24 November 2019

Financial Times: Fund chiefs quit London as Brexit disruption lingers

This month, €557bn fund group Allianz Global Investors replaced its outgoing chief executive Andreas Utermann, who operated from London, with Munich-based Tobias Pross.

The reshuffle mirrored similar moves at several other companies, notably €757bn house Axa Investment Managers, which last month replaced London-based Andrea Rossi with an interim chief executive located in Paris, and €752bn manager DWS, which installed Frankfurt-based Asoka Wöhrmann last year after dismissing Nicolas Moreau, who worked in London.

Though the changes were made for different reasons and none of the asset managers cited Brexit as a contributing factor, they are an indication that UK’s departure from the EU is denting London’s appeal as the nerve centre for asset managers’ international operations.

Amin Rajan, chief executive of Create Research, a consultancy, says that given the stature of the companies involved, the recent executive moves are far from a mere coincidence.

“There is acute uncertainty in the asset management industry about Brexit and the fate of ‘passporting’ arrangements,” says Mr Rajan. “It hangs like the sword of Damocles over every strategic decision.”

There is a tradition of global asset managers locating their CEOs in London in light of the city’s status as a top financial centre. US and Asian investment houses have historically established their European headquarters in the UK capital, seeing it as a gateway to Europe.

Some big European asset managers with parent companies headquartered on the continent also placed senior leaders in London. Santander Asset Management and Candriam Investors Group, which is owned by a US company, continue to be led by London-based CEOs despite the bulk of their business being in the EU. [...]

 “London used to be the obvious place for global asset managers to locate their headquarters, but the benefit of basing a business [in the UK capital] is now less obvious with the prospect of Brexit,” says Jean-Louis Laurens, former managing partner of Rothschild & Cie Gestion. “For groups with a parent in continental Europe, the argument for being based in London is basically gone.”

Although the continuation of delegation rights after Brexit has been protected, enabling investment groups to continue to manage funds from London, a question mark hovers over what will happen to passporting — the open relationship on which asset managers rely to sell funds across the EU. The agreement governing the UK’s withdrawal from the bloc contains scant detail on this point.

Mr Rajan says: “London may well remain a major centre for the asset management industry, but the continent will be its growth engine. London’s pre-eminent position may well erode with time, depending on what replaces passporting arrangements.” [...]

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