Author: IIMI Admin

As the UK recovers from COVID-19, it is vital that the country’s highly successful asset management industry remains competitive. While Brexit has thrown up a number of operational and logistical challenges for domestic asset managers marketing into the EU, the UK’s new-found autonomy does give it much greater flexibility to shape regulation and policy as it relates to funds. The Independent Investment Management Initiative (IIMI) spoke to its diverse membership about how the UK government could potentially stimulate future growth in the asset management sector. 

IIMI’s Recommendations 

• The UK regulator should consider streamlining the fund authorisation process-especially for managers who are only selling their products to institutional investors. 

• There needs to be greater engagement by the regulator with the industry about ways to strengthen and enhance the UK asset management sector’s position in the global market. The UK regulator also needs to replicate its peers in Luxembourg and Ireland in terms of its commitment to promoting the UK as an asset management hub. 

• Reform of certain regulations – such as PRIIPs – would help support the local funds industry, as would sweeping changes to existing VAT rules. 

• If such reforms are enacted, there is likely to be greater re-domiciliation of funds into the UK – a shift which could result in asset servicing jobs being created across the entire country. 

Investor appetite for ESG (environment, social, governance)-focussed funds is reaching new heights, fuelled by a combination of the asset class’ perceived performance benefits; regulatory intervention; and growing fears about stranded asset risk. According to Morningstar data, ESG funds accumulated $139.2 billion in net inflows during the second quarter of 2021, bringing total AuM (assets under management) to $2.3 trillion.1 Following COP26, 220 asset managers representing $57 trillion in AuM – signed up to the Net Zero Asset Managers Initiative – in what is further indicative of the industry’s commitment to ESG. 

Amid the ESG asset class’ strong growth, regulators – particularly in the UK- are keen to ensure standards remain high – following growing concerns about potential greenwashing. Greenwashing is a problem which the IIMI [Independent Investment Management Initiative] – together with its members – is looking to counter. IIMI recently polled its membership, which is comprised of leading independent asset management firms from the UK and Continental Europe, to gather their views on the recent steps taken by the UK’s Financial Conduct Authority (FCA) around ESG. 

Key Points

• IIMI fully supports the FCA’s guiding principles and proposals to make TCFD reporting mandatory as it believes this will root out greenwashing. 

• The UK must carefully consider the unintended consequences of potential overlap and divergence with other ESG regimes. 

• With more markets increasingly adopting ESG legislation, an element of standardisation is required, otherwise, it could create further confusion. This is something that IIMI is willing to engage with regulators about.