Not a big threat to as­set man­agers’ fun­da­men­tals

Financial Mirror (Cyprus) - - FRONT PAGE -

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.

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