Cross border fund management outsourcing providers, such as Dublin and Luxembourg-based Carne financial services has begun targeting UK fund managers to do so.

Carne says it is "the only company with established third-party UCITS and AIFM management companies in both Ireland and Luxembourg and can offer ‘plug and play’ solutions where the portfolio management function can be delegated to the UK manager".

"Carne is a strong partner with 70+ staff in Luxembourg and Dublin dedicated to providing management company solutions and can assist with the set up of your own management company in both Luxembourg and Dublin and provide directors and designated directors for the substance you would need." it says.

Others, such as Laven partners, a UK based manager, say that it will consider passporting its regulated umbrella to Ireland, the Netherlands or Malta.

In a statement to clients following the referendum, Laven says: "There is no doubt that all pockets of the UK will be affected. It will affect London above all however especially for the asset managers who manage EU funds and/or those who depend on EU distribution. Countries from Malta to Luxembourg will be welcoming any new business. For Laven Partners passporting our regulated umbrella to Ireland, the Netherlands or Malta is a possibility and one which we unfortunately can take if it is required to protect our client base."

The Carne Statement is as follows:

‘Shock Brexit Result Leads to Uncertainty for Fund Managers and Investors in Funds’

In the wake of the UK’s shock decision to leave the EU there is now huge uncertainty for UK fund managers looking to sell products in the European Economic Union (EEA) and for investors in existing and future funds.

Whilst politicians grapple with the impact of the vote it is vital that UK investment managers move swiftly to reassure their investors that they have a solution for a post-‘Brexit’ world.

Former Commissioner for Financial Stability, Financial Services and Capital Markets Union, Lord Hill – speaking on passporting opportunities post ‘Brexit’ – noted that ‘most approaches that offer access come with free movement of people and I can’t see that flying given the weight of immigration as an issue in the referendum’.

Uncertainty for Investors
If the outlook for managers is uncertain then so too is the outlook for European consumers of UK-managed investment funds, currently distributed under the UCITS or AIFM passporting regimes.

Many investors invested on the basis of its status as a UCITS or an EEA AIF fund. Such status may be a pre-requisite for investment or for investors such as insurance companies as it has the potential to offer a better capital treatment when compared to non-EEA product.

Whilst the UK is likely to remain as a member of the Union for at least the next 2 years, investors make investment decisions on longer time horizons. So will an investor who has purchased a UCITS or an AIF be happy to be a shareholder in a Non-EEA AIF in 3 years time?

UK managers need to move now to reassure and comfort existing and future investors who may now be asking questions such as how ‘future proofed’ is this fund, will there be further costs to me from this fund or will there be tax impacts to come as a result of the change?

Such uncertainty might delay investor decisions as a result of their need to feel that their investments are secured for the future and costs minimised as the ‘Brexit’ fall-out continues.

In addition to impacting funds domiciled in the UK, many UK investment managers will manage AIFs and UCITS domiciled in other EEA jurisdictions such as Ireland and Luxembourg pursuant to the relevant UCITS and AIFM passporting regimes. In a post “Brexit” scenario these management company passports may no longer be available to UK managers and a restructuring of these arrangements may be required.

As well as investors, distributors too will now be assessing the impact on funds as a result of the referendum and managers need to be ready and able to answer those questions.

Options for UK Managers
The world will not stop while the UK negotiates its exit from the European Union or reconsiders its decision to exit – so UK managers now need to consider their options for continued access to Europe and be well placed to deal with questions from existing and prospective investors who have the option to purchase competing products domiciled or managed in the remaining EEA states.

One option that UK managers could choose is to set up a permanent presence in the EEA. However this option comes with considerable cost implications and involves ‘putting boots on the ground’ (acquiring office space and seeking additional regulatory approvals in one of the remaining 27 member states) most likely in Ireland or Luxembourg. While the regulatory requirements today may well resemble those of the FCA today there are no guarantees that they will in 5 years time.

Each Way Bet
An alternative solution is to partner with a UCITS and/or AIFM manager domiciled in one of the remaining member states and operate in an investment management capacity under the manager’s UCITS/AIFM permissions.

Under this scenario the Fund simply appoints an EEA manager to act as the AIFM or UCITS manager and the manager in turn delegates investment management to the UK entity.

This is a structure that is popular with investment managers based outside the EEA in jurisdictions such as the US, Canada, Hong Kong and Australia. If the UK negotiates passport access to the EEA in due course then this structure can remain or be adapted but it will have been achieved at relatively little cost and time.

How Carne Can Help UK Managers to Manage Investor Uncertainty
Carne has vast experience in dealing with these issues and provides our clients with the strength, trust and reassurance that their needs are met even in the most challenging of times. We stand ready to provide advice to investment managers considering their options.

For example, Carne is the only company with established third-party UCITS and AIFM management companies in both Ireland and Luxembourg and can offer ‘plug and play’ solutions where the portfolio management function can be delegated to the UK manager.

Carne is a strong partner with 70+ staff in Luxembourg and Dublin dedicated to providing management company solutions and can assist with the set up of your own management company in both Luxembourg and Dublin and provide directors and designated directors for the substance you would need.

We are trusted to oversee funds for many of the world’s leading investment managers (including a number currently domiciled in the UK) meaning that we have the experience to support UK managers through these uncertain times.

With proper planning and support the future need not be as unclear as it currently seems. Working with the right partner it might even create hitherto unforeseen opportunities.

Any member of our team in Carne is happy to take a call or sit down with you and answer any questions you may have about how to manage the current uncertainty and build a more secure future for your investors.

There are no concrete answers to all of the uncertainties caused by the ‘Brexit’ result but Carne can help smooth the way when it comes to managers having conversations with existing (or new) investors in existing funds or new investors for new funds."