Six months after the U.K. voted to quit the European Union, there's increasing uncertainty about the impact on the hedge fund industry.
The British government has yet to trigger Article 50, which will set a two-year clock for U.K. institutions to disentangle themselves from the E.U. It's still unclear what that will entail for U.K.-based hedge fund operators, as well as non-U.K. managers with operations in London. U.K.'s Brexit czar, David Davis, suggested on Dec. 1 that Britain would consider making payments to the E.U. to ensure continued access for U.K. businesses — similar to arrangements Israel, Norway and Switzerland have with the union.
If the U.K. were to lose such access, hedge fund managers could be cut off from investors on the Continent. To maintain their marketing "passports" under the E.U.'s Alternative Investment Fund Managers Directive, U.K. fund operators would have to establish investment-management or risk-management operations in other parts of the E.U., such as Ireland or Luxembourg, said hedge fund lawyer Lucy Frew, a partner at Walkers.
In a survey released Dec. 9, Preqin found that 70% of U.K.- based managers have no intention of relocating operations. The U.K. is home to 63% of the hedge fund firms in the E.U. and 80% of hedge fund assets, according to Preqin.
Originally published in Hedge Fund Alert December 14, 2016
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
