A good idea, so why the anger?
It came as little surprise to The Lens that the UK and Brussels reached an 11th hour agreement over the delegation of fund management activities in the event of a no-deal Brexit – and it probably was not a surprise to you either. That’s exactly why you might have some cause to be angry, just like one chief executive The Lens has met.
As you no doubt know, delegation refers to the ability of a fund management company in the EU to delegate certain functions to a country outside of the EU. European regulators would inevitably have less oversight of the activity there, and that is a worry for them.
Portfolio management was the main sticking point during the recent debate over delegation in the context of Brexit. So much portfolio management for funds based in the EU – mainly ‘Ucits’ and alternative investment funds based in Luxembourg and Ireland – is carried out in London.
Brexit appeared to threaten the ability of such funds to continue to have their investment management carried out in the UK after the country is no longer in the EU, creating concern for asset owners and managers.
The apparent threat to delegation ran for months. Then in February EU financial regulators – including the European ‘super’ regulator for financial markets, Esma – did the inevitable: they agreed to sign a memorandum of understanding with the UK Financial Conduct Authority that would allow portfolio management to continue to be carried out in London (or Edinburgh, wherever).
The MoU should have been no surprise to anyone. London is a global centre of excellence for portfolio management and crucial aligned services, like brokerage and securities research. It was ludicrous to think that London would suddenly be seen as a rogue state when it came to the trustworthiness of its institutional investment management practices.
So why the anger on the part of this CEO? Because despite the inevitably that the status quo would prevail, decent firms such as this one still felt obliged to spend hundreds of thousands – even “millions”, apparently – of pounds on legal fees to explore solutions just in case delegation was ended.
It’s surely not often that politicians and civil servants attract so much ire for doing something that everyone agrees was a good idea.