M&G Investments, the fund management arm of insurer Prudential, will build a funds business in Dublin amid fears the British decision to leave the EU will dent its ability to attract investors given its London base.
The London-based asset manager said work had begun on setting up a new range of funds in Ireland to sell to European investors, which otherwise would be excluded once Britain separates from the EU.
Staff would be added or relocated to oversee the fund management business in Dublin but M&G said that existing operations would not be moved out of the UK as a result of the Brexit vote. Instead, funds would in effect be replicated in Dublin for its overseas investors.
About 10 per cent of M&G’s £246 billion (€bn) in assets are accounted for by non-UK investors.
The Brexit vote has caused concern in the fund management industry, which fears being locked out of European fundraising.
European investors account for more than a fifth of the £5.5 trillion of assets in the UK investment industry — more than the total size of Germany’s asset management market.
“The Brexit vote is profoundly negative for the export of UK asset management services,” said a senior regulatory expert, who asked to remain anonymous. “Those companies that don’t have fund ranges set up outside the UK need to do so very quickly.”
Investment managers are required to have a base in the EU to sell their funds to continental retail investors. The vast majority of M&G’s funds are domiciled in the UK, and its ability to market those funds overseas has been curtailed by last Friday’s referendum result.
Anne Richards, the newly-appointed chief executive of M&G, said: “The referendum result doesn’t change who we are as a business, nor our commitment to our customers, wherever they are.”
The Investment Association, the trade body for UK-based fund managers, has defended the future of the asset management market in London, with some predicting failing revenues and job cuts as a result of the Brexit vote.
The IA said: “It is important we adopt a collective long-term focus on how the UK can preserve the pre-eminence of its financial services sector including our highly successful asset management industry.”
Fund companies are already grappling with sinking profit margins and concerns about performance.
Assets under management in the UK fund industry have fallen by a fifth over the past year. McKinsey, the consultancy, forecast that profits at asset managers would fall by a third over the next two years.
Daniel Godfrey, former head of the IA, the trade body representing UK fund managers and who is working with the UK regulator, said the Out vote would deliver more pain.
“There is an immediate downside for asset managers. Plunging valuations means plunging assets, and that will dent revenues. All industries could see job cuts if GDP slows and asset management will be no different,” he said.
(Copyright The Financial Times Limited 2016)
