Jupiter chief executive Maarten Slendebroek has said his business has been obliged to prepare for a “hard Brexit” scenario in the belief that talks over the UK’s future relationship with the EU will go on for longer than some suspect.
Addressing the question of potential next steps following the UK’s vote to leave the bloc, Mr Slendebroek said the fund house was operating under a “worst case” scenario in the absence of further clarity - but added Jupiter was well placed to withstand this development.
“There are two interested parties here, the UK and the EU… it’s in the interest of both parties to push the can down the road for as long as possible, while keeping the noise level up in terms of sabre rattling. However we can’t run our business that way, so we assume the worst – a hard Brexit, no trade deal, so let’s get ready for that,” he told analysts.
Reporting interim results to June 30 this morning (July 27), Mr Slendebroek said a full Brexit, “without mutual passporting arrangements”, would mean a “limited” amount of legal restructuring for Jupiter’s European operations but no relocation of staff.
The issue of whether UK financial firms will continue to be able to “passport” their services into the single market post-Brexit has been a particular point of debate in the referendum aftermath.
Asset managers, however, have additional leeway because their own industry passport grants market access not to companies, but to individual funds. Funds domiciled in Dublin and Luxembourg can be managed by EU or non-EU firms alike under current Ucits regulations.
Mr Slendebroek added: “Let’s try to see if we can’t combine doing [Brexit] work in the background with what we want to do anyway, ie expanding our business in continental Europe and growing our footprint. So try to find the opportunity around this event rather than being all negative about it.”
Speaking to Investment Adviser, the CEO said one tangential benefit could arrive in the form of investors’ strategic asset allocations. The UK’s forthcoming detachment from Europe was already causing international investors to consider reclassifying their geographical allocations, Mr Slendebroek suggested.
“Prior to the referendum, you could have made up a story that UK equities as a separate asset class was in gentle or long-term decline. [We] now need to reassess, and think of them as distinct.
“[International buyers] saw UK equities in a pan-European or global context. I am picking up the first soundings that that may change, though it is early days”, he said.
Jupiter’s interim results revealed the fund house had continued to see net inflows in July. It intends to continue launching new products later this year, following a six-month period in which pre-tax profit rose 3 per cent to £86.6m.
“Our strategy is designed to deal with different market conditions,” Mr Slendebroek said. The business has seen particularly strong flows into its strategic bond and absolute return products this year as risk appetite dwindles.
Asset managers face other potential hurdles in 2016, however, not least the initial findings of the FCA’s competition study. An interim report is due out in the third quarter, though some have suggested the findings may be pushed back.
“I check my mailbox on a daily basis but have not heard a word [yet]”, Mr Slendebroek said of the slated timeline for the review.
