Fund managers look at leaving London

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Some London hedge fund and private equity managers are starting to look at shifting operations out of the UK and hiring staff in continental Europe after Britain’s decision to sever its relationship with the EU.

A survey, conducted after last month’s referendum, by research firm Preqin polled 142 alternative asset managers on leaving the UK. It found that 7 per cent of them are thinking about moving their operations outside of Britain and another 17 per cent are unsure whether to change where they are based.

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London has long been the base of choice in Europe for most hedge funds and private equity groups. But if the UK leaves the EU without striking a deal to participate in the single market, asset managers could find it much more difficult to sell funds to investors on the continent.

Large mainstream asset managers, including M&G and Columbia Threadneedle, have already outlined plans to establish European operations, or move some staff to EU locations such as Luxembourg and Dublin to preserve their access.

Orlando Montagu, partner at Odey Asset Management, one of the UK’s best-known hedge fund companies, said the group had “lots of ideas” about hiring more staff in EU locations following the referendum, but no firm plans.

The shift of alternative asset managers away from the UK would bring additional pain for the City of London, which economists and business executives fear will lose influence at an international level after Britain’s decision to leave the EU.

Several large banks have also warned that the British exit, or Brexit, will undermine the logic of basing so many staff in the UK. JPMorgan said before the vote that it could cut up to 4,000 UK jobs, while HSBC has suggested 1,000 employees could move to Paris, where it has a large subsidiary. Neither has announced firm plans since the referendum.

Carl Sjostrom, head of executive reward for Europe at Hay Group, the recruitment company, said many alternative asset managers were considering boosting their presence in the EU to ensure they could continue distributing funds on the continent.

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He said: “It is probably healthy for asset managers to be broader in their marketing efforts. They have relied too much on [investors] coming to London with their money. I think Brexit will dampen the London marketplace so British firms need to become more agile and innovative.”

Preqin also found that nearly a fifth of fund managers planned to reduce their investments in the UK over the next 12 months as a result of the referendum.

Investors in the alternative industry have taken an even more pessimistic view of the UK market, with 41 per cent saying they will invest less in the UK over the next 12 months, compared with just 9 per cent who plan to invest more.

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