Not a big threat to asset managers’ fundamentals

If the United Kingdom were to leave the European Union (Brexit), the operational and business impact would be manageable for most rated asset managers, according Moody’s Investors Service.

Moody’s does not expect the loss of management and marketing passporting rights to have profound implications for the asset management industry overall, because many UK groups operate in continental Europe through subsidiaries, and vice versa for continental European managers.

“Even if UK managers would, from a EU perspective, become ‘third country firms’ and would not benefit from passporting regimes, they would be well positioned to benefit from concessions available to third countries because existing legislation meets the EU requirements,” said Marina Cremonese, a Vice President at Moody’s.

“That said, post-Brexit financial market volatility would weigh on asset managers’ operating margins because of weak market performance and reduced investor appetite for risk. Non-UK based asset managers would also be affected if such market volatility spreads to continental Europe,” added Vanessa Robert, a Senior Credit Officer at Moody’s.

The UK is the largest asset management centre in Europe, with GBP5.5 trln of assets under management (AUM) as of December 2014, according to the Investment Management Association (IMA). Two fifths of AUM (39%) were managed on behalf of clients located outside of the UK. Moody’s research shows clients domiciled in EMEA (Europe Middle East Africa) represent between 20% and 40% of the total AUM of independent UK asset managers, highlighting the importance of European business.