in the UK and indeed in Europe.

You know, I think the US is in a better place. And the federal system works very well in the United States for encouraging people to be empowered at a lesser level. In fact, we've been great advocates of that here in the UK to take some of the power away from the central government and give it to the individual cities. It's called devolution in the UK. But we're only maybe 10% or 15% of the way through the process of devolution in the UK. But if there's something we really want to change in the UK, it's more devolution, more empowerment to people at a city level who themselves have great solutions. So we back winners.

And we back winners in a number of cities across the UK. Often they're the vice chancellors of universities. Our universities punch above their weight. We maybe have 30 of the top 100 universities in the world and, similarly, four or five of the top 10 we've never capitalized on that in the way that MIT, Harvard, and Stanford have. I had the privilege of doing a PhD at MIT. Still very proud of that.

But Boston's been an incredibly innovative city way more than any city in the UK. California massively more innovative and creative than anywhere in the UK. We want to copy some of those ideas, implement them here, but bring some of the ideas that we've had in the UK to the United States, particularly to some of the states and indeed the individual cities which maybe haven't been as ambitious as other parts of the United States.

- Right. Well, we'll see what this initial investment in biotech in particular brings to that whole conversation. So Nigel Wilson, Legal and General Group chief executive. Good to get some time with you. Thank you.