Luxembourg funds industry grows as managers move out of UK

Statistics released by the Luxembourg financial regulator, the Commission de Surveillance du Secteur Financier (CSSF), in its annual report (172 page / 6.7MB PDF), show that the total number of authorised investment fund managers in Luxembourg rose by 10 last year. There were 15 registrations and five withdrawals during 2017 and the total number rose to 306 authorised entities.

The CSSF said most managers registered in 2017 were German, British, Swiss or French and the number of UK-headquartered entities rose from 20 to 23.

The regulator said the increase in employees working in the funds industry, from 4,513 to 4,969, was due to a general increase in employee numbers as well as the arrival of new entities.

Firms in other financial services sectors including banking and insurance are also making plans to move out of the UK. Luxembourg and Ireland have emerged as key domiciles for institutions moving operations and employees away from London in anticipation of a possible ‘no-deal’ Brexit in which they would lose the right to sell products and services in the EU.

Asset management expert Gayle Bowen of Pinsent Masons, the law firm behind Out-Law.com, said Ireland had also seen a surge in applications from UK based asset managers including a number of the larger firms.

“Ireland is particularly popular with UK based managers  as itis closer both culturally and geographically to the UK than any other European jurisdiction.  The fact that Dublin is a large cosmopolitan city that can facilitate the movement and relocation of staff who want to move to an English-speaking jurisdiction, with easy access back to the UK is definitely an advantage,” Bowen said. 

“As we are both common law jurisdictions with similar legislation, UK managers are more comfortable entering into Irish law governed agreements than would be the case with civil law governed jurisdictions,” Bowen said.

In June representatives of the Central Bank of Ireland told asset managers and other financial institutions that applicants who had not begun the process would find it very difficult to obtain authorisation in Ireland by March 2019.

Recent research by trading network Liquidnet found that almost two thirds of asset managers were readying themselves for a ‘hard Brexit’, making contingency plans including shifting their domiciles to EU countries out of the UK.