Talking Brexit with Lionel

UK asset managers move ever closer to adopting their post-Brexit model. There is still much uncertainty, but always something to learn from the Swiss.

The Lens was privy to a recent conversation involving Lionel Aeschlimann, the chief executive of the Switzerland’s boutique asset manager Mirabaud, about how the important Swiss financial services industry is preparing for Britain’s EU departure.

Mirabaud targets the UK institutional market. The fact that it does this as a Swiss player arguably gives its boss a clear vantage point from which to comment. The fact that Aeschlimann is familiar with the legal intricacies of cross-border trade (he’s a former asset management lawyer) can only be of help, too.

He said that for the 45 years that the UK has been a member of the EU, Swiss banks and asset managers have invested in the UK on the assumption that, from a base within the EU, they would be able to sell their funds throughout Europe.

But could Brexit start to unravel that?

“The worst case scenario for us is that the UK leaves the EU completely and does not sign any kind of treaty with the EU,” Aeschlimann said.

“No agreement on trade in services seems highly unlikely, but it is nevertheless a possibility and would have a big impact as it would mean no market access.

“If that were to happen, investment firms would basically not be able to import services into the UK or import services into the EU from the UK.”

Almost all of Mirabaud’s funds are domiciled in Luxembourg which, Aeschlimann says, would “presumably” lose their EU passport to be sold in the UK post-Brexit in the absence of a deal for financial services.

The most likely solution is that Mirabaud – which currently employs 100 people in London – will have to set up UK-domiciled open-ended investment companies (OEICs) if it wants to continue to sell its products in the UK post-Brexit.

A bigger worry is that Brexit could lead to a dismantling of the delegation model, which allows funds in one EU state to outsource the investment management of a fund to portfolio managers in another country, typically the UK – where most of Europe’s investment expertise is concentrated.

“The UK market is consultant driven and the consultants act as gatekeepers. As a result competition is fierce on all accounts including price and it has been so for the last 15 to 20 years,” Aeschlimann says.

Rather reassuringly, he adds that Mirabaud invested in the UK because “we believed in the UK and continue to believe in the UK”.

And despite what many people may say, Aeschlimann is convinced that the UK will remain a “very important management centre on all counts”.

“I think the catastrophe predicted by many might well not happen,” he adds.

Preparing for the worst and hoping for the best is the order of the day.