28 May 2017

Financial Times: Asset managers fine tune Brexit contingency plans

Contingency plans include adding staff to European operations, applying for additional licenses from EU-based regulators and establishing new offices on the continent.

The moves have intensified fears that Brexit will damage the UK’s position as Europe’s financial centre, as companies from other sectors, including banks, insurers and wealth managers, also begin to reduce their reliance on the City.

Sean Tuffy, head of strategy for Europe at Brown Brothers Harriman, the US bank, said: “Most asset managers are enacting plans to Brexit-proof parts of their businesses. What will be damaging to the City is death by a thousand cuts.

“You won’t see mass migration, but you will see slippage [of jobs moving away from the UK], as well as unseen losses — jobs that would have gone to London and now go somewhere else.”

Maarten Slendebroek, chief executive of Jupiter, said: “There are a few things we need to do and will do. Our overseas subsidiaries are small and hang on to the UK entity. We will rewire that to hang on to the European entity. It will cost us man hours and a couple of hundred thousand pounds.”

The concern across the industry is that licenses granted by the UK regulator — particularly the coveted Mifid license — that enable fund companies to access European clients, will become void if Britain loses access to the single market. This has pushed investment managers to strengthen their presence on the continent to have a firmer chance of not being locked out of European fundraising.

“Most asset managers have come to the conclusion that Brexit will be a hard Brexit. The question is how hard,” Mr Tuffy said. “Most are looking at what substance they will need to set up in Europe to get ready for that. None of these things can be done overnight. If you accept the premise that you cannot rely on a UK Mifid license, you will need to have substance somewhere else.”

Despite concerns about the impact of Brexit on the UK, a number of international asset managers have strengthened their presence in London in recent months, including Unigestion, the Swiss fund manager, PSP, the Canadian pension scheme, and OppenheimerFunds, the US investment company.

Schroders, the UK’s largest listed asset manager, and Ashmore, the London-based fund house, have also prepared Brexit contingency plans, although they have held back from making operational changes.

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