Brexit to prompt European fund launches

Brexit EU referendum vote ballot

Brexit will prompt two years of fund launches as UK firms seek to establish EU-domiciled funds and vice versa, says Thomson Reuters Lipper, as signs point increasingly to the UK losing its passporting rights.

It contrasts to Q2 figures, which show a total of 689 funds were withdrawn from the market, while only 463 new products were launched, with equity funds continuing to dominate market share, accounting for 37 per cent of European funds.

Mixed asset was the next most popular type of fund, accounting for 28 per cent of products, followed by bond funds (21 per cent).

The net decrease of 229 products is similar to figures from Q2 2015, but is a drawback from the long-term trend, Lipper notes. Funds that were withdrawn were either liquidated (437 funds) or merged (252 funds).

The Lipper report says the UK’s vote to leave the European Union will further Ireland and Luxembourg’s dominance as international fund hubs.

At the end of June, Luxembourg hosted 9,109 funds, out of the 31,815 mutual funds registered for sale in Europe. France was the next most popular domicile with 4,452 funds.

PwC has previously warned it will be politically difficult for the UK to maintain passporting rights as it would require free movement of people, budget contributions and acceptance of EU legislation.

Last week, German lawmaker Michael Fuchs, an ally of chancellor Angela Merkel, warned passporting would be non-negotiable in Brexit talks.

In July, Fidelity International said it would be adding 100 staff to its 65-strong team in Dublin, but said the move was not connected to Brexit. M&G has said it will be establishing a Dublin fund unit too.

Meanwhile, Columbia Threadneedle has said it is expanding its presence in Luxembourg so it can continue to serve EU clients.