Hedge fund group puts fund passporting on Brexit wishlist

UK firms should still be able to manage EU-domiciled funds in spite of Brexit according to hedge fund lobby group AIMA.
By Paul Walsh
The ability for UK firms to manage EU-domiciled funds or accounts is a key priority post-Brexit, according to the Alternative Investment Managers Association (AIMA).

According to information seen by Global Custodian, the ‘delegation model’ granting UK firms the ability to manage EU domiciled funds or accounts should continue despite the UK’s decision to leave the EU.

Continued UK access to the single market hinges on UK firms being granted full ‘passporting rights’ to offer their services across the EU.

Global Custodian recently investigated the impact of the UK’s decision to leave the EU on the fund space, particularly whether the UK will be granted equivalence under the Alternative Investment Fund Managers Directive (AIFMD).

The Brexit vote appears to have dented the enthusiasm for European regulators to extend equivalence. Full passporting rights can only be granted once it receives sign off from the European Commission, the European Council and European Parliament.

Various intricacies of AIFMD and the likelihood of passport extensions have continuously been discussed but the impact of a post-Brexit environment is likely to bring unexpected challenges including whether the UK will receive AIFMD equivalence from ESMA to passport funds into the EU.

Another challenge is the possibility of the UK withdrawing from the single market meaning it will be designated as a third country.

The AIMA information also stresses the opportunity for a post-Brexit UK to further develop its position as a global hub for investment management by proposing that new UK fund and securitisation vehicles be developed to enable hedge fund and private credit assets to be domiciled onshore.

“With 85% of European hedge fund assets managed from the UK, members have been concerned about accessing European investors, hiring talent from the rest of the EU and continuing to trade on European markets,” said Jack Inglis, CEO at AIMA, in a blog post.

“We believe the UK government should seek to maximise single market access for the entire financial services sector, by hardwiring into a treaty the principles of market access based on equivalence, non-discrimination and reciprocity.”