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They will have to set up a registration in Europe’s other big centres of fund management – Luxembourg or Dublin – but that’s a lengthy process which can take up to six months. “For a small or medium-sized entity it’s blooming expensive,” says Stuart Alexander of Gemini Investment Management.
“It would be carnage for smaller and medium fund management businesses which will have no representation in Europe. They’ll have to go out and find it.”
Smaller fund managers won’t be welcome everywhere – Luxembourg rules require €10m capital on the balance sheet for a registration although in Dublin only €300,000 is needed.
It will also be an issue for UK investors who’ve used a wealth manager to look after their finances. Many wealth managers only invest their clients’ cash into Ucits-compliant funds, because they like the tight regulatory framework it offers. “The wealth manager would have to withdraw the money from the funds on your behalf,” Alexander explains.
This won’t be a problem for global fund managers which have already set up structures and subsidiaries around Europe and the rest of the world.
A report from Morgan Stanley suggested Britain leaving the Europe would cause so many issues for fund managers it could lead to an exodus overseas. “Britain has the second-largest asset management industry in the world with significant earnings for UK.... [Brexit] could potentially be so disruptive that some UK-based fund houses would be looking at the option of moving their domicile,” the report states.