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Alternative Investment

Funds and the Brexit Transition Period. Opportunity or Uncertainty?

Posted by on 25 January 2019
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We asked one of our key speakers, Carla Jane Findlay-Dons about her thoughts on the following question. Carla is speaking at the at the Fund Marketing and Distribution conference on 'Brexit: The Evolving Industry Impact.'

"How do you think UK funds and managers will cope with adopting EU legislation during the transition period once the UK has no official EU influence?"

Chief Global Regulatory and Market Strategist at Brown Brothers Harriman (BBH)
Chief Global Regulatory and Market Strategist at Brown Brothers Harriman (BBH)

Whilst much of the City is spending its time, energy, and resources on preparing for the Brexit transition period - not to mention contingency planning for a no-deal Brexit scenario - there is an increasing level of engagement around what UK financial services will look like in a post-Brexit world.

"Even with considerable challenges ahead, UK asset managers should view Brexit as an opportunity to shape their ideal financial product for competition on a global stage."

In the short-term, Brexit has the very real, and often uncomfortable, impact of creating uncertainty around rules and requirements of doing business in the UK with EU counterparts. But in the long- term, the room for opportunity should not be underestimated.

In the Brexit aftermath, the UK asset management and banking industries—through work with the Financial Conduct Authority (FCA) —can succeed in creating a globally-competitive market with commercially-attractive regulatory standards and innovative products. Initially, this may manifest itself through the creation of UCITS-like funds that share many UCITS characteristics, but which then may have some measure of distinct and divergent regulatory features...noting that not every distinction from EU requirements would necessarily be inconsistent with high-level EU regulatory principles.

In any post-transition period, there will likely be an urgent call for innovative regulation to help maintain and grow the UK asset management sector. And the UK—with its combination of an established financial services industry, deep local talent pool, jurisdictional certainty, and reputation for innovation—is likely up to the task. Given the UK’s legacy in the financial industry, it stands to reason that it will continue to be an attractive and desirable place for managers to do business. Let’s not forget that many of the architectural concepts and themes within the EU regulation (transparency, fiduciary duty, outsourcing, oversight, and treating a customer fairly) were driven, in part, by the FCA, English civil servants, and lawmakers in engaging with the EU commission and parliament.

Whilst the chatter surrounding Brexit has focused on the unprecedented challenges that lie ahead, once the dust settles, Brexit provides a commercial and growth opportunity for financial services. It also provides a chance for the FCA to independently demonstrate the strength of its Principled-based approach to setting standards for financial services that benefit the end investor and the economy.

If you'd like to hear more insights from Carla, she is speaking at the Fund Marketing and Distribution event on 5-6 February in London. Her agenda session is entitled 'Brexit: The Evolving Industry Impact.'

To claim a 10% discount, please visit the Fund Marketing and Distribution website. (discount will be applied automatically at checkout)

The views expressed are as of 18/01/19 and are a general guide to the views of Brown Brothers Harriman (“BBH”). The opinions expressed are a reflection of BBH’s best judgment at the time and any obligation to update or alter our views as a result of new information, future events, or otherwise is disclaimed.

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