HOW PREPARED IS THE UK FUND INDUSTRY FOR BREXIT?

HOW PREPARED IS THE UK FUND INDUSTRY FOR BREXIT?

In the first of our four-part series of surveys DMS have addressed the question of Brexit and the results were surprising.

We contacted a cross-section of European institutional investors and 64% believed that UK managers have ‘failed to plan’ or have ‘inadequately planned’ for Brexit and its market implications.The question of timing proved a key consideration, with only 31% of those surveyed believing that it should be considered an ‘immediate concern’, 67% stating it would be a concern if Brexit plans were not in place by the end of the year and 86% if plans were not in place by this time next year.

Aside from preparation and timing, other key concerns among institutional investors were:

  • The ability of the manager to market their funds to the investor post Brexit – 50%
  • The ability of the manager to manage European domiciled funds post Brexit – 29%
  • The impact of Brexit on managers cost structure due to the possibility of adding complexity to align with Brexit – 10%

Emerging from the survey results was a certain degree of confidence in the market, with 12% having no concerns, clearly feeling confident that the UK funds industry would be able to arrive easily at practical solutions. We also saw an understanding that Brexit is a complex and open-ended issue and a level of confidence in managers’ ability to deal with challenges presented to them.

Most notably, NONE felt it would result in having to redeem holdings with UK managers.

There were no strong opinions on the question of the correct Brexit approach to adopt and 26% felt that this was a decision best made by the investment manager.On the subject of geographical location, just under a third of those surveyed felt that the manager might need to relocate all or substantively all of their operations to European locations. 40% felt that remaining in the UK was the preferred option, to avoid disruptions to the Alpha generating team by partnering with a third party MiFID/AIFM provider.

Overall, and perhaps surprisingly, investors felt that Brexit was the third most important challenge facing investment managers today, trailing behind the question of MiFID II and fees.

Our View

ave surprised us – we had not anticipated seeing Brexit ranked as the least pressing concern. Brexit has received extensive media coverage and we had thought that, for the European Institutional Investor, it would be a paramount and time sensitive concern. Encouragingly, we have discovered that there is a quiet confidence that the industry will get this right when the time comes.

Our aim in undertaking these surveys was to uncover these unexpected trends and to dig deeper into the issues that affect our industry.

Over the coming months DMS will engage with the European investor community on a number of subjects including, MiFID II, Fees and In-demand strategies.

We value your opinion and invite you to contribute to our surveys by getting in touch with us by email: [email protected]

How Can DMS Help

DMS is uniquely positioned to assist investment managers who are currently considering their current and post Brexit options.

We hold MiFID, AIFM and UCITS licenses and operate in the UK, Ireland and Luxembourg. Please contact Derek Delaney who will be delighted to assist you further.

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