IIMI, the boutique asset management think tank, has today published a paper calling for the development of a new UK fund structure that could rival UCITS and AIFs, while decentralising fund management in the country and encouraging regional growth. The full paper, entitled “Decentralising Fund Management: Encouraging Regional Growth”, can be found here.
As the UK government works towards economic recovery and seeks to “level up” prosperity and opportunity across the country, IIMI is advocating the development of a fund structure that, if successful, could generate an upsurge of new roles in the UK funds industry. IIMI believes a bespoke UK fund structure could facilitate the onshoring of more asset servicing roles that have traditionally been based in Ireland and Luxembourg, many of which do not necessarily need to be carried out in London. Owing to the rental cost savings of locating an office outside of the capital, and the abundance of talent available at a lower cost, a number of leading fund administrators already have thriving offices across several regional UK cities, including Birmingham, Bournemouth, Belfast, Glasgow and Liverpool.
IIMI asserts that a widening of the asset management industry’s UK footprint provides the opportunity for wealth to become more evenly distributed from affluent regional cities to nearby towns, which are among the country’s most depressed areas. The government could potentially incentivise financial institutions to invest in infrastructure and education in especially deprived parts of the UK to help promote long-term economic regeneration.
In order to gain traction, NCI proposes that UK retail and institutional investors currently invested in UCITS be given the opportunity to convert their holdings into the new UK fund structure. To facilitate this, managers should make switching as easy as possible. For example, early stage converters could be given fee discounts in the new fund vehicle. Furthermore, IIMI believes strategic tax incentives, such as exempting non-UK investors from paying UK tax on investments, could stimulate foreign investment in UK asset management firms, which in turn could further promote employment in the wider financial services industry, particularly outside of London.
IIMI notes that the new structure would need to incorporate the investor protections presently enshrined under the UCITS and AIFMD regimes, and cites a number of potential improvements, including the tightening of the prescriptive liquidity arrangements mandated under UCITS, in light of last year’s Woodford episode. IIMI believes that such a fund structure would ultimately provide both retail and institutional investors with more choice and encourage competition.
Summary of NCI’s proposals
- In order to stimulate asset management and asset servicing jobs following Brexit, the UK should create its own fund brand. This is something which IIMI is willing to engage with the government on.
- If this fund structure is successful, it could spark further growth in UK asset servicing and asset management roles. The government should encourage these businesses to launch outside of London.
- Similarly, incentives – potentially tax benefits – should be given to financial institutions to invest in infrastructure and education in especially deprived parts of the UK. This could help promote long-term economic regeneration.
- IIMI is willing to facilitate conversations between the industry and regional economic bodies to help support the funds’ industry development outside of London.
“IIMI believes that the roll-out of an effective domestic UK fund structure could materially strengthen the financial services industry, particularly outside of London. By encouraging the asset management industry to widen its geographical footprint within the UK, it could result in a more even distribution of wealth across the country, supporting the Northern Powerhouse and the Midlands Engine, and enabling local economies to flourish. Some of the biggest names in global finance already have a sizable UK regional presence but we believe there is still a huge amount of room for growth. As we face both fresh and familiar challenges, from the COVID-19 economic shock to Brexit, we believe the time for this new generation fund structure is now, and we’re ready to engage with government and industry to realise this vision.”Nick Mottram, Chairman of IIMI