Investment Management Association (AIMA) has released a note outlining the
various possible effects of a Brexit.
“There will not be a
single impact on the UK investment management industry – rather it will affect
individual firms in different ways, depending on the extent to which they are
UK/global or EU focused, the types of products they offer to investors, and can
be mitigated by the amount of business they are able or willing to conduct
outside the EU,” it says in the document.
It notes that the
impact of a Brexit for UCITS funds “could be significant” because they can only
be established in the EU. AIMA says that without a negotiated settlement that
permits the UK to remain a UCITS domicile, all non-EU legal entities would need
to be re-domiciled and/or re-authorised.
companies that are authorised as alternative investment fund managers (AIFMs)
by the Financial Conduct Authority (FCA) are currently considered as EU AIFMs
and can manage funds and market their businesses throughout the EU.
But as AIMA points
out, “UK AIFMs will of course cease to be EU AIFMs. The UK may choose to apply
a lighter post-exit regulatory regime on its asset managers. Conversely, a UK
AIFM wishing to market its funds to investors in the EU would be required to
either (a) use local private placement regimes where available (or rely on
reverse solicitation) or (b) delay its marketing until the UK is evaluated and
approved by ESMA and the AIFMD passport is extended to it (and to the third country
in which any relevant non-EU AIF is established).”
highlights that there are still a number of unknown variables regarding
Britain’s expected exit from the EU and says that until these uncertainties are
resolved it will be difficult for businesses to plan ahead.
AIMA says that one way
for asset managers to “future proof” their ability to access the EU is to set
up subsidiaries or management companies and funds on the continent. However, it
also notes that this could prove to be a very costly exercise, especially if
post-Brexit the UK decides to largely maintain the existing status quo.