Think Tank the New City Initiative has called for a dual funds regime to allow UK managers access to the EU post Brexit while relieving firms without EU interests of EU regulation.
The NCI, which names Brexit as “the biggest challenge facing UK asset managers since the financial crisis”, has published a policy paper identifying the more specific issues asset mangers will face in the next five years.
These include the loss of passporting rights for UK managers and the possible revoking of all access to the EU for those without an EU base if the national private placement regime is removed during the Brexit negotiations.
In a NCI poll of asset managers following the EU referendum, respondents’ main concerns were: regulatory arbitrage between the UK and EU (54.5 per cent); market volatility (27 per cent); and investor outflows/fundraising challenges (18 per cent).
The NCI says that if the Government introduces a dual funds regime, “it would help asset managers deal with many of these worst-case scenarios”.
Jamie Carter, deputy chairman of New City Initiative and CEO of Oldfield Partners, says: “A dual funds regime would allow UK managers with EU interests to continue to comply with EU laws and directives and retain favourable access to their EU investors, while simultaneously letting others market to the rest of the world ex EU, and avoid the worst excesses of EU regulation.
“Such a regime may also enable fund managers to avoid restructuring their businesses to onshore EU locations such as Ireland and Luxembourg providing equivalence for the UK is granted.
“However, a dual funds regime is not something that can be established with ease, and we recognise huge challenges lie ahead. That being said, it is an approach that could help improve competitiveness in the UK funds’ market, and ensure both the UK and EU gets a good deal out of Brexit negotiations.”