Almost two thirds of global asset managers are in the process of revising their global distribution strategies in response to Brexit – and Luxembourg and Ireland are jurisdictions most likely to benefit, according to a survey by US financial services group State Street.
The survey – of 250 asset managers across 15 countries in April and May – highlights the upheaval that Brexit is having on the global asset management industry. London is the HQ of choice for many international fund managers seeking to access the European Union. But as the clock ticks down on Brexit negotiations, many asset managers to are rushing to open offices in new countries.
The majority of asset managers polled said they were reshaping distribution strategy and expected to increase hiring in new locations over the next five years.
Nineteen percent of asset managers polled by State Street said they had already taken action, while 54% said they were in the process of taking action to revise their global distributions strategies, according to the survey. A further 19% expect to take action within the next five years.
Luxembourg and Dublin
Sixty two percent of asset manager respondents said they planned to use Luxembourg as a domicile to distribute products over the next five years – a sharp rise on the 46% of respondents that currently use the grand duchy, according to the research.
M&G Investments is among asset managers planning to shift UK assets to Luxembourg to hedge against Brexit risks while Columbia Threadneedle is is offering Luxembourg-domiciled alternatives to UK-domiciled funds.
Ireland, meanwhile, is also set to benefit. Fifty five percent of asset managers surveyed said they planned to domicile funds in Ireland in the next five years – up from 42 per cent of respondents currently.
The survey question allowed respondents to list multiple jurisdictions.
“Locations such as Luxembourg and Ireland that can meet regulatory obligations confidently and efficiently are seen as the natural choice by asset managers, allowing them to mitigate risk, achieve economies of scale and reach investors globally,” said David Suetens, head of State Street in Luxembourg.
“As cross-border products are increasingly seen as the optimal path for growth, asset managers are looking for domiciles with an established regulatory environment.”
Top five EU destinations
Other European jurisdictions likely to see a rise in use as a domicile for funds are the Netherlands, currently used by 5% of asset managers surveyed, but set to increase to 11% in five years; Germany, currently 18% but expected to rise to 22% in five years; and France, currently 10% but set to rise to 14% in five years, according to State Street’s survey.
The top five top European destinations vying to nab fund management business from London are likely to be Amsterdam, Dublin, Frankfurt, Luxembourg City and Paris, according to industry experts.
The State Street survey asked the 250 global asset managers how they are developing cross-border strategies, including the factors influencing their choice of fund vehicle, passport and domicile location.
Sixty four percent of asset managers said they were planning to launch cross-border products in the next five years, according to the survey.