More than two-thirds of investment professionals believe UK asset managers will not be able to sell their funds freely across the EU following Britain's departure from the economic bloc, according to a poll conducted exclusively for FTfm by PwC.
The professional services provider polled 644 professionals from 400 asset management companies at a conference in London last month. It found widespread concern about the impact of Brexit on UK-based investment companies, which manage £7 trillion of assets collectively and employ about 50,000 people.
Asset managers are unlikely to retain full “passporting” privileges that allow UK financial institutions to access the EU single market without restrictions, according to 70 per cent of the respondents.
Most UK asset managers have bases in Luxembourg or Dublin to sell mutual funds to mainland European investors, and will, in theory, still be able to sell these funds, known as Ucits, to EU-based clients after Brexit.
Staff relocation
According to the PwC poll, 85 per cent of the respondents said they believed it would be necessary to relocate some UK-based investment staff to mainland Europe as a result of Brexit.
Only one investment company – US asset manager Columbia Threadneedle – has confirmed it will move staff to mainland Europe in response to the vote.
Seven per cent of respondents, however, said their companies had already started to relocate investment staff following the referendum, while nearly a quarter said their companies planned to begin relocating investment professionals.
Jim McCaughan, chief executive of Principal Global Investors, the $418 billion US asset manager, said his company was exploring whether it might need to move trading and portfolio management employees from London to other EU locations after Brexit.
“Our main concern is what happens to our ability to employ European nationals in the UK. We have heard positive assertions from the government but we will have to see how things work out.
“While I don’t think our ability to do business around Europe will be seriously affected by Brexit as our fund range is domiciled in Dublin, we may have to expand activities in other parts of the EU.”
Andrew O’Callaghan, asset and wealth management leader in Europe for PwC, added it was vital for asset managers to undertake “detailed operational and product assessment reviews” to determine the adjustments that might be needed.
Basic freedoms
Just under one-third of respondents said their companies were undecided about how to respond to Brexit.
Wolfgang Schäuble, Germany’s finance minister, presented a tough line on EU divorce talks with Britain last month, warning that restrictions on immigration would end UK financial services companies’ free access to European markets. “Without acceptance of the four basic freedoms of the internal market there can, of course, be no passporting, no free access for financial products, or for financial actors,” he said.
Jorge Morley-Smith, a director at the Investment Association, the trade body for UK fund managers, said the UK should try to maintain passporting rights but the question of how disruptive Brexit would be was “not black-and-white” as the EU regulatory environment was not as harmonised as it first appeared.
He added that even in the event of a hard Brexit, whereby Britain loses access to the single market in return for restrictions on immigration from the EU, it was unlikely there would be an exodus of investment managers from the UK. – (Copyright The Financial Times Limited 2016)
