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* UK tax move seen as boosting private placements market
* Sector could get further boost from EU
By Huw Jones
LONDON, Dec 4 (Reuters) - Six asset managers will put about9 billion pounds ($14 billion) over the next five years intohigh-yielding investments in British companies, schools androads following tax changes, a funds industry body said onThursday.
British finance minister George Osborne announced onWednesday that interest accrued on private placementinvestments, a form of long-term, non-bank debt financing forsmaller firms and infrastructure projects, would be exempt fromwithholding tax.
Allianz Global Investors, Aviva, Friends Life, Legal andGeneral, Prudential and Standard Life - all fund management armsof insurers - intend to make investments totalling around 9billion pounds in private placements and other direct lending toBritish firms, the Investment Management Association (IMA) said.
"This (tax) measure, announced yesterday in the AutumnStatement, is a significant boost to the development of the UKprivate placement market, unlocking crucial capital for UKbusinesses," said IMA Chief Executive Daniel Godfrey.
Insurers and pension fund managers are keen to invest insuch long-term investments as they match their long-termliabilities in pensions and savings.
The illiquid nature of the infrastructure projects givesthem higher yields than long-term government debt, but assetmanagers complain a shortage of viable projects has made this acrowded trade, reducing returns.
Osborne said the fund managers' decision would attractfurther investment to Britain and increase credit to companies.
"This also signals the potential beginnings of an enduringprivate placement market for the first time in the UK," Osbornesaid in a statement.
The European Union's financial services chief Jonathan Hillis due to announce plans for a capital markets union (CMU) thatis expected to include initiatives to boost private placementsin a bid to reduce the region's reliance on banks for funds.
"Compared to the stability and depth of its U.S.counterpart, the European private placement market remains inits infancy, so will need continued careful nurturing to achieveits full potential," said Deborah Zurkow, chief investmentofficer for infrastructure debt at Allianz Global Investors.
Allianz said it would invest upwards of 3 billion poundsover the next three to five years in UK infrastructure, with 600million pounds invested by the end of 2014. It said it wouldinvest in projects including roads, schools and hospitals, andwater and energy assets.
Aviva said it would make an immediate allocation of 500million pounds in British infrastructure, following a 500million pound allocation made a year ago.
Friends Life, which this week agreed to be taken over byAviva in a 5.6 billion pound deal, said it had already allocatedover 1 billion pounds to private placements, including a 500million infrastructure mandate, and the tax changes would enableit to carry out more deals.
(1 U.S. dollar = 0.6380 British pound) (Additional reporting by Carolyn Cohn; Editing by Mark Potterand Pravin Char)
