Thursday 13 September 2018 10:15 am | Updated: Tuesday 21 May 2019 4:28 pm

Calls for Brexit deal to protect UK asset management industry

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Analysts have called for the final Brexit deal to protect the asset management industry as it emerged that the value of investments managed in the UK for European clients increased by 30 per cent last year.

A total of £3.2 trillion is managed in the UK for overseas clients, of which £1.8 trillion is assets from European investors, figures from the Investment Association revealed this morning.

The UK remains the largest centre of asset management in Europe, with more investment under management that Germany, France and Switzerland combined. It is the second largest internationally after the United States.

Investment Association chief executive Chris Cummings said: "The clear value the European market brings to the UK asset management industry underlines the urgent need for a Brexit deal to be completed by March 2019 which protects our industry, and more importantly, the savings of millions of people right across Europe."

The new statistics were revealed as UK based asset managers pick up the pace with Brexit contingency planning, with a raft of companies strengthening their presence in Europe.

"The main issue for the asset management industry is being able to sell products and services to European customers, which is under threat from a disorderly Brexit," Hargreaves Lansdown senior analyst Laith Khalaf said.

"A good Brexit for the fund management industry would involve some sort of deal which allowed them to continue servicing European clients from the UK. In the event that doesn’t happen, it’s likely firms will find ways to sell into Europe, though that may involve setting up businesses on the continent rather than trading across borders."

Luxembourg is set to benefit as firms establish offices and seek regulatory permissions to continue to trade SICAV funds, which are regulated under European law, after the UK leaves the EU in March next year.

London-based firm Jupiter, which looks after an estimated £50.2bn, has opened a Luxembourg office to manage SICAV funds and conduct discretionary portfolio management activities.

Jupiter will also seek approval from the Securities and Futures Commission in Hong Kong and Taiwan's Financial Supervisory Commission, and provide notifications to other regulators in jurisdictions where the SICAV funds are registered.

Similarly, City investment manager M&G has set up a new corporate structure in Luxembourg where it has built a SICAV platform to "be the home of investment solutions" for international clients.

Edinburgh-headquartered Standard Life Aberdeen will use its existing Luxembourg management company post-Brexit and establish a new distribution and investment company in Dublin.

Once the firm has the relevant approvals it will implement the arrangements regardless of the outcome of the Brexit negotiations.

“Whilst Brexiteers look forward to the return of the blue passport, the passport of more interest to the investment industry is the one that allows for the free movement of capital and distribution of funds throughout the single market," AJ Bell chief investment officer Kevin Doran commented.

“The softer the Brexit, the less scope for disruption to the existing arrangements in place.

"The immediate priorities ought to be a focus on providing greater clarity around the Temporary Permissions Regime and ensuring a reciprocal arrangement applies to funds operating in the UK. Only with this in place can the industry begin to plan with any certainty for the post-Brexit world."