Asset managers affected by Brexit will decide on which jurisdictions to base their operations in by the end of June, a management consultancy said.
Most asset managers are assuming the UK will not retain passporting rights within the EU once the Brexit programme is completed, according to Cerulli Associates.
This means firms are looking for EU-based business partners to offer management services, else they will have to set up operations themselves within one of the remaining 27 EU countries.
Barbara Wall, Europe managing director at Cerulli, said: “Industry sources tell us that asset managers are typically comparing three or four jurisdictions. The expectation is that most will have decided on, and likely announced, their choice of EU-27 location by the end of June 2017.”
However, in case passporting is retained, the firms affected are doing the “bare minimum” required to continue to operate in the EU.
Firms were seeking to initially establish the smallest possible entity in an EU-27 country, Cerulli said, ideally delegating or outsourcing as many functions as possible back to the UK. This approach enables firms to minimise costs at this early stage, and easily unwind the operation if the UK retains its passporting rights.
Cerulli said that while most large asset managers have fund operations in Luxembourg and Ireland, roles such as distribution, sales, and portfolio management are currently often located in the UK.
“The question of what constitutes ‘substance’ in terms of the functions and staff levels of a subsidiary operation and whether firms would be required to relocate portfolio managers is not clear.”
Wall made her comments in ‘Cerulli Edge – Global Edition’ report.
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