Brexit could boost UK asset managers’ profits up to 23 per cent if sterling drops as a result of the UK leaving the EU, says Numis.
A Numis note released this week argues asset managers’ costs are mostly in sterling, while only a small percentage of assets under management, and therefore revenue, is in GBP.
In an analysis of 10 asset managers, Numis predicted Polar Capital would see the biggest jump in profits at 23 per cent, while St James’s Place would experience a more modest 4 per cent boost.
Ashmore and Schroders would see healthy boosts to profits, rising 13 per cent and 12 per cent respectively.
However, the industry update warned that asset managers’ profits could be hit if Brexit caused a destabilisation of the global economy and asset classes across the board suffered as a result.
It added that asset managers would have to establish local European subsidiaries rather than relying on passporting under a Brexit scenario, but believed this would be manageable in the two-year transition period.
The boost to asset manager profits would buck the trend for financial services, which is expected to be one of the most severely hit industries in the case of a Brexit.
As a result, asset manager share prices might suffer a knee-jerk share price contagion resulting in a sector buying opportunity.
In contrast, Numis warns it would be cautious of a rally of asset manager share prices in the case of a vote to remain in the EU.
Last month the International Monetary Fund warned London’s status as a global financial centre would be damaged by a vote to leave the European Union.