With the marketing of funds between the UK and the EU set to continue, London will remain a funds hub explains Head of Alternative Investments, Simon Burgess.
Domicile choice depends on where a fund's investors are based and their appetite to invest through particular jurisdictions. In Europe, since the UK's Brexit referendum in 2016, Luxembourg has become a jurisdiction of particular interest to European investors.
Until recently, market participants had not known the extent to which managers in London would be able to access the European investor pool after the UK's transition period ends on 31 December. But the announcement by the UK's Financial Conduct Authority and European Securities and Markets Authority in July that the Memoranda of Understanding (previously agreed in February 2019 to cover "a hard Brexit" or "a no-deal Brexit" scenario) would take effect following the end of the Brexit transition period alleviated these concerns.
This was a key announcement and supports current structures and the business operations of fund managers operating from London. In other words, whatever the outcome of the UK/EU trade negotiations, in 2021 and onwards they will be entitled to provide portfolio management services for funds promoted to EU investors. It means portfolio management can remain in London, and the City will remain a funds hub for Europe. To try and dismantle that in such a short period of time would be problematic.
Furthermore, the uncertainty around the marketing of funds across Europe has lessened. The plan enables marketing to continue between the EU and UK on a third-country private placement basis. It's business as usual.
At Ocorian, we provide alternative investment fund managers with depositary and fund administration services from both the UK and Luxembourg and we have seen an uptick in activity this summer. The UK is still seen as a secure place to do business and will remain so going forward. That's very exciting for London, which is maintaining its status as an investment hub.
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