The UK leaving the European Union will have a limited impact of the continent’s fund management industry, a former president of the European Fund and Asset Management Association (Efama) believes.
Alexander Schindler told portfolio institutional that despite the current deadlock in the negotiations he expects Theresa May to sign a provisional exit deal with Brussels before the end of November.
Schindler, who was president of the association representing Europe’s fund managers until 2017 and still sits on its board, said most asset managers are ready for the UK’s departure, having made arrangements for many scenarios.
“The Financial Conduct Authority and its European counterparts are well aware of the potential risks associated with a no-deal Brexit and will continue to provide an environment where the existing regulatory framework remains in place until at least 2020,” he added.
Indeed, a survey by accountancy giant Ernst & Young confirms that more than a third of financial services firms in the UK are relocating part of their operations to Europe, with up to 57% of front office roles affected.
Yet Schindler argues that the operational effects for the end-investors, including pension funds, will be limited and that the main risk would be volatility in the capital markets. “The main dangers for pension funds could come from areas such as forex volatility, but the more we talk about a de-valuation of the pound, the less likely it is going to be because people are already positioning themselves,” he added.
According to Efama’s latest monthly asset management report, the UK remains Europe’s largest asset management market, accounting for 35.4% of all assets managed across the continent. This, according to the Investment Association (IA), means that £7.7trn of assets are managed from the City. Almost of a third of these assets (£1.8trn) are owned by European investors.
Chris Cummings, chief executive of the IA, argues that this underlines the importance of signing a Brexit deal. “The clear value the European market brings to the UK asset management industry underlines the urgent need for a Brexit deal to be completed by March 2019 which protects our industry, and more importantly, the savings of millions of people across Europe.
Schindler added that the City will continue to be the City no matter what the terms of the exit are. “Whatever the outcome of the Brexit negotiations, Europe will depend for quite some time on sourcing financial resources from the UK,” he said. “You don’t build up something like the City of London overnight.”