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The discussion was held at the RSA on Wednesday 28 September 2016 in front of a room comprising representatives from across the UK asset management industry.  Sitting on the panel were Charles Bathurst, Consultant to SuMi TRUST, Duncan Crawford, Global Head of Hedge Fund Sales and Capital Introductions at Societe Generale and Martin Cornish, Partner at M J Hudson.

  The discussion was held to mark the relaunch of the Hedge Fund Association (“HFA”) of America in the UK.  The HFA is an International not for profit industry trade and nonpartisan lobbying organisation devoted to advancing transparency, development and trust in alternative investments.  Martin Cornish, partner of MJ Hudson and Tim Baker, Group Head of Sales for Asset TV will be taking on the role of Co-Directors of the HFA in the UK to promote the association’s principles, partnerships and membership within the UK industry.

  The main conclusions of the discussion, which included thoughtful and well informed comments and questions throughout the debate from many members of the audience, were:

• Most alternative managers are playing a waiting ‘game’, seeking greater clarity on the ‘direction, nature and intensity’ of Brexit before making any significant changes as regards their future primary domicile, fund structures and asset raising strategy;  
• A number of managers are reviewing the setting up of parallel Management Companies in Dublin or Luxembourg to “cover their bets”;  
• The primary reason for management firms deciding on the location of their fund vehicle at launch is the domicile or geography of their target investors to maximise fund raising and not other factors;   
• The British fund industry should not feel unduly challenged by the exit from the EU even though the ‘shape’ and timing of this is at yet unclear.  The two dominant countries in Europe for raising assets for alternative funds are the UK and Switzerland – both of which will be outside the EU so Brexit won't be a ‘game changer’.  The traditional UK long only industry has already established operations in Luxembourg and Ireland to passport their funds pan Europe.  
• The UK alternatives asset management industry already operates in full compliance with AIFMD. The move to UK domestic regulatory oversight in the wake of Brexit is expected to necessitate ‘technical’ adjustments only and a smooth transition process with little real disruption to how managers operate or market themselves in Europe.  On the basis that "equivalence" is granted on the same basis as other countries that have received positive indications of this from the EU, then the current passporting regime would remain in place, with the U.K. becoming a recognised third country;   
• The attractions of London as a global financial centre will not be altered or lessened by Brexit and there will be no disruptive exodus of people and talent or re-domiciliation of firms as a result. US managers considering their plans in Europe remain strongly attracted to the UK as a result of common language, skilled human resources and support systems and service providers;  
• Any concept of ‘Fortress Europe’ needs to be carefully considered by the European authorities as moving in this direction would in effect be “shooting themselves in the foot”  as this could impact all managers domiciled outside the EU looking to raise assets;    
• Strong evidence of new firms locating to the UK from Europe and other countries and limited movement away from the UK as a primary domicile. The U.K. is now a cheaper place to operate from for overseas players, further tax cuts are envisaged for companies and likely to be even more flexible in terms of regulation going forward and in contrast to the EU.  

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Related article:
12.Oct.2016 Other Voices: The impact of Brexit on UK asset managers marketing into the EU