The majority of asset management groups in the UK are expected to announce where they plan to set up their post-Brexit European base by June, according to research provider Cerulli Associates.
Fund groups have been eyeing up cities in Europe to ensure investors across the continent are able to access their products when the UK cuts ties with the European Union.
So far, only a handful of financial firms have confirmed where they will set up their base since the Brexit vote last year, including asset management giant M&G which confirmed it was looking to establish a base in Luxembourg.
In its latest report, the managing director of Cerulli’s European division, Barbara Wall, said: "Industry sources tell us that asset managers are typically comparing three or four jurisdictions.
“The expectation is that most will have decided on, and likely announced, their choice of EU-27 location by the end of June 2017.”
Last month, Lloyds of London confirmed it was creating a subsidiary business in Brussels, and the head of AIG's European division revealed plans to move its European headquarters back to Paris.
For asset managers, this might turn out be more of a brass-plating exercise. Jason HollandsWhile most large asset managers have fund operations in Luxembourg and Ireland, the Cerulli report pointed out that roles in distribution, sales, and portfolio management divisions are often based in the UK.
The firm said it wasn’t clear what kinds of roles would relocate to subsidiary operations in Europe as the Brexit arrangements unravel, but that many firms hope to create the smallest possible entity in an EU-27 country in the first instance, while outsourcing as many functions as possible back to the UK.
By doing this, Ms Wall said firms can minimise costs at the early stage, and easily unwind the operation if the UK manages to hold on to its passporting rights.
Despite this, the report found that most asset management firms assume the UK will fail to retain its passporting rights, and are therefore preparing for the worst.
Many asset managers are in the process of drawing up flexible contingency plans that can be introduced in phases, starting with the bare minimum needed to continue operating in the European Union.
Jason Hollands, managing director of wealth management giant the Tilney Group, said Paris and Frankfurt are seen as two rival financial centres to London.
Both cities, he said, hope to attract sizeable numbers of banking jobs from London, especially in areas such as currency clearing.
However, for asset managers he said this might turn out be more of a “brass-plating exercise” where groups need to create a regulated subsidiary within the EU to ensure continued passporting rights after Brexit, as opposed to a wholesale relocation of front-line fund management teams.
“My guess is that firms in this position will be looking primarily at Dublin or Luxemburg, the two key domiciles for existing offshore fund ranges and where fund board meetings will already be taking place.”
katherine.denham@ft.com
