Possible impacts of a Brexit on fund managers
With the distinct possibility of a Brexit looming in the not too distant future, UK based fund managers and those those trading in the UK could potentially be greatly impacted. The International Monetary Fund recently warned that a Brexit could cause severe damage to the economy, yet opinion is still somewhat divided on the specific impact for fund managers as analysts now suggest there is a 40-50 per cent likelihood of voters opting to leave the EU.
The Place of the EU in the funds industry
The Investment Association’s Annual Survey, published in September 2015, stated total assets under management (AuM) in the UK to be over £5.5 trillion – a 37% portion of the total EU AuM. Based on these figures, alongside the UK’s global position in the financial markets, it could be said that the EU itself would have more to lose in not finalising a package that would allow a synergistic relationship between the UK and Europe for investment managers. Analysts and regulators alike are issuing stark warnings about the potential impacts on asset managers, with these views also being supported by the Investment Association, yet opinion is still divided as the general consensus amongst fund managers themselves appears to conclude that a Brexit would be manageable and not a massive risk to their access to the single market.
Possible implications of a Brexit for UK managers
For those less optimistic about a friendly split between Britain and the EU (should voters opt for this on 25th June 2016), finding an alternative jurisdiction that’s safe from a legal and regulatory domicile perspective is a key topic for discussion. Ireland stands out as a front-runner for those who have considered the possibility that domiciling in the UK following a Brexit would mean managers no longer have access to oversees investors, or be allowed to run funds that are registered and overseen elsewhere in Europe.
An alternative jurisdiction – Ireland prepares
Ireland is already preparing for this outcome as the Irish Times quotes Gareth Murphy, Director of Markets Supervision at the Central Bank of Ireland, saying, “The firms we regulate and their counterparts in the UK are faced with a considerable period of uncertainty if Brexit were to happen. We are envisioning that there will be quite a few possible applications for authorisation in this jurisdiction”.
John Bohan, Managing Director of Apex EMEA and Apex Ireland concurs, saying, “We should see further and ongoing flow from the UK using Ireland as a legal and structural base from a funds offering and tax perspective. This should lead to a surge in growth of the investment management industry in Ireland which can leverage off of the platform offerings for directives such as AIFMD and MIFID.”
Ireland is clearly establishing itself as a gateway to Europe from an investment management perspective both within Europe, and globally. For managers currently domiciled in the UK and passporting into other jurisdictions, a settlement that permits the UK to continue as a domicile for UCITS would be required. If this did not happen, those managers would be forced to relocate to an EU country or cease to continue as a UCITS fund altogether.
The importance of working with global service providers
In this situation fund managers will really need to look to the support of global providers to ease the impact on their businesses. As a fund administrator with a global network of offices, Apex can provide security and a smooth transition for managers looking to work across multiple jurisdictions and adapt to political and economic factors impacting their investment strategies. With full service centres in London, Cork and Dublin, Apex delivers fund platform and regulatory solutions alongside a robust service provision for managers should they be affected by a potential UK exit from Europe.
Visit the Apex UK, Apex Cork and Apex Dublin pages to contact a local office.
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