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16 June 2018

Financial Times: Brexit contingencies: asset managers put plans into action

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Asset managers are losing patience with politicians over the slow pace of Brexit negotiations, with several deciding it is better to assume the worst and fire the starting gun on their contingency plans.

FTfm contacted more than 40 large asset managers with significant operations in the UK. A third outlined plans to beef up or move parts of their operation to Dublin or Luxembourg, both major fund management centres.

For those still working on detail, the clock is ticking. The focus for the industry is on making a smooth move to deliver services to clients whatever happens, says Dan Waters, managing director at ICI Global, the trade body for international fund managers.

According to the European Fund and Asset Management Association, the worst outcome is a “super hard” Brexit where there is no UK-EU deal and no co-operation partnerships in place.

Many smaller companies are, however, scrambling to finalise their arrangements. A wave of applications for licences has been submitted to authorities in Ireland and Luxembourg. Most are from smaller fund managers exploring their options.

The Commission de Surveillance du Secteur Financier, the Luxembourg financial regulator, and the Central Bank of Ireland have been swamped by applications, say market sources. Neither regulator would comment.

In the two years since the vote to leave the EU, numerous asset managers have stuck patiently to the line that they need clarity on a final deal before committing to changes.

The tone is hardening with frustrated managers saying they have to act now to protect clients in the event of a hard Brexit.

“There may be a transition deal later this year. This could buy the industry more time but we mustn’t become complacent,” said Dave Mace, who runs the Luxembourg branch of MFS, the $492bn US fund group.

Stuart Dunbar, partner at Baillie Gifford, said: “It is future-proofing. We have to look after our European-domiciled clients.” The Edinburgh-based £178bn manager has not finalised its plans but it told FTfm that it will establish a management company “with substance” within the EU before next March.

Legg Mason, the $754bn US investment manager which is preparing to open a Dublin office this year, echoed the view that it would prepare for a worst-case scenario. “Continued uncertainty around the future of some of the delegation and passporting of products and services has meant that, while remaining flexible, we have to take action now,” said Ed Venner, chief operating officer of global distribution.

Full article on Financial Times (subscription required)

© Financial Times

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