The UK could outperform the US as an investment destination in 2023 because of the pound’s decline and the greater returns that companies offer, according to Blackstone Inc.’s Jonathan Gray.
(Bloomberg) — The UK could outperform the US as an investment destination in 2023 because of the pound’s decline and the greater returns that companies offer, according to Blackstone Inc.’s Jonathan Gray.
“Since Brexit, the UK lost its halo a little bit and again this summer with some of the policy decisions, but I think that’s been course corrected in a meaningful way,” Gray, president and chief operating officer at the world’s largest alternative asset manager, said in an interview with Bloomberg. “I think the Sunak government is making very good choices that will ultimately attract capital.”
Data out Friday indicated the UK economy may avoid a recession for now as consumers continued spending through the steepest cost increases in four decades. Globally, inflation remains a key challenge for companies and investors, but is starting to decelerate, Gray said.
“I think the sentiment around the UK has gotten way too negative. And yes, it faces challenges, but when you look at it relative to other places in the world to deploy capital, the UK seems really attractive,” Gray said. This is not the first time Gray has made a case for the UK, where his firm is expanding its European headquarters with a new base in London.
Blackstone is beginning to see job vacancies at its portfolio companies come down, as well as easing pressure on revenue and wages, he said. Though for markets globally this year, Gray said “what we have ahead of us is probably still a fair amount of volatility until central banks pause on the rate increases.”
Monetary tightening is affecting corporate dealmaking as well, with investors including Blackstone struggling to find financing for leveraged buyouts. The firm had to bypass investment banks and turn to private credit lenders to purchase a unit of Emerson Electric Co., Bloomberg reported in November.
Blackstone, which did its most successful transaction just before the financial crisis with the buyout of Hilton Worldwide Holdings Inc., remains optimistic about deals in the coming year. “Some of the public stocks have traded off a lot, particularly in sectors that we like,” Gray said. “You will see privatizations happen and one of the great things about us is we can buy large-scale things and we can commit a lot of equity.”
The firm has $180 billion of dry powder across its different businesses and “this will be a favorable time to deploy capital,” Gray said.
–With assistance from Ben Stupples and Neil Callanan.
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